[Senate Hearing 109-1158]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 109-1158

                    SECURITY OF TERMINAL OPERATIONS 
                             AT U.S. PORTS

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 28, 2006

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation















                                _____

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
             Kenneth R. Nahigian, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 28, 2006................................     1
Statement of Senator Allen.......................................    15
Statement of Senator Boxer.......................................    10
    Prepared statement...........................................    11
Statement of Senator Burns.......................................    14
    Prepared statement...........................................    14
Statement of Senator Cantwell....................................     8
Statement of Senator DeMint......................................    16
Statement of Senator Dorgan......................................    13
Statement of Senator Ensign......................................    14
Statement of Senator Hutchison...................................     6
Statement of Senator Kerry.......................................     2
Statement of Senator Lautenberg..................................     7
Statement of Senator Lott........................................    17
Statement of Senator McCain......................................     4
Statement of Senator Bill Nelson.................................    20
Statement of Senator E. Benjamin Nelson..........................     5
Statement of Senator Pryor.......................................    61
Statement of Senator Rockefeller.................................     9
Statement of Senator Smith.......................................    18
Statement of Senator Snowe.......................................    17
Statement of Senator Stevens.....................................     1
Statement of Senator Sununu......................................    19
Statement of Senator Vitter......................................     3

                               Witnesses

Bilkey, H. Edward, Chief Operating Officer, DP World.............    21
    Prepared statement...........................................    24
    Article, dated October 31, 2005 from the Wall Street Journal, 
      entitled ``P&O Attracts Buyout Overture Amid Shipping-
      Industry Boom..............................................    27
    Article, dated November 14, 2005 from the Journal of 
      Commerce, entitled ``P&O Ports in Play; Unsolicited Offer 
      for Port Operator Could Be Followed by Other Bids''........    28
    Article, dated November 29, 2005 from the London Times, 
      entitled ``Dubai's DP World Seals Pounds 3.2bn Purchase of 
      P&O''......................................................    29
    Article, dated November 17, 2005 from the Financial Times, 
      entitled ``DP World Moves Closer to P&O Bid''..............    30
    Article, dated October 31, 2005 from the Financial Times, 
      entitled ``Dubai State Ports Operator Approaches P&O''.....    31
Jackson, Hon. Michael P., Deputy Secretary, U.S. Department of 
  Homeland Security; accompanied by Rear Admiral Thomas H. 
  Gilmour, U.S. Coast Guard, and Jayson Ahern, Assistant 
  Commissioner for Field Operations, Customs and Border 
  Protection, Department of Homeland Security....................    58
Koch, Christopher, President/CEO, World Shipping Council.........    42
    Prepared statement...........................................    44
Mitre, Michael, Director, Port Security, International Longshore 
  and Warehouse Union (ILWU).....................................    52
    Prepared statement...........................................    54
Scavone, Robert, Executive Vice President, Strategic Planning and 
  Development, P&O Ports North America, Inc......................    34
Yoshitani, Tay, Senior Policy Advisor, National Association of 
  Waterfront Employers (NAWE)....................................    34
    Prepared statement...........................................    36

                                Appendix

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared 
  statement......................................................    87
Response to written questions submitted by Hon. Daniel K. Inouye 
  to:
    Christopher Koch.............................................    94
    Michael Mitre................................................    95
    Robert Scavone...............................................    88
    Tay Yoshitani................................................    92
Response to written questions submitted by Hon. Frank R. 
  Lautenberg to:
    H. Edward Bilkey.............................................    87
    Michael Mitre................................................    95
    Robert Scavone...............................................    90
    Tay Yoshitani................................................    93
Written questions submitted to Michael P. Jackson by:
    Hon. Maria Cantwell..........................................    97
    Hon. Daniel K. Inouye........................................    95
    Hon. Frank R. Lautenberg.....................................    98
    Hon. Mark Pryor..............................................    99

 
                    SECURITY OF TERMINAL OPERATIONS 
                             AT U.S. PORTS

                              ----------                              


                       TUESDAY, FEBRUARY 28, 2006

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:45 p.m. in room 
SD-106, Dirksen Senate Office Building, Hon. Ted Stevens, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. The Co-Chairman has been detained, so we'll 
start the hearing at this time. And we do thank you for 
responding to our request to appear here today.
    Much has been reported over the past few weeks concerning 
the proposed port terminal operations transaction between Dubai 
Ports World, a Dubai-owned company, and P&O Ports, a British 
company. Many of the reports have contained incorrect or 
misleading information. Today's hearing is intended to learn 
the facts directly from the companies involved and to have a 
more global discussion concerning what is being done to secure 
United States ports.
    While I agree with many of my colleagues that we need to 
scrutinize any transaction that involves foreign investment in 
the United States, particularly when the transaction has even a 
peripheral effect on national security, there are a few points 
which need to be made here at today's hearing.
    First, this transaction would be one between two foreign-
owned companies subject to Federal Government approval through 
the Committee on Foreign Investment in the United States. This 
is not an agreement between the Dubai company and our Federal 
Government. The current terminal operator, P&O Ports, formerly 
the Peninsular and Oriental Steam Navigation Company, is a 
company based in the United Kingdom.
    Second, neither the British nor the Dubai terminal operator 
would own any U.S. ports. State and local port authorities own 
our ports. These companies are terminal operators and manage 
American longshoremen in the loading or unloading of cargo from 
ships, subject to the Coast Guard and Customs inspection and 
security procedures.
    Third, terminal operators such as these companies are not 
responsible for securing U.S. ports. The Coast Guard, TSA, 
Customs and Border Protection, the FBI, and local law 
enforcement secure our ports. Cargo arriving at U.S. ports is 
assessed for risk, and screened accordingly. In many cases, the 
cargo is screened at foreign ports before being loaded on a 
shipping vessel.
    Fourth, the document released yesterday regarding the Coast 
Guard's analysis about this acquisition is somewhat misleading, 
because it's only a portion of the overall analysis. After 
completing its review, the Coast Guard concluded publicly that 
DPW's acquisition of P&O does not pose a significant threat to 
U.S. assets.
    Fifth, the United Arab Emirates, within which Dubai is 
located, is a strategic ally of the United States not only in 
the war on terror, but also generally in that region of the 
world. I've been to Dubai, and I'd remind my colleagues that 
the UAE allows our U.S. military to dock 56 warships, 590 
military sealift command ships, and 75 allied warships at their 
ports.
    Finally, a significant number of terminal operators at U.S. 
ports are actually foreign-owned or -leased. In fact, in Los 
Angeles, one of our largest airports, which a portion of the 
Committee reviewed last year, flew over it, examined it very 
carefully, Chinese, Taiwanese, and Singapore government-owned 
companies operate terminals. It's interesting to note that 
another Singaporean Government-owned company lost out to Dubai 
ports in its bid for P&O Ports in the transaction at issue.
    As Americans, we do need to look at this deal closely to 
ensure that our national security remains unaffected, but we 
must also recognize the benefits of a global economy and avoid 
unwarranted discrimination among our allies.
    Is there any Senator that wishes to make an opening 
statement?
    Senator Rockefeller? We should follow the early bird rule. 
I'm sorry,
    Senator Kerry?

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Thank you, Mr. Chairman, for holding this 
hearing.
    This Dubai Ports deal, I think, has raised a lot of 
questions in the minds of Americans, obviously, and 
particularly in the minds of the Members of Congress. I think, 
most importantly, it underscores the public's very legitimate 
concern, and our legitimate concern, about the overall state of 
our port security, which is something a number of us have been 
talking about for a number of years. We all understand that the 
bottom line is, those containers that come in are not 
adequately accountable from wherever they're coming. And so, 
there's an enormous issue, beyond Dubai, and there's been a 
lack of willingness to invest in either the technology or the 
local accountability necessary to achieve that.
    But there's also a larger question, or a similarly 
significant question, about the judgment and the competence and 
the manner in which this was approved. This much is clear. A 
secretive government committee hastily approved the transaction 
without conducting the 45-day national security investigation 
mandated by law. The Department of Homeland Security, a member 
of the Committee on Foreign Investment in the United States, 
CFIUS, initially raised security concerns, but then signed off 
on the deal despite intelligence gaps cited by a newly released 
Coast Guard document.
    So, apart from what the Chairman says, which is legitimate, 
that there are alliances and there are these cooperative 
efforts, there was a process that was not followed and that 
raises questions. And, amazingly, the Secretary of Homeland 
Security didn't even know about the transaction until it was 
reported in the press. The Secretary of the Treasury says he 
wasn't involved. The President says he didn't know, yet he's 
prepared to use his veto pen, for the first time in his 
Presidency, over a deal he apparently didn't bother to pay 
attention to until there was some backlash.
    The Administration's response to criticism has been to say, 
``Well, take our word for it that the deal has been vetted and 
the security considerations have been addressed.'' And yet, 
most recently, a Coast Guard document appears which states that 
it lacked the most basic intelligence information about DP, and 
that flatly contradicts that assertion and is further evidence 
of a hands-off attitude taken with respect to our ports.
    And, finally, this morning the Jerusalem Post reports that, 
``DP Government-Controlled Parent Company Participates in the 
Arab Boycott of Israel,'' which is inconsistent with everything 
that we believe in America. So, that casts even more doubt on 
the judgment of the Administration Officials who claim to have 
thoroughly investigated DP, and it clearly calls for further 
congressional review, which is taking place.
    The fact is, the Administration did not conduct an 
exhaustive review of this transaction. It took a pre-9/11 
business-as-usual approach to approve a deal with Dubai without 
adequately ensuring it wouldn't compromise national security, 
in a number of different ways, which I'm confident my 
colleagues will raise in the course of this hearing.
    So, it's appropriate for Americans to be concerned, and 
it's appropriate for us to be having these hearings.
    Thank you, Mr. Chairman.
    The Chairman. Senator Vitter?

                STATEMENT OF HON. DAVID VITTER, 
                  U.S. SENATOR FROM LOUISIANA

    Senator Vitter. Thank you, Mr. Chairman. I want to thank 
you for holding these hearings, as well, and thank all the 
witnesses. This is important to me, as it is to all the members 
of the Committee and, indeed, of Congress. It's particularly 
important to me, because one of the ports directly involved 
would be the Port of New Orleans.
    Certainly since September 11, we've all come to realize we 
can't be too careful when it comes to national security. This 
has certainly highlighted those concerns. And that's why I 
strongly support the more extensive review of the DPW 
acquisition of P&O Ports, which now will, thankfully, happen.
    U.S. ports and waterways handle more than 2.5 billion tons 
of trade annually. U.S. also imports 3.3 billion tons of oil 
and services 134 million passengers by ferry annually. It's 
only getting bigger. Within the next 15 years, it's predicted 
that the amount of cargo that our ports will handle will 
double. At that rate, our port facilities would account for as 
much as one-third of GDP.
    In Louisiana, we have a lot of that activity, which we're 
very happy about. Our river system connects to the largest port 
system in the Nation, 5 of the 15 busiest single ports. Fifty 
percent of Ag exports and imports come through Louisiana's 
ports and the Mississippi River there. Thirty-six States depend 
on the lower Mississippi and our port system in Louisiana for 
maritime commerce. All of that is important for the economy. 
All of that also underscores vulnerabilities and possibilities, 
in terms of homeland security. So, that's why we need to be 
particularly vigilant about this.
    I've expressed real and strong concerns about this deal, 
and a clear need to get more information about it. The good 
news is that we're now on the road to having that deeper 45-day 
review. And I want to applaud Dubai Ports World for agreeing to 
this so that all of us can be involved and the CFIUS process 
can take that deeper 45-day review.
    As we do that, I do think we need to get to the real facts, 
and understand them, and communicate them clearly. Mr. 
Chairman, you underscored one of those facts that is not yet 
fully understood, and that is that the sale of terminal 
operations to a foreign entity would mean direct foreign 
control of, or ownership of, U.S. ports or security operations. 
And that's not true. As you said, our domestic ports are owned 
and operated by port authorities, which are typically state or 
local government units. Now, these port authorities typically 
lease terminal operations to private companies, and that's 
where this deal comes into play. So, it's different from owning 
a port, controlling a port, but it is still a very important 
role at a port that merits the more in-depth review we are now 
having.
    As we take a look at this specific deal, I also hope we 
take a look at two broader issues. One is the CFIUS process, 
and the second is port security issues, which I've been focused 
on with you, Mr. Chairman and many other members, and I hope we 
are very focused on the needs to reform those two areas, the 
CFIUS process and port security. And I'll be having, 
specifically, a budget resolution, same one I had last year, 
about port security. I think it's very important, within our 
budget, that we maintain a separate port security grant program 
to keep a focus on port security, specifically, and to make 
sure the unique nature and needs of port security are 
addressed. And I'll be following up on that, particularly, in 
our budget resolution debate.
    Thank you very much, Mr. Chairman.
    The Chairman. Senator Nelson, would you mind if we yield to 
Senator McCain? He has another appointment.
    Senator Ben Nelson. That would be fine.
    The Chairman. Senator McCain?

                STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    Senator McCain. I thank you, Mr. Chairman. I'll be very 
brief. I thank you for holding this hearing. And I think we 
should address a lot of our concerns today about the overall 
issue of port security. And I appreciate our witnesses being 
here on that issue.
    But since the issue of the day seems to be the issue of 
UAE, Mr. Chairman, let me just briefly remind my colleagues 
that foreign operators will continue to manage about 80 percent 
of port terminals in the United States, companies from the 
United Kingdom, Denmark, Hong Kong, Japan, South Korea, 
Singapore, China, and Taiwan, just as U.S. companies will 
continue to manage terminals in foreign countries.
    And, Mr. Chairman, I just want to briefly point out, since 
9/11, the UAE had provided U.S. and coalition forces 
unprecedented access to its ports and security, and overflight 
clearances. The UAE has played host to over 700 U.S. Navy ships 
at its ports, including the Port of Jebel Ali, which is managed 
by DP World and the United States Air Force at al Dhafra Air 
Base. They host the UAE Air Warfare Center, Fighter Training 
Center in the Middle East, and has worked with us to stop 
terrorist financing and money-laundering.
    Mr. Chairman, after 9/11, the President of the United 
States asked Middle Eastern countries to be with us or against 
us. The UAE has been with us. And I would refer my colleagues 
to General Tommy Franks, General Abizaid, General Powell, and 
the Chairman of the Joint Chiefs of Staff as to how this 
country has cooperated with us on the war on terror. And that 
doesn't mean we shouldn't have the review, the 45 days and all 
that, but I think it's important to have it be part of the 
record that we are dealing with a friend and an ally on this 
issue.
    And I thank you, Mr. Chairman, for your courtesy.
    The Chairman. Thank you.
    And thank you for your courtesy, Senator Nelson.

             STATEMENT OF HON. E. BENJAMIN NELSON, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Ben Nelson. Thank you, Mr. Chairman.
    I appreciate your holding this hearing today. I suppose it 
might surprise people that when I was back in Nebraska, which 
is not known for its port, except for Port Omaha and the 
Nebraska Navy, that that was one of the first questions I got 
asked almost everywhere I went, is, What's going on with this 
port outsourcing?
    As we all recognize, it's not simply the acquisition of P&O 
by DP World, it's the perception, real or not, that this deal, 
in some way, might jeopardize national security. There's 
already a series of incidents that have raised questions and 
caused jitters about national security. So, anything that 
raises questions needs to be addressed. And that's why I think 
it's important to be sure that this acquisition is understood 
and examined.
    There are two questions. Of course, the one that we're 
talking about today is about DP World and what we can do to 
satisfy ourselves that this is not going to in any way 
compromise our security at the ports. The second one, I think, 
probably catches most people by surprise, and that was that we 
are outsourcing the ports in any event. When I've driven by or 
ridden by the building that says New York Port Authority, I 
thought that was the New York Port Authority, probably run by 
the City of New York. But I find now that that may not be the 
case.
    So, most Americans have questions about this situation. I 
believe taking 45 days to review it, it's appropriate. It's 
also an opportunity to hold hearings and determine questions 
about the broader issue regarding port and cargo security. Many 
people were very, very surprised, although I've not been 
surprised, because I've known the number, that only maybe 5 
percent of the cargos are actually checked for security 
purposes. Maybe there is a point where beyond you can't go, but 
I think 5 percent seems to be a pretty small percentage for 
something that is so sensitive with materials coming in. I 
think the instincts of the Nebraskans I talked to last week 
were right, it's an issue we all need to be paying attention to 
and we need to know more about.
    I think they're also of the opinion that we ought not to 
overreact, but, if we fail to take careful review of this, then 
we'd be very guilty of underacting in a very obvious way.
    And so, I appreciate this opportunity, look forward to the 
testimony of the witnesses, and as we work toward assuring the 
American people that what has been done here will not be a 
national security matter.
    Thank you.
    The Chairman. Yes, sir.
    Senator Pryor? Gone.
    Senator Hutchison?

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Thank you, Mr. Chairman.
    Mr. Chairman, I also have a major port in my state, and it 
is a port that has the second-largest chemical complex in the 
world adjacent to it. So, port security has been a priority of 
mine. And I was very pleased when we passed the Maritime 
Transportation Security Act, in 2002. But this was just a first 
step.
    Since that time, this committee has passed a bill that has 
port security, as well as rail, aviation, and pipeline 
security. I think it is essential for us to bring that bill 
forward if we possibly can. And I realize that there may be 
other parts of the bill that still need work. But I think port 
security, in general, has not kept up to the pace that many of 
us think is the right pace.
    The bill that I introduced, and which is incorporated in 
Senate bill 1052, does address some of the gaps. It directs the 
Department of Homeland Security to require all foreign 
countries shipping goods into the United States to grant access 
to additional U.S. inspectors so that containers heading to our 
shores are able to be inspected at their port of origin.
    Now, we have a few that are doing this today, but not 
nearly enough. We need to have better coverage, and we also 
need to have the technology that allows us to put seals on and 
know that, when something leaves, it hasn't been tampered with 
when it arrives.
    I want to say that I think the UAE has been among the very, 
very best cooperators in port security. I don't think this is a 
UAE issue, although I certainly understand the comments that 
are being made about the process. And I think we need to 
address the process. I think that is the role of the U.S. 
Senate.
    But I think, regardless of that particular situation, we 
need to have a port security plan for our country that 
requires, at a minimum, that we have more inspectors and that 
every inspector is allowed to inspect at the point of origin 
and throughout the process and when it arrives into our 
country. As many of us know, there are many foreign companies--
countries that own the foreign terminal, the ship itself, and 
the terminal in the United States. So, that means there is a 
foreign country or a foreign company that is going to control 
this cargo from the beginning to the end.
    So, we must be aware of that, not close our shores, but 
make sure that we are in charge of the port security, that we 
have the facilities to do it, not just that we have the 
ability, but that we have the capability with enough people 
designated in the foreign country to look at any piece of cargo 
that we choose to look at. And we need to have a plan that 
tracks from the embarkation all the way through to destination 
in the United States. And that's what is in Senate bill 1052. 
It is in my Senate bill that is separate.
    And, Mr. Chairman, I would just ask you to work through 
this, as the Committee of jurisdiction, to assure that we pass 
either the full Senate bill with all of the modes of 
transportation included, or my bill, that is the separate bill 
for port security, that will assure us that, regardless of who 
the foreign owner is, or the foreign country, that we will be 
protecting ourselves with our own resources.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Lautenberg, my apologies. I did not see you there. 
You, obviously, are invisible, right? Thank you.

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Yes, I didn't mean to be obscure. 
That's not good for our business.
    [Laughter.]
    Senator Lautenberg. Mr. Chairman, I've been concerned about 
port security for a long time. And while it has been suggested 
that Dubai is a country that has some friendly moments with us, 
there is also contact that the United Arab Emirates has with 
some countries that are very worrisome. And we're reminded by 
the FBI that the Port of Newark (and I say to my colleague from 
Nebraska: it's Port of New York and New Jersey) like all of our 
ports, is vital to our economy, but still vulnerable to 
terrorist attack. The FBI has said that a 2-mile stretch of 
land that goes from Newark Airport down to the Newark Harbor is 
the most dangerous place in the country for a terrorist attack, 
that millions could be killed because of the presence of 
chemical companies that transport, manufacture, and store 
chemical materials. And an attack would be a disaster in that 
highly and densely populated area.
    What I'm worried about is that the Dubai Ports deal would 
put sensitive information about our port operations in the 
hands of a foreign government with a dubious record on 
terrorism. Most disturbing is the fact that the Bush 
Administration didn't even bother to thoroughly investigate 
this deal. Treasury Secretary Snow was in charge of this 
process, but he wasn't even aware of the sale. Secretary of 
Defense Rumsfeld also claimed ignorance of the event. Given the 
Administration's inaction in this matter, I just don't trust 
them to look out for the security of New Jerseyans. And that's 
why I've supported efforts in Congress to slow down or stop 
this deal so we in Congress can review it.
    We all know that Dubai Ports World themselves were the ones 
to request the 45-day investigation of this sale to try to calm 
the waters.
    But let's be clear about what's actually happening here. 
The deal is still going through, as scheduled. Dubai Ports 
World will take over the P&O company in 2 days, this Thursday. 
Investigating this deal after it becomes final may be too 
little too late.
    Since the Administration has dropped the ball, we need to 
empower our local ports to protect themselves. And that's why 
I've introduced a bill that will allow the U.S. port management 
to terminate or condition any lease when it's transferred to a 
new, foreign owner or operator. Passing my bill is a step that 
Congress can take to shore up port security by adding another 
checkpoint so that we don't permit any lapses to take place.
    Mr. Chairman, if there is a silver lining to the outrageous 
Dubai Ports World deal, it's an increased awareness of the 
issue of port security. And I hope that the Senate will 
consider my bill, as well as Senate bill 1052, and begin the 
process of making our ports and our communities more secure.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    I've asked the staff to have reproduced and delivered to 
every Senator and to the press the list of international 
activity in U.S. ports prepared by the staff.
    Senator Cantwell?

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Mr. Chairman. And thank you 
and Senator Inouye for holding this important hearing, because 
I know we all care about the security of our Nation and making 
sure that U.S. ports are secure.
    And these elements that everyone is talking about, I think, 
give us a chance today to talk and reflect about where we've 
been. Certainly, Senator Hutchison's comments about the 
Maritime Security Transportation Act, and how much money 
originally was authorized, and the Coast Guard's recommendation 
that, to implement the Maritime Security Act, that it would 
take about $7 billion over a 10 year period of time that would 
be needed. And yet, I don't think that we have come anywhere 
close to appropriating those kinds of funds. And certainly we 
should take a look at that.
    For the West Coast, and particularly for us in Washington 
State, every day 50,000 containers enter the Port of Seattle 
and Tacoma, and nearly 6 million containers enter our Nation's 
ports each year. These Washington ports generate over 700 
million annually for the Washington economy, and more than 
100,00 workers in the Puget Sound, including longshoremen, 
freight forwarders, are dependent upon these trade jobs. Now, 
that's nothing to say the other ports in our state, Vancouver, 
Everett, Grays Harbor, Bellingham, and Anacortes, and some of 
the others that I'll forget and will be reminded later. So, 
Washington's economy definitely depends on the movement of 
cargo, container, and traffic.
    And this weekend I had a chance to meet with both officials 
from the Port of Seattle and Port of Tacoma to discuss exactly 
how our operations are working there, and to review a pilot 
program that had been part of the Secure Container Program on 
electronic seals, and was very impressed with the progress that 
the Port of Seattle and Tacoma have made with the Thailand port 
on security measures that, as Senator Hutchison said, do 
definitely start at the point of origin.
    Like my colleagues, I am very concerned about how we take 
this issue and have a larger debate about security issues. 
Besides looking at where we need to go on infrastructure 
funding, to look at the TWIC program, which is about employee 
background checks, and where we are in having that implemented 
on a worldwide basis. Besides electronic seals, the deployment 
of radiation and scanner technology and the security background 
checks of facility security officers, who are those individuals 
that own the manifest responsibilities for any port activity--
my understanding is, we don't have as deep of background checks 
on them--and, obviously, a review of these larger ownership 
issues.
    Mr. Chairman, on February 22, Senator Snowe and I, as the 
Chair and Ranking Member of the Subcommittee for Fisheries and 
Coast Guard, sent a letter to the Coast Guard asking them for a 
briefing on their analysis of this Dubai deal, in the sense we 
knew that it was part of their responsibility.
    The Chairman. What did that have to do with fisheries?
    Senator Cantwell. The Coast Guard, sir. The Fisheries and 
Coast Guard Subcommittee, which Senator Snowe and I are--
Senator Snowe is the Chair, and I'm the Ranking Member on, 
asked for a briefing. And, I know, since then there has been 
quite a bit of discussion in the last 24 hours about that 
information. And we have access to some of it. So, I hope that 
today at the hearing we will get more, and if, perhaps, Mr. 
Chairman, that isn't sufficient, that the Committee will 
consider a classified briefing to get access to that 
information.
    I thank the Chairman.
    The Chairman. Senator Rockefeller?

           STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Rockefeller. Thank you, Mr. Chairman.
    To me, this is an issue about government accountability, 
government process, congressional oversight of what might be 
deemed by some in the Administration not to be that important. 
It's also an issue of security and all the aspects that lead to 
it, as well as ownership, or maybe more than ownership. There's 
a list here of the top 25 ports in the country, and only two of 
them are involved, as far as I can see, with U.S. ownership; in 
one case, a minority.
    I am profoundly worried about the fact, as Senator 
Hutchison implied, not only in port security, where you're 
dealing with containers with 5 percent checking, but also in 
air cargo security, where you are, lo and behold, also involved 
with about 5 percent checking. In other words, no matter who 
we're dealing with, if we're all doing it ourselves or if we're 
doing it with somebody else, we're only doing a very small part 
of the job. And our responsibility is to get the intelligence 
that leads up to how this decision was made and why it wasn't 
taken to a higher level earlier, but, most importantly, that we 
do something about the problem, that the 5 percent is a--is the 
biggest security risk of all. If they were just being done by 
the most perfect company you could think about, 5 percent is 
not secure. Ninety-five percent unchecked, 5 percent checked, 
that is ridiculous. That is embarrassing. Homeland security, 
from the vantage point of West Virginia, which is without any 
ports or large lakes that I can think of, is the home of many, 
many, many chemical companies. And they back up to the Ohio 
River and the Kanawha River. And I think there are only three 
or four Coast Guard boats that patrol all the way up from 
Pittsburgh all the way down to Louisville. I may be wrong on 
that, but that's an embarrassment. We are not taking our own 
homeland security seriously. An issue like this comes along, 
people jump on it. They may be right to do so. It would be best 
to jump on it when one best knows what the facts are. But, we 
have a custom that we like to jump on things, sometimes because 
we're not doing the job ourselves. I would suggest this is one 
of those cases. The Dubai ownership has to be looked at 
closely. But, to me, the most scary issue of all is the 95 
percent, which is available to anybody to misuse and to damage 
us.
    Thank you, Mr. Chairman.
    The Chairman. Senator Boxer?

               STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Mr. Chairman, thank you.
    Our ports are a soft target. Al Qaeda told us that when we 
found that out through the documents. And now, Dubai Ports 
World has been approved by this Administration to take over 
operations, not at just 6 ports, but 20 U.S. ports. And those 
ports are in Maine, Massachusetts, Rhode Island, New York, New 
Jersey, Pennsylvania, Delaware, Maryland, Norfolk, Virginia, 
Florida, Mississippi, 3 in Louisiana, and 6 in Texas.
    Mr. Chairman, we need to correct the record about the role 
of terminal operators in port security. Those who say these 
companies have nothing to do with security are wrong. The 
Department of Homeland Security hands out security grants to 
terminal operators because they are involved in security.
    Here's how the Washington Post describes the terminal 
operator's responsibilities, ``In the process, they must 
maintain security at their facility. These port operators are 
intricately involved with security and''--here's an important 
point--``even have access to the port's entire security plan.''
    Experts tell me that the Committee on Foreign Investment in 
the United States should have conducted an automatic 45-day 
review of the acquisition by DP World, because it's owned by a 
foreign government. But we all know that didn't happen until 
there was a public outcry.
    There are many troubling aspects, to me, of this swift 
approval by the Administration. I speak for myself here.
    First, the Committee that approved this is headed by 
Treasury Secretary John Snow. Secretary Snow's former employer, 
CSX, sold CSX World Terminals, which is its international port 
operations, to Dubai Ports World. This, in and of itself, 
raises serious ethical questions regarding Secretary Snow's 
participation in this decision, since he still has a financial 
connection to CSX.
    Second, the President's nominee to head the Maritime 
Administration, whose job it is to, ``meet the economic and 
security needs of the Nation,'' comes straight from Dubai 
Ports. That was his former employer.
    Third, the President's family has very strong financial 
ties to the UAE.
    Next we have the question of UAE's ties to 9/11. Two of the 
hijackers were from there. Money that supported the operation 
was funneled through there. Terrorism experts today say, 
``There is still an al Qaeda presence at the UAE.''
    And perhaps most troubling to me is that nuclear weapon 
components were shipped through the Dubai Port to Iran, North 
Korea, and Libya. That port was run by Dubai.
    Now, I have to say, that, in itself, is a disqualifier. But 
what makes this deal even more fraught with danger is our 
dismal record in securing our ports. And I know my time is 
running out, so I would ask unanimous consent that the rest of 
my statement be placed in the record.
    [The prepared statement of Senator Boxer follows:]

 Prepared Statement of Hon. Barbara Boxer, U.S. Senator from California
    Mr. Chairman, thank you for holding this hearing today.
    This issue involving Dubai Ports World is the latest example in a 
string of policy decisions by the Bush Administration that have failed 
to protect our ports in this post-9/11 world.
    Our ports are a soft target. We've known this since September 12, 
2001, when we examined our vulnerabilities. Al Qaeda told us as much in 
the documents we have seized from them.
    Now, Dubai Ports World has been approved by this Administration to 
take over some operations not just at 6 ports but at 20 U.S. ports. 
These ports are:

        Portland, ME
        Boston, MA
        Davisville, RI
        New York/New Jersey
        Philadelphia, PA
        Camden, NJ
        Wilmington, DE
        Baltimore, MD
        Norfolk, VA
        Miami, FL
        Gulfport, MS
        New Orleans, LA
        Baton Rouge, LA
        Lake Charles, LA
        Beaumont, TX
        Port Arthur, TX
        Galveston, TX
        Houston, TX
        Freeport, TX
        Corpus Christi, TX

    Mr. Chairman, we need to correct the record about the role of 
terminal operators in port security. Those who say these companies have 
nothing to do with security are wrong.
    The Department of Homeland Security hands out security grants to 
terminal operators.
    And here is how the Washington Post describes their 
responsibilities: ``Terminal operators typically lease facilities from 
a local port authority . . . where their main task is to move the 
thousands of containers . . . In the process, they must maintain 
security at the facility . . . ''
    Let's not deceive the American people. These port operators are 
intricately involved with security.
    Experts on the Exon-Florio law tell me that the Committee on 
Foreign Investment in the United States should have conducted an 
automatic 45-day review of the acquisition by Dubai Ports World because 
it is owned by a foreign government. But, we all know this 45-day 
review did not happen until public opinion forced it.
    There are many troubling aspects of this swift approval by the 
Administration.
    First, the Committee on Foreign Investment in the United States is 
headed by Treasury Secretary John Snow. Secretary Snow's former 
employer, CSX, sold CSX World Terminals--which is its international 
port operations--to Dubai Ports World.
    This in and of itself raises serious ethical questions regarding 
Secretary Snow's participation in this decision.
    Second, the President's nominee to head the Maritime 
Administration, whose job it is to ``strengthen the U.S. maritime 
transportation system--including infrastructure, industry and labor--to 
meet the economic and security needs of the Nation,'' comes straight 
from Dubai Ports World as the Director of Operations for Europe and 
Latin America.
    Third, the President's family has very strong financial connections 
to the UAE, which include investments in The Carlyle Group and the 
financing of the President's brother's business.
    Next we have the question of UAE's ties to 9/11. Two of the 
hijackers were from the UAE. Money that supported the operation was 
funneled through Dubai and even now terrorism experts tell me there is 
still an al Qaeda presence in UAE.
    Perhaps most troubling to me is that nuclear weapon components were 
shipped through the Dubai port to Iran, North Korea, and Libya. That 
port was run by Dubai.
    But what makes this deal even more fraught with danger is America's 
dismal record since 9/11 in securing our ports.
    If our ports were secure . . .

        If we were screening all of our containers;
        If we had made the necessary physical improvements;
        If we had blast resistant containers;
        If we had taken advantage of all the technologies available to 
        us;
        If we had a system to adequately credential all the workers;
        If we had stringent standards for cargo seals and locks;
        If we had followed the advice of the 9/11 Commission to protect 
        our infrastructure in this country . . .

    . . . then this Dubai deal--although still unacceptable--would not 
carry the heavy risks that it does.
    Mr. Chairman, let's take a quick look at this record of inaction.
    I have a chart that shows four pieces of legislation that the 
Commerce Committee passed but never became law. This committee is 
trying to do its job, but we have moved nowhere with this Congress and 
this President.
    And I have another chart with examples of amendments to increase 
port security funding that failed in the 107th and 108th Congresses.
    Mr. Chairman, thank you for holding this hearing. We have a long 
way to go in securing our Nation's port system. In my opinion, we 
should not allow our ports to be operated by a foreign government.
    In my own state, Senator Feinstein and I raised security concerns 
when China applied to run one terminal at the port of Long Beach in 
1997.
    We received letters from then-Secretary of Defense Cohen and 
National Security Advisor Sandy Berger assuring us that there was no 
national security threat.
    That was pre-9/11. I now believe past deals involving foreign 
government-owned companies should be reviewed again. And, in the 
future, they should not be allowed to go through--starting with this 
Dubai Ports World deal.
    Thank you, Mr. Chairman.

    Senator Boxer. And if I just could have 10 additional 
seconds to sum it up.
    We're not screening all our containers. We haven't made the 
necessary physical improvements. We don't have blast-resistant 
containers. We don't have a system to adequately credential all 
the workers. We don't have stringent standards for cargo seals 
and locks. We haven't followed the advice of the 9/11 
Commission.
    So, you take the Dubai situation, plus our lack of action 
on security, and I think this whole deal is fraught with 
danger. And I'm going to oppose this deal.
    The Chairman. I'm sorry that the podium is not open to 
debate. I would like to debate with you on that one.
    Senator Boxer. I would love to.
    The Chairman. Senator Dorgan?

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much.
    The right answer to this issue, I don't think requires 45 
days. In fact, I don't think it requires 45 minutes. We have 
terrorist threats in this country, at our airports, in our 
seaports, we are told constantly. Go to board an airplane, and 
you're asked to take off your belt and take off your shoes to 
get on the airplane at the airport. At the same time, you get 
on the airplane and read the USA Today article about our 
seaports are going to be different because we're going to turn 
the management of our seaports over to a foreign-controlled 
United Arab Emirates company.
    Mr. Chairman, we will have disagreements about that, but it 
seems to me that everybody says, ``Well, we don't want to 
offend anybody.'' What about offending common sense here? I 
think this proposal is nuts. The question is--yes, national 
security--I think there are real serious national security 
issues. The July 2005 GAO report, it says, ``Industrial 
security: The Department of Defense cannot ensure its oversight 
of contractors under foreign influence is sufficient.'' The 
Department of Defense can't assure that its influence or 
oversight is sufficient, but the Department of Homeland 
Security can? I don't think so. The evidence is right in front 
of us.
    A larger question for me, in addition to the security 
issues, is, why is America, particularly in an era of terrorist 
threats, not able to manage its own port facilities? Have we 
become so numb on this notion of outsourcing and offshoring and 
the orgy of globalism that we can't understand our 
responsibility for our own national security interests, our own 
national economic interests?
    Well, it is a global economy, but that doesn't mean you 
have to stop thinking or you're allowed to stop thinking 
clearly. I just don't understand this at all.
    One of the Administration officials said, ``Well, this is 
about--it's about commerce and trade.'' That's all this is 
about? Money? Just commerce and trade, dollars and cents? I 
don't think so.
    What about the national interest here? Are we, in a global 
economy, selfish when we think about the interests of the 
United States of America for a change? I think that our own 
economic interests, our own security interests ought to 
persuade us, in this circumstance, to just say no. The sooner 
we say it, the better. It doesn't take 45 days. It shouldn't 
take 45 minutes, Mr. Chairman.
    The Chairman. I'd like to remind the members that we do 
have a series of witnesses, two different panels, and we're 
into an hour, already, of opening statements.
    Senator Ensign?

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. Thank you, Mr. Chairman. I'll be very 
brief.
    I think that Senator McCain raised some very legitimate 
points, and I think that those kinds of points have to be taken 
into account. We are in a global war on terrorism, and the UAE 
appears to be a good friend in the global war on terrorism. We 
must look at all the implications of this deal. National 
security certainly has to be put right up at the top of the 
priority list, but that same national security also includes 
our relationship with the UAE. And so, we have to look at the 
pros and cons of a deal like this. There's no question that we 
have to look at our ports and every aspect of homeland 
security. We also have to look at the competitive nature of 
ports. The more that we screen, or the more processes that we 
put into place--are we putting lines so long at our ports that 
then they want to offload in Canada, in Mexico?
    I heard the Governor from California, this Sunday on one of 
the talk shows, talking about that, that when he was meeting 
with the prime minister of Japan, one of the complaints with 
the California ports is that they are too slow in offloading. 
Well, the more security we put on that, the more it slows 
things down. Delays could make us less competitive.
    And so, we have to look at a lot of these issues. They are 
not as simple as some are making them out to be. It's very easy 
to get out there and call a press conference and make this look 
like a black-and-white simple issue about national security, 
when it is, in reality, a very complex issue. We need to act 
like adults and make sure that we are doing what is the right 
thing in the interests of the United States and its security, 
as well as its economic interests.
    So, I thank you, Mr. Chairman. These are important hearings 
to have.
    The Chairman. Senator Burns?

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. Mr. Chairman, I have a--just a short 
statement, but I would ask unanimous consent that it be made 
part of the record. I came to listen to these fellows down 
here.
    [The prepared statement of Senator Burns follows:]

   Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
    Chairman Stevens, Senator Inouye, thank you for calling this timely 
and significant hearing today on the security of operations at our 
Nation's ports.
    While my state is far from any seaports, I have heard from hundreds 
of Montana constituents expressing their concern with the transaction 
that we have come here today to discuss. I, too, am very concerned. In 
this post-9/11 era, we must be absolutely vigilant in ensuring national 
security when it comes to foreign management of any sector or industry 
within the United States.
    When there is any question regarding national security, we as a 
Congress and as members of Committee have a responsibility to examine 
it as thoroughly as possible. As the attacks of September 11 have 
taught us, we cannot afford to be wrong even once. When the Chinese 
Government's pursuit of energy assets in the United States last year 
threatened to negatively impact our national security, I worked with my 
colleagues, some of whom are members of this committee, to make sure 
that a thorough national security review was conducted on any future 
transactions of that nature. I plan to do the same in this case, and I 
think we need to have a level-headed and clear discussion about these 
issues, to make absolutely sure that we are doing what is best for the 
safety and security of this country.
    It has come to my attention that the Administration and Dubai Ports 
World have agreed to conduct a 45-day national security review of this 
transaction. While I have been informed that the proper procedures were 
initially followed by those involved with the Dubai Ports World/P&O 
acquisition, I think we all can agree that a second look will be in the 
best interest of national security, and the citizens of this country.
    There also appears to be some disparity over what exactly the law 
says when it comes to reviewing foreign acquisitions with potential 
impacts on U.S. national security. It is my hope that we can find some 
answers to those questions today. The process may very well need to be 
clarified, and all parties involved--the Administration, Congress, and 
industry alike--need to work together.
    We must also look beyond this transaction to the future of port 
security. Port security is just as important to landlocked states as it 
is to those with coastal waters. What comes into our ports reaches 
every part of the country, making this a national issue with national 
implications. On the issue of port security, after the attacks of 
September 11, we in this committee and later in the full Senate worked 
to pass the Maritime Transportation Security Act of 2002, which set out 
to improve security at our Nation's ports, enhance cargo security 
requirements, and strengthen overall port and maritime security.
    As a long-time member of this committee, I am proud of the work we 
have done to enhance security, whether it is by land, sea or air. Since 
September 11, 2001, we have made great progress in recognizing the 
threats we face and being prepared for the future. Our job, however, is 
far from over. We, as members of this committee and this Congress, have 
a responsibility to ensure security at our Nation's ports, on our 
borders, and in every other aspect of our daily lives. I take this 
responsibility seriously, and I will continue these efforts throughout 
my time on this committee.
    Again, thank you for calling this important hearing. I welcome and 
look forward to the testimony of our witnesses. I believe it is time 
that we have an open discussion on this issue.

    The Chairman. Thank you very much.
    Senator Allen?

                STATEMENT OF HON. GEORGE ALLEN, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Allen. Thank you, Mr. Chairman. And I appreciate 
your holding this hearing. Unlike some of my colleagues, who 
have made a determination on this, I actually want to listen 
and learn, gather evidence, determine what sort of added 
security, scrutiny, and transparency would be occasioned here. 
There are several issues, and I think they are all legitimate 
concerns. National security is number one, at our border, at 
our seaports and our airports.
    You have a difference here because it's a government-owned 
terminal operation versus a private one. I'd like to find out 
what sort of differences in security or transparency one would 
have when it's a government, especially if it's emirs, a 
monarchy of sorts, versus a private company that has to file 
reports. There's a certain disclosure there that you don't 
necessarily get out of governments.
    We also need to understand why there are so few American 
companies doing this work. In our ports of Virginia, which are 
big ports, if West Virginia wanted to rejoin us, they'd have a 
port, a major port. And we'd have a Jefferson County back in 
Virginia. But, at any rate, we have Denmark, for example, in 
Maersk Marine, just an absolutely wonderful privately owned 
company. They're the only foreign-flag steamship line that's 
involved in our sealift for our military. In fact, they sunk 
their ships rather than allow Hitler's Germany to get their 
ships in Denmark. So, just because it's a foreign-owned company 
doesn't mean it's bad. In fact, it may make it just fine.
    I just hope that as we go forward here, we'll ask 
questions, try to discern the evidence. The American people 
deserve it. It's not just the Congress. And I'm glad there's an 
extra 45 days, because I think there needs to be a lot of 
comfort, whether people are in Montana or Virginia or 
California. They ought to have a comfort that this has been 
scrutinized, that there are proper precautions in place, 
because, number one, as far as I'm concerned, is national 
security. And I am hopeful that all of these various Federal 
agencies--Customs, Coast Guard, Department of Homeland 
Security--are going to put in some added precautions, because 
this is a facility or an operation owned by a foreign 
government. I'm one who just generally doesn't like the 
government competing with the private sector, but if they are, 
in these sort of situations, there should be adequate security, 
transparency, scrutiny, and conditions to assure the American 
people that these operations will be safe.
    And I thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator DeMint?

                 STATEMENT OF HON. JIM DeMINT, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator DeMint. Thank you, Mr. Chairman.
    Just a few comments. Like most Members of Congress, the 
first I heard of this was from a reporter that told me some 
Arab countries were taking over American ports. That was the 
extent of the information I got. And I think, like most Members 
of Congress, I expressed reservations. But, as we learn more 
about the facts, I think we can see some more of the 
justification here.
    As someone said before, there is silver lining to all of 
this. I think we've learned, as a Senate and as a Congress, how 
sensitive Americans are to the security of their ports. And 
it's something we need to respect and take care of. I think we 
also learned that Americans and most Members of Congress are 
not fully informed about how our ports work. It's difficult to 
look at just one component, Mr. Chairman, as you've talked 
about, but we're usually dealing with foreign products coming 
to this country, loaded in foreign ports, riding on foreign 
ships. And for us to take one piece of this giant puzzle and 
pretend that we're going to solve the problem by beginning what 
is, in effect, racial profiling of different countries, we know 
that's not going to fix the problem.
    We've also known as a Congress, for years, that what was 
mentioned before, that the Transportation Worker Identification 
Credentials, that has been very poorly implemented, is probably 
our biggest Achilles' heel, as far as security of our ports. 
And we've done nothing about it.
    I do hope, as a committee, we can work in good faith and be 
honest about our representations. I am somewhat discouraged, 
what I heard Senator Boxer say. She was--tried to block the 
President's commonsense requirements that our airport security 
workers be citizens of this country. She was one of four 
Democrats to actually sponsor a bill that noncitizens can do 
that. And I think to come back today and say foreign 
governments can't be involved in the management of our ports 
suggests to me that we might not have as good a faith of debate 
as I had hoped.
    But I hope we can take a comprehensive look at our port 
security. Americans deserve it. But they deserve better than a 
racial profiling debate, which we appear to be starting.
    I yield back.
    The Chairman. Senator Lott?
    Senator Lott. I'll pass, Mr. Chairman.
    The Chairman. Senator Snowe?

              STATEMENT OF HON. OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing on this vital question of national 
security.
    And this decision has, rightly, produced a public 
firestorm. Like most Americans and many of my colleagues, I'm 
deeply disturbed by the potential of adding an additional risk 
at a time when security at our 361 ports around America are 
extremely vulnerable.
    And what has become unquestionably clear is that we're 
still unclear exactly how this decision was reached, how it was 
justified, who essentially justified it, in the final analysis, 
given the threat environment in which we find ourselves, and 
given that this issue does represent and underscore our 
greatest terrorist vulnerability, and that is our ports.
    If there's one thing that we've heard time and time again, 
and most certainly in my position as Chair of the Subcommittee 
on Fisheries and Coast Guard, it's that our ports remain 
extremely porous. To quote the National Plan to Achieve 
Maritime Domain Awareness, released in response to the National 
Security Presidential Directive, ``The vastness of the maritime 
domain provides great opportunities for exploitation by 
terrorists. Terrorists can use large merchant ships to move 
powerful conventional explosives or WMD for detonation in a 
port.''
    Moreover, even with the implementation of the Maritime 
Transportation Security Act, back in 2002, that established a 
legal framework for providing for our port security, according 
to the 9/11 Commission's December report, a litany of 
vulnerabilities at our port remains unaddressed. For critical 
infrastructure, we get a D. For national strategy for 
transportation security, we're given a C-minus. For cargo 
screening, they assigned a D. This is not the kind of grades we 
should be satisfied with as a Nation.
    So, this is exactly the wrong time to be introducing an 
additional risk; and all the more so, given the fact that the 
Coast Guard had at once been presented with the tremendous 
responsibilities of providing security at our ports while 
receiving paltry funds and resources with which to execute 
these responsibilities.
    While the service requires $7 billion to fully implement 
these port security plans and initiatives, to date they have 
received a mere $825 million. And just as astonishing, the 
Administration is not requesting any port security grants for 
Fiscal Year 2007. That was a subject of a committee hearing 
here last July.
    Concerned about the fact that the Coast Guard, which is 
responsible for port security, assembled an intelligence report 
for the DHS that expressed objections about the sale due to the 
breadth of the intelligence gap, DHS also initially expressed 
concerns about the sale, and yet, at the end, a purchase was 
still approved without the 45-day review mandated by law for 
any sale that has national security implications.
    What is troubling, Mr. Chairman, is the way in which this 
decision was arrived at, that both the Department of Homeland 
Security, as well as the Director of National Intelligence 
undertook threat assessments simultaneously, including a Coast 
Guard report that was part of the DHS report, but it never rose 
to the highest levels of decisionmaking and leadership, whether 
it was the Secretary of Homeland Security, whether it was the 
Secretary of Defense, whether it was the Secretary of the 
Treasury, whether it was the Director of National Intelligence. 
That, I think, illustrates the problem with reaching these 
types of decisions that have profound implications and 
obviously are grave decisions for the future about national 
security.
    Toward that end, Senator Cantwell, as she mentioned, we 
have sent a letter to the Coast Guard. We want to know exactly 
what types of decisions were included in that memo, what kinds 
of issues were considered, and to what level did they--were 
they raised within the Department of Homeland Security.
    Similarly, Senator Schumer and I have sent a letter to 
Secretary Chertoff expressing our strong concerns about the 
system that's obviously broken. We want to know if the 
Secretary became aware of the concerns raised by the Coast 
Guard and the concerns raised by any of the other component 
branches within the Department of Homeland Security. Did 
Members of the Committee on Foreign Investment see the Coast 
Guard memo or any of the final reports that were issued within 
the Department of Homeland Security on this final transaction?
    The bottom line is, Mr. Chairman, there are unanswered 
questions that demand answers to this very grave situation. I 
think we all should be concerned about the fact that national 
security decisions should reach the highest levels of decision-
making leadership within the departments, as well as the 
President of the United States.
    The Chairman. Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. I don't believe we 
would be having this hearing if this company in question were 
still owned by the British. And I think that that exposes an 
unfortunate aspect to all of this.
    We need friends in the Middle East. We certainly need them 
in the war on terror. And the UAE has been a friend. But 
setting all that aside, I think the American people would be 
shocked to find just how internationalized shipping is, that 
roughly only 3 percent of ships bear American flags now, that 
carry American goods in and out of all of our ports.
    Only a South Korean company, and soon a Taiwanese company, 
will be delivering things into Portland. If you travel to 
Oakland, Los Angeles, Seattle, you'll find their port terminals 
are operated by many different nationalities, including 
Singapore, one of the largest.
    I think my question, Mr. Chairman and colleagues, is simply 
that we must focus on, was the law followed? Was security 
adequately provided for? And do we need to change the law? And 
I think the focus on the Arab peoples in this is unfortunate 
and unworthy of us.
    So, I am anxious to find out the facts and make sure that 
the security of the American people is provided for without 
regard to the ethnicity of the owners of these companies.
    Thank you.
    The Chairman. Senator Sununu?

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you, Mr. Chairman.
    I couldn't agree more with the sentiments of Senator Smith 
with regard to looking at this process, and whether the law was 
followed, and whether security interests are being dealt with, 
regardless of the ethnic background of the particular firm. 
We're talking about a process for reviewing the leases that are 
signed for operating certain terminals at certain ports in the 
United States. And before and after September 11th, we had, 
across America, port authorities signing agreements with many 
foreign-owned firms, for just the reason Senator Smith 
described. This is an international business. These are 
international ports.
    And the questions, in all cases, should be whether those 
firms can be counted on to work cooperatively with the port 
authorities with whom they sign the leasing arrangements, who 
are the port owners, and with the Coast Guard or Department of 
Homeland Security or others that are providing for the 
fundamental security considerations at the port, whether they 
have good personnel and auditing systems in place that will 
enable them to be a good corporate tenant at the particular 
firm. Those are the operating questions. Those are the 
essential questions.
    I think we ought to be able to look at them in a direct 
way, in an honest way, and make sure that, as Senator Smith 
said, the law was followed. I don't think anyone in this room--
certainly none of the Members of the Senate--I don't think 
anyone in Congress feels that we were given as much time as 
would have been ideal to look at the process, to look at 
information that was put together during the review. And I 
think that's why we have been provided with a delay, if you 
will, to make sure that the committees of jurisdiction have 
time to take a look at this process.
    But it should be done without focusing on ethnic background 
certainly, and respecting the fact that firms from North 
America and Europe and Asia have all had good working 
relationships with all of the major ports around the country. 
And I expect that if we do our job here, and the panelists do 
their job, that will continue to be the case.
    Thank you, Mr. Chairman.
    The Chairman. Senator Bill Nelson?

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Bill Nelson. Thank you, Mr. Chairman.
    I think it has already been mentioned here that this 
morning's Jerusalem Post had a story that, ``Dubai Ports World 
Examines Their Certificates of Origin to Make Sure that 
Products Entering Dubai Do Not Originate in Israel.'' And that 
is something that clearly ought to be examined.
    The other thing, Mr. Chairman, that I would hope, in the 
course--maybe not this hearing, but that this committee would 
examine--on February 7, a nominee came through this committee, 
named David Sanborn, to be the head of the U.S. Maritime 
Administration. At the time of that hearing, nothing was said 
about him being a high official in this particular company. And 
so, in light of what has happened over the course of the last 
week and a half, clearly I would hope that we will bring him 
back to this committee to re-examine this fact that was 
omitted, to see if there is any potential conflict of interest, 
since he's named as the head of the U.S. Maritime 
Administration.
    Thank you, Mr. Chairman.
    The Chairman. I'm going to exercise the prerogative of the 
Chair and ask Mr. Jackson, Admiral Gilmour, and Mr. Ahern to 
leave the witness table and call the second panel first. I feel 
that there's--if we go through one complete round of 
questioning of the Administration witnesses, we'll never get to 
those we've asked to come explain this deal. So, let's take the 
explanation first.
    Mr. Jackson, I apologize.
    Senator Kerry. Mr. Chairman, we also have some key 
questions of the Administration themselves.
    The Chairman. They will testify, but first we'll hear from 
the facts of the Dubai people, the people we've asked come to 
testify.
    Senator Kerry. Mr. Chairman, schedule-wise, that may 
present some problems. Could we keep the record open for 
submission of questions in writing?
    The Chairman. You certainly may. It's my intention that the 
Senators who are here will hear the facts from the proponents 
of this process. I think if we hear the Administration 
witnesses, too many will leave by the time we get to 5 o'clock, 
5:30.
    Senator Kerry. No, I respect what the Chairman is trying to 
do. I just want to make certain that we can--because we have 
some other----
    The Chairman. Oh, they will--they're not leaving us. 
They're going to testify----
    Senator Kerry. But----
    The Chairman.--this afternoon.
    Senator Kerry. Right, but some of us have conflicts. We 
expected this panel to be first and we have other things. So, 
I'm just asking the record be left open so we can submit 
questions in writing.
    The Chairman. That would be----
    Senator Kerry. Thank you.
    The Chairman.--agreeable.
    Mr. Bilkey is Chief Operating Officer of Dubai Ports World. 
Could we call on you first? We'll expect to go right through 
the witness table and then go through a series of questions, 
or, if the Committee would agree, listen to the Administration 
witnesses before we ask any questions. We'll determine that at 
the end of your testimony.
    Mr. Bilkey, thank you for coming.

                STATEMENT OF H. EDWARD BILKEY, 
               CHIEF OPERATING OFFICER, DP WORLD

    Mr. Bilkey. Thank you, Mr. Chairman.
    The Chairman. Pull that toward you and push the button, 
please.
    Mr. Bilkey. This is my first time.
    I have some handouts, Mr. Chairman, that I'd like to be----
    The Chairman. The staff will come get them, yes, sir.
    Mr. Bilkey.--in the appropriate time.
    The Chairman. Someone go get those. OK.
    Mr. Bilkey. Mr. Chairman and members of the Committee, my 
name is Ted Bilkey, and I'm the Chief Operating Officer of DP 
World. And I've worked in the Middle East for many years.
    I commend you for holding this hearing, and DP World 
welcomes the opportunity to get the truth out so that Congress 
and the public can better understand the facts surrounding our 
acquisition of P&O Ports North America, Inc.
    By way of personal background, I grew up in New Jersey and 
New York. I served as an officer in the U.S. Navy, and I have 
worked in the ports and shipping business for over 45 years, 
and started on the docks of Brooklyn and Newark.
    Also, as a personal note, it's an honor for me to appear 
before this committee of the U.S. Senate. My grandfather, 
Joseph S. Frelinghuysen, served as a Senator from New Jersey 
early in the 20th century and as a Chairman of the Senate 
Committee on Coast Defense.
    Indeed, every generation from the founding of the United 
States to today----
    Senator Kerry. Mr. Chairman?
    Mr. Bilkey.--members of my family----
    Senator Kerry. Can the witness pull the mike closer?
    Mr. Bilkey.--have served in the Senate, House of 
Representatives----
    The Chairman. Mr. Bilkey, could you pull the mike up closer 
to you, please?
    Mr. Bilkey. Yes, sir.
    The Chairman. All of you, they are very, very sensitive, 
distance sensitive. Thank you.
    Mr. Bilkey. Let me start by giving a little background on 
DP World.
    DP World is the seventh-largest port terminal operator in 
the world, before this acquisition. We manage 19 terminals, 4 
free-trade zones, 3 logistics centers, one of which is the 
largest in the world--the building is even bigger than the 
Pentagon--and operations in some 14 countries, where we're all 
welcome.
    Our Jebel Ali facility in Dubai handles more container 
freight than all the ports on the East Coast of the United 
States combined. We support the U.S. military in Germany, 
Djibouti, and Dubai.
    Our facilities in Dubai have hosted the U.S. Navy on a 
continual basis for nearly 2 decades. I was involved in 
initiating the first carrier coming into Jebel Ali in the first 
Gulf War. Our harbor master control center in Dubai is manned 
24/7 by U.S. Navy personnel.
    And, if I may, Mr. Chairman, I'd like to show the Committee 
some pictures, which I've handed around.
    We operate as a strictly commercial entity, but are owned 
by the Government of Dubai. And our management is truly 
international, and we have 3 Americans on our 11-man top 
management team.
    Last week, Lloyd's List voted DP World as the Best Port 
Operator of the Year in 2005, and we're very proud of our 
record.
    Now, as a general trend, the shipping and port business is 
becoming increasingly globalized and consolidated. DP World 
determined to acquire P&O for commercial reasons, based on its 
strong management team and a complimentary geographic fit. It 
is important to understand that this is a $6.8 billion 
transaction involving assets all over the globe. The U.S. 
operations of P&O, P&O Ports North America, constitute 
approximately 10 percent of the overall value of the 
transaction.
    It is also important to understand that it has always been 
our intent to operate P&O Ports North America as a separately 
incorporated U.S. legal entity using its longstanding 
reputation in management structure and personnel to the maximum 
extent possible.
    As a smaller entity acquiring a larger entity, DP World 
needs the existing talent and expertise of the P&O Ports North 
American team to run these operations. And I am joined here by 
Rob Scavone, the General Counsel of P&O Ports North America.
    I would now like to dispel a couple of myths and try to 
establish fact from fiction.
    First, we are not acquiring or taking over U.S. ports, as 
some people have claimed. It's been said here earlier, U.S. 
ports are owned by local governments or port authorities, which 
is a fundamental fact that has been totally distorted. Rather, 
we act as an operator, who has a lease to operate a particular 
terminal within a port. The terminal operator is responsible 
for the area within the port that serves as a loading, 
unloading, or transfer point of origin.
    Second, this transaction does not involve an outsourcing of 
U.S. security, as some have alleged. And I would defer to the 
Department of Homeland Security or my colleague from P&O Ports 
in charge of security to describe in detail how port security 
operates in the U.S. Suffice it to say that security is a 
layered approach, with the U.S. Customs and Border Protection 
and Coast Guard taking leading roles, followed by local police 
and harbor police. A terminal operator is one piece of a 
complex picture.
    DP World and P&O Ports North America actively participate 
in various U.S. Government-sponsored initiatives. These 
programs include the Customs Trade Partnership Against 
Terrorism, so-called C-TPAT, the Container Security 
Initiative--in fact, the United Arab Emirates was the first 
country in the Middle East to join that initiative--the 
Business Alliance in Smuggling and Counterfeiting, and the 
International Maritime Organization, International Ships and 
Port Security, ISPS, as it is known, and, finally, the 
Megaports Initiative with the Department of Energy. DP World 
has expressly committed to continuing, and, as appropriate, 
expanding, its commitment to all these programs.
    Third, DP World did not obtain U.S. Government approval of 
its acquisition of P&O Ports North America, as some people have 
stated, secretly, in the dead of the night, or without adequate 
review. This is a total misrepresentation. There is an explicit 
process administered by the Committee on Foreign Investment in 
the United States, CFIUS, mandated by Congress in the Defense 
Protection Act and by the Department of the Treasury 
regulations. In point of fact, CFIUS actively reviewed the 
transaction for almost 3 months, and we complied with the 
process, and we complied with the law.
    DP World actually first met with the CFIUS staff on October 
17, 2005. Two weeks later, we held a face-to-face meeting with 
certain key CFIUS member agencies, including the Department of 
Homeland Security, Customs and Border Protection, Coast Guard, 
Department of Justice, and the Department of Commerce. We 
provided detailed information on the proposed transaction to 
CFIUS, which had already commenced its review and analysis of 
the transaction.
    We subsequently met, on a voluntary basis, on December 6, 
2005, with all member agencies of CFIUS. I, myself, flew in 
from Dubai to participate in that meeting with our senior vice 
president for operations for Europe and the Americas and our 
senior officer responsible for overseeing global security.
    Further, during this period, the transaction received 
considerable coverage in the press in the United States and 
Europe.
    We filed our CFIUS notification on December 15. CFIUS 
commenced a 30-day review, as required by statute. During the 
course of that review, CFIUS asked us to memorialize certain 
undertakings we had voluntarily made in our notification, as 
well as others, at their request. These took the form of a 
letter of assurances, dated January 6, 2006. And among these 
undertakings were seven additional express and legally binding 
commitments unique to the transaction.
    Based on this review and the letter of assurances, on 
January 17, 2006, CFIUS issued a formal letter of no objection, 
completing the CFIUS review and allowing the transaction to 
proceed. In reliance on the U.S. Government's clearance, DP 
World took the legal steps necessary to complete its purchase 
of P&O on a global basis.
    In conclusion, I respectfully submit that DP World is a 
company that, in good faith, sought to comply with applicable 
U.S. legal requirements. And having been told by the U.S. 
Government that we met those requirements, now finds itself in 
the position of being told that that was not good enough.
    Nonetheless, we recognize that there are concerns in 
Congress and among the public about DP World's acquisition of 
P&O's terminal operations. DP World has, therefore, voluntarily 
acted to assure people that the security of the United States 
will remain strong. Specifically, on February 26, we 
voluntarily issued a legally binding Hold Separate Commitment 
under which the management and control of P&O North America's 
operation will be held in suspension without direction or 
control from DP World until May 1, 2006, in order to allow 
additional review of DP World's acquisition of P&O Ports North 
America.
    In addition, at the same time, we requested CFIUS to 
conduct a review, including a full 45-day investigation of the 
acquisition. We stated that we would abide by the outcome of 
that review. The Hold Separate Commitment contains a number of 
specific obligations, including maintaining P&O Ports North 
America's current management, having a U.S. citizen serve as 
the chief security officer for P&O Ports North America, as it 
actually exists today.
    We are confident that further review by CFIUS will confirm 
that DP World's acquisition of P&O's U.S. operation does not 
pose any threat to America's safety and security.
    If there is good to come out of this experience, perhaps it 
is that both Congress and the Executive Branch will take a 
closer look at ways to upgrade port security, and increase 
funding for those efforts. DP World strongly encourages such 
efforts and look forward to working with you to achieve them.
    Finally, I'd like to conclude by making a couple of 
observations as an American with a long family history in 
America. The U.S. Government, through successive 
administrations, had pursued a policy of encouraging investment 
in the United States. The assumptions underlying this policy 
are that the United States is a land governed by the rule of 
law, but it also is a country that treats fairly and on an even 
playing field. It is a nation whose economic well-being and 
national security are enhanced by engaging with the world.
    I firmly believe that the security of our country, the 
United States, is well served, and, in fact, enhanced on 
numerous levels, by allowing this transaction to go forward and 
by working with DP World's global 51-terminal network, which no 
other company has, as a responsible partner in securing 
additional security. At home and abroad, security is 
everybody's business, and it's particularly our business.
    And I'd end by saying, on Sunday--I'm kind of an American 
historian, and I went to the Lincoln Memorial to relax and 
consider all that's happened. And I saw the words of our 16th 
President on his second Inaugural Address, ``And with malice 
toward none, with charity for all, with firmness in the 
right.'' And it's my personal prayer that all our actions will 
be guided by these principles.
    Thank you all very much.
    [The prepared statement of Mr. Bilkey follows:]

                Prepared Statement of H. Edward Bilkey, 
                   Chief Operating Officer, DP World
    Mr. Chairman, Mr. Co-Chairman and members of the Committee,
    My name is Ted Bilkey. I am the Chief Operating Officer of DP 
World. I commend you for holding this hearing. DP World welcomes the 
opportunity to get the truth out so that Congress and the public can 
better understand the facts surrounding our acquisition of P&O Ports 
North America, Inc.
    By way of personal background, I grew up in New Jersey and New 
York. I graduated from Yale and the Fletcher School of Law and 
Diplomacy and served as an officer in the U.S. Navy. I have worked in 
the ports and shipping business for over 45 years, starting on the 
docks of Brooklyn and Newark. Also, on a personal note, it is a 
pleasure and an honor for me to appear before this Committee of the 
U.S. Senate. My grandfather, Joseph S. Frelinghuysen, served as Senator 
from New Jersey earlier in the 20th century and as Chairman of the 
Senate Committee on Coast Defenses. Indeed, in every generation from 
the founding of the United States to today members of my family have 
served in the Senate, House of Representatives or as Secretary of 
State.
    Let me start my presentation by giving you a little background on 
DP World and its acquisition of The Peninsular & Oriental Steam 
Navigation Company, which is headquartered in the United Kingdom. Prior 
to the acquisition, DP World was the seventh largest port terminal 
operator in the world. We manage 19 container terminals, 4 free trade 
zones, 3 logistics centers and operations in some 14 countries, which 
incorporated the operations of the U.S. company CSX World Terminals 
about one year ago. These include operations in support of the U.S. 
military in Germany, Djibouti and Dubai. Our Jebel Ali facility in 
Dubai handles more container freight than all the ports on the East 
Coast of the United States combined. We operate as a strictly 
commercial entity but are owned by the Government of Dubai. Our 
management is truly international. Of the 11 members of DP World senior 
management, three are Americans, one is British, two are Indian, one is 
Dutch and four are citizens of Dubai. Our Board Chairman, a citizen of 
Dubai, went to Temple University. Our Chief Executive Officer, also a 
citizen of Dubai, is a graduate of the University of Arizona. Last week 
Lloyds List voted DP World as the Port Operator of the Year 2005. Our 
facilities in Dubai have hosted the U.S. Navy on a continual basis for 
nearly two decades. Our Harbor Master control center in Dubai is manned 
247 by U.S. Navy personnel. Additionally, U.S. Customs has a 
constant presence. If I may, Mr. Chairman, I'd like to show the 
Committee some pictures which may be helpful in understanding what we 
do.
    Now, as a general trend, the shipping and ports business is 
becoming increasingly globalized, and, as a result, consolidated. DP 
World determined to acquire P&O for commercial reasons, based on its 
strong management team and global and complementary geographic fit as 
the shipping world becomes more consolidated. It is important to 
understand that this is a $6.8 billion transaction involving assets all 
over the globe. The U.S. operations of P&O--P&O Ports North America--
constitute approximately 6 to 10 percent of the overall value of the 
transaction, depending on calculation methods. As a smaller entity 
acquiring a larger entity, DP World wants and needs the existing talent 
and expertise of the P&O Ports North America team to run those 
operations. It is important to understand that it has always been DP 
World's express intent, from the start, to operate P&O Ports North 
America as a separately incorporated U.S. legal entity, using its 
longstanding reputation and maintaining the current management 
structure and personnel to the maximum extent possible but reporting to 
the senior management in Dubai. As part of our voluntary cooperation 
and offer, we have agreed to disengage any reporting to Dubai 
management for the present.
    I would now like to try to dispel a couple of myths which have been 
played up.
    First, we are not ``acquiring,'' ``controlling'' or ``taking over'' 
U.S. ports, as some people have claimed. U.S. ports are owned by local 
governments or port authorities, which is a fundamental fact that has 
been totally distorted. Rather, we act as an ``operator'' who has a 
lease or license to operate a particular terminal within a port. The 
terminal operator is responsible for the area within the port that 
serves as a loading, unloading or transfer point of the cargo. To be 
exact, DP World would acquire the following terminal leases or 
concessions that handle containers operated by P&O Ports North America:

   Baltimore

   Philadelphia--in a 50-50 joint venture with Stevedoring 
        Services of America

   Miami--50 percent of Port of Miami Terminal Operating 
        Company

   New Orleans

   Newark--through a 50-50 joint venture in the Port of Newark 
        Container Terminal (PNCT) with Maersk terminals

    P&O is involved in general stevedoring and other cargo handling 
operations in a number of other locations in the United States and a 
passenger terminal in New York in close cooperation with the U.S. Coast 
Guard. Stevedoring is lifting containers on or off vessels and 
depositing them in an area operated by the port authority.
    Second, this transaction does not involve an ``outsourcing of U.S. 
security,'' as some have alleged. I will defer to the Department of 
Homeland Security and others to describe in detail how port security 
operates or to my colleague from P&O Ports North America in charge of 
security, Rob Scavone. Suffice it to say that security is a layered 
approach, with the U.S. Customs and Border Protection and Coast Guard 
taking leading roles to ``push out the borders'' of the United States. 
A terminal operator is one piece of a complex picture.
    Within the context of the terminal operator's responsibilities, 
both DP World and P&O Ports North America are active participants in 
various U.S. Government-sponsored and international initiatives. These 
programs include:

   The Customs-Trade Partnership Against Terrorism;

   The Container Security Initiative--in fact the United Arab 
        Emirates was the first country in the Middle East to join that 
        initiative;

   The Business Alliance on Smuggling and Counterfeiting;

   The International Maritime Organization International Ships 
        and Port Security; and

   The Megaports Initiative with the Department of Energy.

    DP World has expressly committed to continuing and, as appropriate, 
expanding its commitment to these programs.
    Third, DP World did not seek to obtain U.S. Government approval of 
its acquisition of P&O Ports North America, as some people have stated, 
``secretly,'' ``in the dead of the night'' or ``without adequate 
review.'' This is a total misrepresentation. There is an explicit 
process administered by the Committee on Foreign Investment in the 
United States (CFIUS) mandated by Congress in the Defense Production 
Act and by Department of the Treasury regulations. In point of fact, 
CFIUS actively reviewed the transaction for almost 3 months. We 
believed we were doing the right thing as we were following the law and 
the process, as we have in other countries.
    DP World first met with CFIUS staff on October 17, 2005 to discuss 
the acquisition. We then held a face-to-face meeting with certain key 
CFIUS member agencies--including the Department of Homeland Security, 
Customs and Border Protection, Coast Guard, Department of Justice and 
Department of Commerce--on October 31, 2005. As a result of those 
meetings, DP World provided additional detailed information on the 
proposed transaction to CFIUS, which had already commenced its review 
and analysis of the transaction. DP World and P&O Ports North America 
held a subsequent meeting on December 6, 2005 with all member agencies 
of CFIUS. I myself flew in from Dubai to participate in that meeting 
with our Senior Vice President for Operations for Europe and the 
Americas and our senior officer responsible for overseeing security.
    Further, during this period, the transaction received considerable 
coverage in the press in the United States and Europe. For example, on 
October 31, 2005 The Wall Street Journal carried an article reporting 
on the transaction and on November 14, 2005 the Journal of Commerce ran 
a lengthy article reporting on the U.S. aspects of it. Also, the 
Financial Times reported extensively on the transaction from the start. 
Copies of some of these articles are attached as exhibits to my written 
testimony.
    We filed our CFIUS notification on December 15, 2005. It should be 
noted that CFIUS has previous filings from P&O from its acquisition of 
International Terminal Operating Company, DP World from its acquisition 
of CSXWT and, most importantly, from P&O's security filings with the 
Coast Guard for its U.S. facilities.
    CFIUS commenced a 30-day review as required by statute. During the 
course of that review, CFIUS asked us to memorialize certain 
undertakings we had voluntarily made in our notification, as well as 
others at their request. These took the form of a ``Letter of 
Assurances'' dated January 6, 2006. Among these undertakings were 7 
additional express and legally binding commitments:

   To maintain ``no less than'' the current levels of 
        membership and cooperation in various security arrangements;

   To provide DHS with at least 30 days advance notice of any 
        proposed material change to our levels of membership or 
        cooperation in these security arrangements;

   To operate all U.S. facilities to the extent possible with 
        current U.S. management;

   To designate a responsible corporate officer to serve as 
        point of contact with the Department of Homeland Security on 
        security matters;

   To provide relevant information promptly to DHS upon 
        request;

   To assist and support law enforcement agencies (including 
        disclosing information on the design, manufacture and operation 
        of the U.S. facilities); and

   To provide records relating to foreign operational 
        direction, if any, of the U.S. facilities.

    A copy of that Letter of Assurances is attached as an exhibit to my 
written testimony submitted to the Committee.
    Based on this review and the Letter of Assurances, on January 17, 
2006 CFIUS issued a formal letter of ``no objection'' completing the 
CFIUS review and allowing the transaction to proceed. In express 
reliance on the U.S. Government's clearance, DP World took the legal 
steps necessary to complete its purchase of P&O on a global basis, 
which included advising P&O that our offer was unconditional because 
all necessary permissions had been received.
    In conclusion, I respectfully submit that DP World is a company 
that in good faith sought to comply with applicable U.S. legal 
requirements, and, having been told by the U.S. Government that we met 
those requirements, now finds itself in the position of being told that 
that was not good enough.
    Nonetheless, we recognize that there are concerns in Congress and 
among the public about DP World's acquisition of P&O's terminal 
operations. Despite having obtained approval by the Federal Government 
and relied on that approval, DP World has moved voluntarily to take 
steps to assure people that the security of the United States will 
remain strong. Specifically, on February 26, 2006, DP World and P&O 
Ports North America voluntarily entered into a legally binding ``Hold 
Separate Commitment'' under which the management and control of P&O's 
North American operations will be held in suspension--without direction 
or control from DP World--until May 1, 2006 or completion of the CFIUS 
process in order to allow additional review of DP World's acquisition 
of P&O Ports North America. In addition, at the same time the two 
companies requested CFIUS to conduct a review, including a full 45-day 
investigation of the acquisition. Both companies expressly stated that 
they will abide by the outcome of that review. The ``Hold Separate 
Commitment'' contains a number of specific obligations, including 
maintaining P&O Ports North America's current management and having a 
U.S. citizen serve as Chief Security Officer for P&O Ports North 
America. We are confident that further review by CFIUS will confirm 
that DP World's acquisition of P&O's U.S. operations does not pose any 
threat to America's safety and security. We hope that voluntarily 
agreeing to further scrutiny demonstrates our commitment to security 
and to operating as a responsible corporate citizen of the United 
States.
    If there is good to come out of this experience, perhaps it is that 
both Congress and the Executive Branch will take a closer look at port 
security and find ways to upgrade it further and increase funding for 
these efforts. DP World strongly encourages such efforts and looks 
forward to working with you to achieve them.
    Finally, I would like to conclude by making a couple of 
observations as an American. The U.S. Government, through successive 
administrations, has pursued a policy of encouraging investment in the 
United States. The assumptions underlying this policy are that the 
United States is a land governed by the rule of law, is a country that 
treats people fairly and on an even playing field and is a nation whose 
economic well being and national security are enhanced by engaging with 
the world. It is my firm belief that the security of our country--the 
United States--is well served and in fact enhanced on numerous levels 
by allowing this transaction to go forward and working with DP World's 
global 51-terminal network as a responsible partner in ensuring 
security. At home and abroad, security is everybody's business.
    On Sunday I went to the Lincoln Memorial to relax and consider all 
that has happened. I saw the words in our sixteenth President's Second 
Inaugural Address: ``With malice toward none, with charity for all, 
with firmness in the right.'' It is my personal prayer that all our 
actions will be guided by these principles.
    Thank you.
                                 ______
                                 

               The Wall Street Journal--October 31, 2005

        P&O Attracts Buyout Overture Amid Shipping-Industry Boom

                            by Jason Singer

    LONDON--Peninsular & Oriental Steam Navigation Co. has received a 
buyout overture from a port operator in Dubai, according to a person 
familiar with the matter, in a potential deal that could be valued at 
nearly GBP 3 billion, or about $5 billion.
    The United Arab Emirates company, Dubai Ports World, owned by the 
emirate of Dubai, sought a meeting for early this week with the British 
ports and ferries company, although the two sides haven't yet talked. 
There can be no assurances a deal will emerge, this person said. The 
offer was previously reported by London's Sunday Times.
    P&O said in a statement yesterday it has been contacted by a third 
party but there have been no negotiations. A P&O spokesman declined to 
elaborate. A person at Dubai Ports World said nobody was available to 
comment.
    If a deal emerges, it would be the latest in the rapidly 
consolidating industry of ports and container shipping, which remains 
the most popular mode of transportation for moving goods world-wide.
    In May, A.P. Moeller-Maersk of Denmark, a large container-shipping 
firm, bought Royal P&O Nedlloyd NV of the Netherlands--a smaller 
shipping company in which P&O held a 25 percent stake--for 2.3 billion 
euros ($2.78 billion). Shipping firms are finding they need greater 
economies of scale as business amid a boom in the business fueled in 
large part by the transport of Chinese exports world-wide.
    Earlier this month German tourism and transportation conglomerate 
TUI AG received the necessary backing from shareholders in CP Ships 
Ltd. to buy the U.K. shipping company for about 1.74 billion euros, 
making TUI the fifth-largest marine shipper by volume.
    Port operators around the world have been consolidating. PD Ports 
PLC of the U.K. said earlier this month it had received a takeover 
approach from an unidentified suitor, and British ports operator Mersey 
Docks & Harbour Co. was purchased by rival Peel Ports in September for 
GBP 771 million.
    P&O has been considered a potential takeover target since Maersk 
purchased Royal P&O Nedlloyd. That sale slimmed the U.K. company into a 
focused port operator with terminals world-wide. P&O has a market value 
of about GBP 2.3 billion.
    Last week, the company reduced its 2005 profit expectations because 
lower consumer-spending in the U.K. had damped business at its two 
British terminals. Should Dubai Ports pursue a deal for P&O, it is 
expected several other global port operators in Hong Kong, Singapore 
and elsewhere may also consider a bid for P&O.
    Founded in 1837, P&O is considered one of the world's top port 
operators after hiving off its container-shipping unit. The company has 
27 container terminals around the world and also runs logistics 
services in more than 100 ports in 18 countries. In the U.K., P&O is 
also one of the top ferry operators.
    Dubai Ports World has grown through acquisitions. It bought the 
international-terminals business of CSX Corp. for $1.15 billion in 
2004, which launched it to the top leagues of global port operators.
                                 ______
                                 

                 Journal of Commerce--November 14, 2005

    P&O Ports in Play; Unsolicited Offer for Port Operator Could Be 
                         Followed by Other Bids

                           by Peter T. Leach

    Whoever wins the nascent bidding war for the assets of Britain's 
venerable Peninsula and Oriental Steam Navigation Co., the outcome will 
clearly spell a victory for P&O management's efforts to unlock the 
value in those assets. The outcome also will underscore the high 
premium that investors place on the consistent earning power of 
container ports and terminals, in contrast to the much more cyclical 
earnings of ocean carriers.
    ``In the same way that CP Ships and P&O Nedlloyd attracted quite a 
premium because of their scarcity value as listed companies, I would 
assume that P&O Ports would attract quite a premium as well,'' said 
Mark Page, director of Drewry Shipping Consultants in London. ``When 
you buy P&O, primarily it's the ports you're getting, because it 
doesn't come with too much additional baggage.''
    P&O Ports, the world's fourth-largest port operator, represents the 
value in P&O's assets, because it generates 80 percent of the group's 
profit. P&O operates 27 terminals and logistics centers in 100 ports in 
18 countries, with 2004 throughput of 22 million TEUs.
    P&O's ferries division is losing money and has been a drag on 
company earnings, and hence its share price. P&O's management has been 
considering ways of spinning off the ferries division, but Dubai Ports 
International, which made a surprise offer for the entire company at 
the beginning of November, apparently was unwilling to wait for that 
eventuality.
    ``What I always thought would happen was that everyone was waiting 
for the ferries to be sold, so that you would have a pure port 
company,'' Page said. ``But what is happening is that because of the 
scarcity value of these listed companies, Dubai Ports said, `We can't 
wait for the ferries to be sold, so we'd better get it now and we'll 
get rid of the ferries.' ''
    Dubai Ports, which became the world's fifth-largest port operator 
last year through its acquisition of CSX World Terminals, approached 
P&O's management in late October with an unsolicited offer. The bid 
could value the company at nearly $7 billion, compared with its market 
value of $4.1 billion before the offer. The bid, which was not clearly 
defined, was quickly leaked to the press, put P&O in play, and drove 
P&O's stock price up 40 percent.
    In the wake of the news, an array of global port operators and 
carriers are said to have contacted their investment bankers and to be 
preparing counteroffers. Potential bidders whose names have been 
mentioned include Temasek Holdings, the investment arm of the Singapore 
government, which already owns PSA Ports, the world's second-largest 
container terminal operator; APM Terminals, the port-operating division 
of A.P. Moller-Maersk; and Hutchison Port Holdings, the port division 
of Hong Kong's Hutchison Whampoa and the world's largest port operator.
    Mediterranean Shipping and CMA CGM are reported to be watching the 
fray closely in the hopes of picking up some of the ports and terminals 
that the winning bidder will inevitably have to sell off. ``In any 
portfolio of ports, there are bound to be certain ports that don't 
necessarily make sense for the acquiring company either because the 
regulators frown on them or because it may already have a terminal in 
that harbor,'' Page said.
    European regulators would certainly frown on the potential 
antitrust issues that would be raised by a successful counteroffer by 
Hutchison Port Holdings. Concerns over competitive issues could force 
Hutchison to sell some of the British and North European ports that it 
might acquire.
    In the U.K., P&O Ports has stakes in terminals in the ports of 
Tilbury and Southampton and has received approval to build a new port 
and logistics center at London Gateway in Thurrock, Essex. Hutchison's 
interests in the U.K. include terminals it owns and operates in the 
ports of Thamesport, Harwich and Felixstowe.
    P&O's port interests in Europe include facilities in Antwerp and Le 
Havre on the Atlantic and Marseilles-Fos on the Mediterranean. 
Hutchison operates and/or owns terminals in Rotterdam, Willebroeck 
(near Antwerp), Gdynia in Poland, and at Germany's inland port of 
Duisburg.
    There apparently would be no antitrust problems in the United 
States, but U.S. politicians might make noise over Hutchison's 
acquisition of P&O Ports, which operates in the Port of New York and 
New Jersey, Philadelphia, Baltimore, Miami, New Orleans and Houston. A 
few conservative Members of Congress have complained that the Hong 
Kong-based company's operation of ports at Balboa and Cristobal at 
either end of the Panama Canal gives China control of the strategic 
waterway.
    Whatever the outcome, P&O's shareholders stand to benefit from its 
management's efforts of the last few years to clean up the company's 
portfolio of holdings. The effort began in 1994, when it sold P&O 
Cruises to Carnival Cruise Lines. In 1996 it spun off its container 
division into a joint venture with Royal Nedlloyd, which became P&O 
Nedlloyd, in which it retained a 25 percent stake until it was sold to 
A.P. Moller-Maersk this year. P&O subsequently divested or sold off 
real estate holdings in ports around the world. Most recently, it sold 
off P&O Cold Logistics, the third-largest cold storage and distribution 
operator in the world, to Versacold Holding of Canada for 183 million 
pounds ($320 million).
    Whether P&O's management had ever intended to prepare the company 
for sale as a result of these beautification efforts, that is the 
almost inevitable outcome now. ``It has resulted in realization of 
shareholder value,'' Page said. ``Before this, no one would have been 
interested in taking it over."
                                 ______
                                 

 Financial Times (London, England)--November 29, 2005 Tuesday--London 
                               Edition 2

          Dubai's DP World Seals Pounds 3.2bn Purchase of P&O

                            by Robert Wright

    Dubai's DP World is to buy P&O, the UK container ports and ferries 
group, for Pounds 3.19bn.
    After the deal--to be announced today--DP World, the container 
terminal operator owned by Dubai's ports and freezones authority, will 
be nearly as big as the world's third biggest container terminal 
operator, Denmark's APM Terminals.
    The price offered for P&O--which announced pre-tax profits before 
exceptional items of Pounds 170m on Pounds 3.06bn sales for 2004--could 
make a counterbid from a rival large container port operator unlikely, 
analysts said.
    The bid is thought likely to come at about 440p a share--just above 
last night's closing share price of 435p.
    P&O announced it had received an approach--without revealing from 
whom--on October 31, after a newspaper story linked the company to DP 
World.
    DP World's concerns about P&O's pension liabilities and projections 
on the cost and likely revenues of P&O's planned London Gateway port 
development have been resolved.
    The deal will bring to an end the independent existence of a 
company that was founded in 1837--the year Queen Victoria came to the 
throne--and was once one of the key institutions of the British empire, 
taking civil servants, soldiers and mail between the UK and India.
    Robert Woods, chief executive, is set to make more than Pounds 2.7m 
from selling his shares and exercising his share options after the 
deal. Lord Sterling, former chairman, will make about Pounds 10m.
    The pair were instrumental in restructuring P&O, turning it from an 
unfocused conglomerate with a range of shipping businesses into the 
present operation, which has only container ports, ferries and a few 
residual property interests.
    Neil Davidson, container ports analyst for London-based Drewry 
Shipping Consultants, said it was hard to see anyone else coming up 
with a bid to defeat DP World's. Mr Davidson said there would now be 
four heavyweight worldwide container terminal operators--Hong Kong's 
Hutchison Ports, Singapore's PSA, APM, part of the Maersk Group and DP 
World.
    DP World became the world's sixth largest container terminal 
operator this year when it bought CSX World Terminals, the terminals 
business formerly owned by the U.S. Railroad.
    P&O had long been seen as a bid target because of its excellent 
assets across the globe, but particularly in China and India.
                                 ______
                                 

 Financial Times (London, England)--November 17, 2005 Thursday--London 
                               Edition 1

                    DP World Moves Closer to P&O Bid

                            by Robert Wright

    DP World has started due diligence work on P&O, the ports and 
ferries operator, in a move that suggests the two are moving closer to 
a takeover deal.
    P&O has allowed DP World access to data on the company's operations 
as part of the process, the Financial Times has learnt.
    The development suggested DP World is the only active bidder for 
P&O, despite widespread expectations that other large container port 
operators would try to trump its bid--thought likely to be for about 
Pounds 3bn.
    DP World's main concerns are thought to surround the likely cost 
and potential profitability of P&O's planned London Gateway container 
port on the Thames, expected to cost Pounds 800m.
    The port--which will be the UK's largest container port when 
completed--is due to start operations in 2008.
    Neil Davidson, container ports analyst at London-based Drewry 
Shipping Consultants, said DP World would want to be sure that London 
Gateway could be built for the amounts P&O had suggested before 
deciding what to pay for the com-pany.
    The London Gateway project is regarded as a key asset for P&O, 
which is the only port operator to have planning per-mission for a 
sizable container port development in south-east England, the area 
where large container carriers prefer to call.
    The main container ports--at Felixstowe and Southampton--are 
reaching the limits of their capacity.
    After it was announced in July, analysts estimated that the project 
added between 13p and 23p per share--at least Pounds 100m in total--to 
the company's present value.
    DP World is likely to bring up widespread industry queries about 
the extent of the dredging work needed to allow large container ships 
to reach the port. It is also likely to raise questions about the 
transport connections to the site, details of which still have to be 
agreed to win planning approval.
    The start of due diligence is the most definite step toward a deal 
since a short meeting between the parties on October 31, the day after 
news of DP World's intentions became public.
    Singapore's state-owned Temasek Holdings--owner of PSA, the world's 
second-largest container terminal operator--has retained UBS, the 
merchant bank, to examine the possibility of bidding for P&O, the 
world's fourth-largest container terminal operator, which has a 
portfolio of assets in key areas around the world.
    However, it appeared to have made no further move.
    Mr Davidson said other potential bidders--including Hong Kong-based 
Hutchison Ports, the world's largest container port operator and 
Denmark's AP Moller-Maersk, third-largest operator--had been 
demoralised by DP World's apparent ability to outbid any rival to buy 
P&O.
                                 ______
                                 

   Financial Times (London, England)--October 31, 2005 Monday--Asia 
                               Edition 1

               Dubai State Ports Operator Approaches P&O

                          by James Mackintosh

    LONDON--DP World, Dubai's state-owned ports operator, has 
approached P&O about buying all or part of the British ports and 
ferries group, according to people close to the companies.
    The approach, made last week, remains tentative but meetings are 
understood to be likely to take place between the two sides soon. One 
person familiar with the approach said it was unclear whether DP World 
wanted to take over the whole of P&O, or just buy its freight business, 
on which it has been refocusing. At Friday's closing price P&O was 
worth Pounds 2.3bn (Dollars 4bn).
    However, the approach could spark a multi-billion pound bidding war 
for P&O, once the flagship of Britain's merchant navy. P&O is the only 
listed global ports operator and both Denmark's AP Moller-Maersk and 
Hong Kong's Hutchison conglomerate, which have biggercontainer port 
businesses, are considered likely counterbidders.
    Singapore's state holding company, Temasek, is understood to have 
built a small stake in P&O as an investment but could also take part in 
any auction to bolster its NOL container business.
    DP World has been expanding rapidly as part of the strategy of 
Dubai to become a transport hub. The purchase of P&O would seal its 
position in the top league of operators.
    It would also confirm the strategy of spending the emirate's petro-
dollars from the record oil price on foreign assets, which this year 
have included a Dollars 1bn stake in DaimlerChrysler, the German 
carmaker, and the Pounds 800m purchase of the Tussauds waxworks 
museums.
    P&O yesterday refused to say to whom it was talking. ``P&O confirms 
that it has received a very preliminary contact from a third party, 
which may or may not lead to an offer for the company,'' it said in a 
statement. DP World declined to comment.
    The sale of P&O, officially the Peninsular and Oriental Steam 
Navigation Company, would end 165 years of flying the flag for Britain.
    P&O has already slimmed down significantly in the past 6 years, 
demerging the Princess cruise line, selling Bovis, the construction 
company, its stake in Royal P&O Nedlloyd container shipping, bulk 
shipping and property including golf courses, shopping centres and 
London's Chelsea Harbour development. It now concentrates on its 
container ports busi-ness, while also being Britain's biggest ferry 
operator.
    DP World spent Dollars 1.15bn this year to buy the container 
terminal business of CSX, the Florida-based railway company, widely 
regarded as a hefty premium. The company plans to more than triple its 
volumes within the next 10 years, and has been growing more than 20 per 
cent annually for the past 3 years.
    DP World has hired Deutsche Bank to advise it on the bid. P&O has 
retained Citigroup.
                                 ______
                                 
Confidential Pursuant to Sections 552(b)(3) and (4) of the Freedom of 
        Information Act, 5 U.S.C. Sections 552(b)(3) and (4), and 
        Section 721(b) of the Defense Production Act, 50 U.S.C. App. 
        Section 721(b)
                                                    January 6, 2006
Stewart A. Baker,
Assistant Secretary for Policy, Planning, and International Affairs,
United States Department of Homeland Security,
Washington, DC.

Dear Mr. Baker:

    This letter outlines the joint representations and commitments of 
Ports, Customs and Free Zone Corporation, a Dubai public corporation 
established by Dubai Royal Decree under Law No. (1) of 2001 (``PCFC''), 
Peninsular & Oriental Steam Navigation Company, a company incorporated 
by Royal Charter in the United Kingdom and listed on the London Stock 
Exchange (``P&O''), and P&O's wholly owned U.S. subsidiary, P&O Ports 
North America, Inc. (``P&O North America''), with respect to the 
proposed acquisition by PCFC of P&O through its wholly owned subsidiary 
Thunder FZE, a Dubai corporation, which will also result in the 
acquisition by PCFC of P&O North America. The commitments of PCFC, P&O 
and P&O North America contained herein shall only be effective if and 
when the proposed acquisition by PCFC of P&O closes.
    This letter reflects the joint representations and commitments by 
these Companies (``the Companies'') to the U.S. Department of Homeland 
Security (DHS) in connection with a joint voluntary Notice filed on 
December 15, 2005, with the Committee on Foreign Investment in the 
United States (``CFIUS'') by the special purpose vehicle subsidiary of 
PCFC, Thunder FZE, and P&O North America, with respect to the foregoing 
described proposed acquisition. These joint representations and 
commitments are being provided for the purpose of providing assurances 
requested by DHS with regard to law enforcement, public safety and 
national security issues within the jurisdiction of DHS. These joint 
representations and commitments have been discussed with DHS and other 
CFIUS agencies in a series of briefings and follow up communications 
both before and after the aforementioned CFIUS Notice was filed for the 
purpose of providing supplemental information for those agencies to 
consider in exercising their role on CFIUS.
    These Companies hereby confirm their joint representations and 
commitments to the following:
Maintenance of Membership, Cooperation, and Support in Security 
        Arrangements
    As was noted by the Companies in a briefing for CFIUS at the U.S. 
Treasury Department on December 6, 2005, the Companies represent and 
commit to maintain no less than their current level of membership in, 
cooperation with, and support for those Security Arrangements they 
currently participate in, as outlined in section 7(D) of the December 
15 CFIUS Notice. Specifically, those Security Arrangements include the 
Customs-Trade Partnership Against Terrorism (``C-TPAT''), the Business 
Anti-Smuggling Coalition (``BASC''), and the Container Security 
Initiative (``CSI'').\1\ In addition, PCFC will continue to maintain 
their 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, in particular using the specialized 
equipment at Dubai's seaports terminals and training of personnel to 
inspect material and share information with respect to such material, 
as outlined in paragraph 5.6 of the November 17, 2005, ``Project 
Thunder Background Briefing Paper for the [CFIUS],'' (``Project Thunder 
Background Briefing'') as amended December 15, 2005.\2\
---------------------------------------------------------------------------
    \1\ The Companies will also continue to comply with all 
international and domestic Security Arrangements which are required by 
law and with which they have represented in the above-referenced CFIUS 
Notice they currently comply, such as the International Ship and Port 
Facility Security Code (``ISPS'') and 33 CFR Subchapter H.
    \2\ PCFC will also maintain no less than the current level of 
membership, cooperation, and support for Security Arrangements pursuant 
to the terms of those Security Arrangements with the U.S. Armed Forces, 
including, in particular, the provision of services to U.S. Navy 
vessels and personnel at Jebel Ali Port, as noted in paragraph 5.7 of 
the Project Thunder Background Briefing, although these arrangements 
are outside the purview of DHS.
---------------------------------------------------------------------------
    The Companies further assure that, should they propose material 
changes with respect to maintenance of their level of membership in, 
cooperation with, or support for these Security Arrangements, the 
Companies will provide at least thirty (30) days advance written notice 
of such proposal to the Assistant Secretary of DHS for Policy, 
Planning, and International Affairs, detailing the reasons, timing, and 
plans for such proposed change. The companies further agree to meet and 
confer with any DHS designated U.S. Government officials prior to 
implementing such proposed change, to provide any relevant information 
requested with respect to such proposed change, and to reasonably 
address any security concerns raised with respect to such proposed 
change.
Management of U.S. Facilities
    The Companies hereby represent and commit that their current intent 
and plan is to operate any U.S. facilities they own or control to the 
extent possible with the current U.S. management structure. These 
facilities include the U.S. persons being acquired as outlined in 
section 3 of the above-referenced CFIUS Notice.
Security Policies and Procedures, Officers, and Points of Contact for 
        U.S. Facilities
    The Companies represent and commit that they will maintain security 
policies and procedures at the U.S. facilities, under the direction of 
a responsible corporate officer, who will serve as a point of contact 
for DHS in any U.S. facilities owned or controlled by the Companies, 
including the U.S. persons being acquired as outlined in section 3 of 
the above-referenced CFIUS Notice. The companies further represent and 
commit that they will make any relevant information concerning those 
policies and procedures promptly available to DHS upon written request 
and will meet and confer with any U.S. Government official designated 
by DHS to address any concern.
Assistance to Law Enforcement
    The Companies represent and commit that they will take all 
reasonable steps to assist and support Federal, state and local law 
enforcement agencies, including but not limited to DHS agencies such as 
U.S. Customs and Border Protection, U.S. Coast Guard, and U.S. 
Immigration and Customs Enforcement (``CBP, Coast Guard, and ICE''), in 
conducting any lawful law enforcement activity related to any service 
provided in the U.S. by the Companies or their subsidiaries. Such 
assistance shall include, but not be limited to, disclosure, if 
necessary, of information relating to the design, maintenance or 
operation of the Companies' U.S. facilities, equipment or services. In 
particular, the Companies also agree to promptly provide, upon written 
request, any relevant records that may exist in the U.S., involving 
matters relating to foreign operational direction, if any, of U.S. 
facilities owned or controlled by the Companies. The companies will 
maintain such records according to record retention policies adopted in 
the normal course of business of those facilities.
Non-Objection in CFIUS
    The Companies understand that, promptly following execution of this 
letter by an authorized representative or attorney for the Companies 
and delivery thereof to DHS that DHS shall notify CFIUS that DHS has no 
objection to the proposed transaction described in the aforementioned 
CFIUS Notice.
    The Companies further understand that, in the event that their 
joint representations and commitments as set forth in this letter are 
materially false or misleading, or the parties have omitted material 
information, DHS may (in addition to any other remedy available at law 
or equity) request that the CFIUS initiate a review of the Companies' 
activities to determine whether such misstatement or omission threatens 
to impair U.S. national security and, if it does, to determine an 
appropriate response to protect U.S. national security. In addition, in 
the event that these representations are otherwise materially nullified 
or breached, DOS may seek any other remedy available at law or equity.
            Sincerely,
                                            Robert Scavone,
                                                      Executive VP.
                              Ports, Customs and Free Zone Corporation,
                                               P&O Ports North America.
                                 ______
                                 
   Addendum from H. Edward Bilkey to Hon. Ted Stevens, March 8, 2006
    Dear Mr. Chairman:

    I am writing regarding my written testimony of February 28, 2006 
before the Senate Commerce, Science and Transportation Committee. I 
have been advised that I was incorrect in one statement in my written 
testimony. I am writing to correct the record with regard to that 
statement.
    Specifically, I stated on page 6 of my prepared remarks that the 
Committee on Foreign Investment in the United States (CFIUS) had a 
previous filing from DP World's acquisition of CSXWT. Although I 
previously understood this to be the case, upon further research and 
consultation with our attorneys, I have been advised that CFIUS did not 
review that acquisition.
    I respectfully request that this letter be added to my testimony so 
that the record is corrected.

    The Chairman. Well, thank you very much. I did not put a 
time limit on you, Mr. Bilkey, I had seen your statement, and I 
think, under the circumstances, with all the charges that are 
made, you deserved the right to have a full statement.
    Mr. Bilkey. Thank you.
    The Chairman. We'll go back, gentlemen, though, to our 
normal limit, for the rest of you. I hope you'll understand.
    Mr. Scavone, do you have a statement?

          STATEMENT OF ROBERT SCAVONE, EXECUTIVE VICE

         PRESIDENT, STRATEGIC PLANNING AND DEVELOPMENT,

                 P&O PORTS NORTH AMERICA, INC.

    Mr. Scavone. I don't have any prepared statement, Mr. 
Chairman.
    Just by way of introduction, I am Rob Scavone. I am the 
Executive Vice President for P&O Ports North America. Included 
in my responsibilities is our security measures in all of our 
terminals. I also happen to be a Member of the Board of 
Directors of the National Association of Waterfront Employers. 
Mr. Yoshitani is speaking on behalf of our group today.
    I also serve as a Co-Chairman of an advisory group to the 
International Standards Organization on matters of container 
security, which group includes all major international terminal 
operators in the world.
    I look forward to contributing to the discussion with any 
questions anybody may have about how our security works on the 
ground in our terminals in the United States.
    The Chairman. Thank you, Mr. Scavone.
    Our next witness is Mr. Tay Yoshitani, Senior Policy 
Advisor for the National Association of Waterfront Employers of 
Washington.

  STATEMENT OF TAY YOSHITANI, SENIOR POLICY ADVISOR, NATIONAL 
           ASSOCIATION OF WATERFRONT EMPLOYERS (NAWE)

    Mr. Yoshitani. Yes, sir.
    The Chairman. Yes, sir. All the statements will appear in 
the record in full. We hope you will summarize them within 5 
minutes.
    Thank you, Mr. Yoshitani.
    Mr. Yoshitani. Yes, sir.
    Good afternoon. I'm Tay Yoshitani, the Senior Policy 
Advisor for the National Association of Waterfront Employers. 
We call ourselves NAWE. We're a national trade association 
which includes most of the large private sector marine 
terminals--terminal operators in the U.S.
    And, just briefly, by background, prior to this role with 
NAWE, I served as the Executive Director at both the Port of 
Oakland and Baltimore, and was the Deputy at the Port of Los 
Angeles.
    And on behalf of NAWE, I want to thank the members of this 
committee for giving us the opportunity to comment on maritime 
cargo security and S. 1052.
    It's estimated that the maritime industry handles about 15 
percent of the U.S. GDP. Our membership reflects the 
international scope of the maritime industry and terminal 
operations. Many of the members of--many of the members are 
U.S. company-owned, but many are foreign-company-owned, as 
well. And, Senator Cantwell and Lautenberg, I'd like to point 
out that SSA Marine and Maher Terminals, who are respectively 
headquartered in your states, are active members of NAWE. And, 
as Mr. Scavone has already stated, P&O is an active member of 
NAWE, as well.
    Recent events have brought attention on the typical 
structure of U.S. ports and what role terminal operators play.
    Terminal operators typically lease property from ports and 
load and unload cargo between ships and marine terminals. Now, 
this sounds a bit simplistic, but it's really not. On any given 
day, there may be several ships at berth, with thousands of 
containers being loaded and unloaded, while a comparable number 
of trucks are entering and exiting our terminal to pick up and 
drop off a load. To do this on a day-in and day-out basis in a 
safe manner while keeping track of where the container is and 
where it's supposed to go is a daunting task. Furthermore, we 
conduct our business in compliance with numerous Federal 
statutes, regulations, policies, many of which are obviously 
security-related.
    I want to clarify how we view our role with respect to 
security. There are basically two security issues. Somewhat of 
an oversimplification, I grant. The first is the facility 
security, which includes the port and the individual marine 
terminals. The MTSA clearly designates the Coast Guard as the 
lead authority on facility security. And, of course, under 
these regulations, our terminal operators are required to 
submit a comprehensive facility security plan, as you know.
    The second area of security is what we will refer to as the 
``cargo chain.'' This refers to understanding what's inside the 
box, and ensuring that that box is not breached during the 
transit. This is the area that most experts have concerns 
about. The terminal operator actually has very little to do 
with this aspect of security, other than a supporting role of 
moving containers around the terminal, under the direction of 
CBP.
    When CBP wishes to inspect a container, they notify the 
terminal operator of the box number, and the box number only. 
When CBP wishes to--they do not reveal the name of the shipper, 
the content, the origin, or the destination of that box. And 
for our purposes, we don't have a business interest in knowing 
the content of the container. We are not given this 
information, and we do not track this information. The one 
exception is hazardous cargo, and there is special handling for 
that, which I can go into in detail, if you'd like.
    We recognize that security is everyone's business and 
requires a public/private partnership. NAWE and all of its 
members have been working closely with our partners at the 
Coast Guard, TSA, and CBP. We are active members of the MTSA 
Subcommittee on COAC. We're currently involved in the ISO RFID 
electronic seals discussion. And it's worthy to note that each 
of our members are currently C-TPAT-compliant.
    NAWE is in full support and agreement with the approach 
that the private and public partnership has taken with respect 
to port security. And I'll go over this very, very briefly.
    Layered approach, we've talked about that already. Risk 
mitigation, by narrowing the focus into--narrowing the focus is 
also a critical element of the approach. Pushing the borders 
out. Controlling access to our terminals using the TWIC 
program. International standards that must be agreed upon 
before various security programs can be implemented. And, last, 
leveraging technology.
    Terminal operators are already employing various 
technologies, such as OCR and RFID, not only to improve 
operations, but to enhance security, as well.
    And, in conclusion, members of this committee, we fully 
support Senate bill 1052. We believe that it's on the right 
track.
    [The prepared statement of Mr. Yoshitani follows:]

      Prepared Statement of Tay Yoshitani, Senior Policy Advisor, 
          National Association of Waterfront Employers (NAWE)
Introduction . . . Who is NAWE?
    Good afternoon, I'm Tay Yoshitani, the Senior Policy Advisor to the 
National Association of Waterfront Employers (NAWE), a national trade 
association which includes most of the large private sector marine 
terminal operators in the U.S. Briefly by way of background, prior to 
this role with NAWE, I served as Executive Director at both the Port of 
Oakland and Baltimore, and was the Deputy at the Port of Los Angeles 
(bio attached). On behalf of NAWE, I want to thank the members of the 
Senate Committee on Commerce, Science, and Transportation for giving us 
the opportunity to comment on maritime cargo security and S. 1052.
    NAWE members work closely with port authorities, ocean carriers, 
railroad and trucking companies, organized labor and shippers to ensure 
the smooth flow of international commerce that keeps our country's 
economy strong. It is estimated that the maritime industry handles 
about 15 percent of the U.S. GDP. Our membership reflects the 
international scope of the maritime industry and terminal operations. 
Many of the members are U.S. company-owned, but many are foreign-
company owned as well. In fact, P&O Ports has long been an active 
member of NAWE and holds a seat on the Board of Directors.
    NAWE has been involved with port security since concerns were first 
raised almost 10 years ago. This Association testified before this 
committee on the initial Maritime Transportation Security Act (MTSA) 
several months before 9/11, and, since its passage, we have been 
involved with the Coast Guard, TSA, CBP, and other elements of DHS as 
MTSA-based security regulations, C-TPAT, and cargo inspection programs 
have been developed and implemented.
What Do Terminal Operators Do?
    Recent events have brought much attention on the typical structure 
of most U.S. ports and what role terminal operators play. As you know, 
the vast majority of ports in the U.S. are publicly owned by a state or 
municipal authority. Typically, the port authority, as land and fixed 
asset owner, leases out marine terminals to terminal operators but 
retains a multitude of important responsibilities. As terminal 
operators, our members typically lease property from ports and 
essentially conduct the business of loading and unloading cargo between 
ships and marine terminals. This sounds a bit simplistic, but it's not. 
On any given day, there may be several ships at berth with thousands of 
containers being loaded and unloaded, while a comparable number of 
trucks are entering and exiting our terminal to pick up or drop off a 
load. To do this day-in and day-out in a safe manner, while keeping 
track of where each container is and where it is supposed to go, is a 
daunting task.
    It is worth noting that some terminal operators provide a service 
that is more limited in scope than what I have just described. For 
example, in some cases, private operators are pure stevedores, 
servicing terminals run by operating port authorities. Regardless of 
scope, we conduct our business in compliance with numerous Federal 
statutes, regulations and policies. In this post 9/11 world, many of 
these are, of course, security related. In fact, we are perhaps one of 
the most federally regulated industries in the country.
What is a Terminal Operator's Role in Port and Cargo Chain Security?
    Given recent interest in the role of marine terminal operators, I 
want to take a moment to clarify how we view our role, specifically 
with respect to port and cargo security. To do this, it's helpful to 
separate security issues into basically two categories. The first is 
``facility security'' which includes the port in general and individual 
marine terminals. The MTSA clearly designates the Coast Guard as the 
lead authority on port facility security. Under Coast Guard 
regulations, terminal operators are required to submit a comprehensive 
Facility Security Plan (FSP) for approval. Subsequent to initial 
submission, the Coast Guard conducts regular audits as well as annual 
exercises. Terminal operators are well aware that failure to comply 
with this approved plan may be cause for closure of the facility. 
Needless to say, terminal operators take these plans, audits, and 
exercises very seriously.
    In conjunction with the Coast Guard, the Port Authorities are also 
actively engaged in facility security matters. Many Port Authorities 
have their own Port Police Force while others have a contractual 
relationship with their respective municipal police authority. A 
typical lease between the port and terminal operator may include 
security requirements that are borne by the lessee. But ultimately, the 
terminal operator is responsible directly to the Coast Guard on 
terminal security matters.
    One key aspect of facilities security is access control of people 
and equipment. NAWE is in strong support of the upcoming TWIC program. 
We have reached out on a number of occasions to both the Coast Guard 
and TSA regarding this program including a recent submission of a 
``white paper'' (see Attachment A) that includes recommendations with 
respect to truck gates at marine terminals.
    The second area of security is what we refer to as the ``cargo 
chain.'' Essentially, this refers to understanding ``what is inside the 
container.'' Much has been written about this aspect of security, and 
it is the area of risk that most concerns those who understand maritime 
industry. The terminal operator actually has very little to do with 
this aspect of security other than a supporting role of moving 
containers around under the direction of CBP/DHS. When CBP wishes to 
inspect a container, they notify the terminal operator of the box 
number only. They do not reveal the name of the shipper, content, 
origin, or destination.
    The ``business service'' that terminal operators provide is 
measured in terms of the ``container unit.'' We need to know from the 
customer what the disposition of the container should be. Is it for 
pick-up by a local business by a trucking company? Is it to go to a 
nearby rail yard for transport to some inland destination? For our 
purposes, we don't have a business interest in knowing the content of 
the container. We are not given this information and we do not track 
this information. The one exception is if there is hazardous cargo in a 
container. We would know this because it is included in the ocean 
carrier's stowage plan, and these containers require special handling 
by the terminal operator. Of course, we are well aware that regulations 
are being drafted for ``cargo chain security'' as we speak. Although 
terminal operators will have no responsibility for cargo within 
containers, these impending regulations may call for the terminal 
operator to play some role in making sure that container seals have not 
been breached. But here again, we anticipate that our role would be 
limited to reporting the breach to the proper authority and taking 
action only under that authority's direction.
    We recognize that security is everyone's business and requires a 
public-private partnership. NAWE and all of its members have been 
working closely with our partners at the Coast Guard, Transportation 
Security Administration, and Customs and Border Protection. We were 
active members of the MTSA Subcommittee of the Commercial Operations 
Advisory Committee. We are currently involved in the ISO RFID 
electronic seals discussion that may ultimately establish the much 
needed standard for the industry. And, it is worthy to note that all of 
our members are C-TPAT compliant.
NAWE Perspective on Maritime Security Concept/Approach
    NAWE is in full support and agreement with the approach that the 
public-private partnership is taking to address maritime facilities and 
cargo chain security.

        1. The ``layered approach'' is rational and makes good sense. 
        No system by itself will ever be perfect. It makes sense that 
        the initial layers begin well before the container reaches our 
        terminals. After screening and targeting, the 24-hour rule 
        permits CBP to get manifest data before loading at the foreign 
        port. CSI allows comprehensive vetting before vessel loading. 
        And, finally, before reaching our terminals, the Coast Guard 
        has the option to board a vessel before it enters our harbors. 
        The layered approach minimizes the chance of a breach of the 
        system.

        2. ``Risk mitigation'' is also a critical element of the 
        approach. This starts with risk assessment one container at a 
        time. CBP must be able to narrow their focus and direct their 
        attention to a manageable percentage of containers in order to 
        physically inspect them.

        3. ``Pushing the borders out'' is also an excellent approach 
        for inbound cargo and goes hand-in-hand with the ``layered 
        approach.'' The CSI program and RPMs at foreign ports are 
        examples of pushing the borders out. There are other 
        developments such as the Integrated Container Inspection System 
        (ICIS), though not yet fully tested, that holds promise of 
        further strengthening this approach. The detection of problem 
        containers needs to be well before they reach our terminals. 
        The focus must be at the point of stuffing the container and 
        loading it onto a ship.

        4. Controlling access to marine terminals using the impending 
        TWIC program is also a good approach. However, at this point, 
        it is our understanding that technology problems still exist 
        with scanning of cards and biometric indicators. The accuracy 
        rate of the TWIC system must be very high for the system to be 
        effective. Subject to resolution of these problems, we are in 
        strong support of this program and continue to urge early 
        implementation.

        5. We all recognize that this is an international business and 
        security issues transcend international borders. Therefore, our 
        solutions must be implemented with international cooperation. 
        International standards must be agreed upon before various 
        security programs can be implemented on a global basis.

        6. And last, leveraging appropriate technology makes a lot of 
        sense. Terminal operators are already employing various 
        technologies such as OCR and RFID to not only improve 
        operations but enhance security as well. We support the use of 
        technologies as long as they are appropriate and fully tested.

    We support all of these concepts/approaches. If all of these 
approaches could be fully implemented, overall security at the 
facilities and the cargo chain would be greatly enhanced.
Comments on S. 1052
    We have reviewed the ``Transportation Security Act'' (S. 1052) 
using the six approaches and concepts that I just mentioned and find 
them to be consistent. Therefore, NAWE fully supports this Senate bill 
as currently written. In the interest of time, I wish to limit my 
comments to three key points. However, we would be happy to submit, in 
writing, responses to any questions you might have on any of the 
specific provisions of this bill.

        1. Provisions indicate clear recognition that DHS must obtain 
        more and better information about what is being loaded inside 
        the container at the point of ``stuffing.'' This is followed by 
        the upgrading of our Automated Targeting System. We believe 
        this represents the most significant opportunity to improve 
        cargo chain security. We are encouraged that this bill would do 
        much to improve upon this critical area.

        2. The CSI program is perhaps the most important effort to 
        ``push the borders out.'' This bill includes provisions to 
        continue and enhance this program. This program needs to be 
        adequately funded and expanded as quickly as possible.

        3. And, last, I'll just mention that we are encouraged that 
        leveraging technology is an important element of this bill. The 
        number of containers entering and leaving the U.S. is expected 
        to grow rapidly over the next couple of decades. There is no 
        way that facility and cargo chain security can be significantly 
        enhanced without advances in technology.

What Else Should DHS and Their Agencies Be Doing?
    In conclusion, NAWE is in support of the overall approach that is 
being taken to improve maritime facilities and cargo chain security. We 
also support S. 1052. We understand and recognize that terminal 
operators do have an important role in this public-private partnership. 
We stand ready to do our part.
    We are concerned about the pace at which progress is being made on 
the various fronts. Cargo chain security regulations and the TWIC 
program are two that come to mind. Both of these are complex, but they 
are vital to upgrading facility and cargo chain security. Proposed 
regulations should be issued as soon as possible. And we urge this 
committee to continue to provide the resources and oversight to bring 
these programs to completion. Along with all our colleagues in this 
industry, members of NAWE have a direct and vested interest in overall 
maritime security. In this regard, NAWE has, in the past, offered to 
provide a ``loaned executive'' to both the Coast Guard and the TSA to 
provide industry expertise. We are respectful of the established 
rulemaking procedures but continue to stand by this offer.
    My last note is to invite all members of this Senate Committee and 
members of your staff to visit one or more of our members' terminals. I 
can promise you that it will be interesting and well worth the 
investment of your time. Please feel free to contact me or any of my 
colleagues at NAWE to coordinate a tour at a terminal that is 
convenient to you. I can assure you that our members would be delighted 
and honored to host a tour.
    Again, thank you for the opportunity to address this committee. I'd 
be happy to answer any questions you might have at the appropriate 
time.
                                 ______
                                 
  Attachment A--Implementing the Transportation Worker Identification 
Credential (TWIC) At Domestic Marine Cargo Handling Facilities: Issues 
            Raised Concerning Facility Truck Gate Operations
Executive Summary
    The members of the National Association of Waterfront Employers 
(NAWE), Pacific Maritime Association (PMA), and United States Maritime 
Association, Limited (USMX) have long supported the expeditious 
implementation of the TWIC program. On February 4, 2005, these entities 
sent a letter to the Transportation Security Administration summarizing 
their position on several key policy issues regarding the TWIC which 
were as follows:

        1. The expeditious implementation of the TWIC program is an 
        essential component of port security:

        2. Employers of maritime labor must not be involved in the 
        application, vetting, or issuing process of employees seeking 
        to obtain a TWIC. TWICs must be issued by a government 
        authority or its trusted agent;

        3. Acts that disqualify an individual from obtaining a TWIC 
        should be related to terrorist acts or crimes against national 
        security; and

        4. The TWIC program must have a meaningful appeals process to 
        permit workers at risk of being denied a TWIC card the ability 
        to correct errors, explain mitigating circumstances, or 
        otherwise present evidence of rehabilitation.

    Those issues previously raised were broad policy matters: the issue 
we are currently addressing relates to the potential direct impact of 
the TWIC program on marine cargo handling facility truck gate 
operations. \1\ These gate operations process outside port truck 
drivers who are entering a facility to deliver or receive cargo. 
Efficient truck gate operations are as important to a facility as 
efficient vessel operations and have broader impact on the entire port 
area. Policy makers implementing the TWIC program must consider the 
impact on the port drayage community and ensure that obtaining a TWIC 
is easy and accessible. The TWIC itself must be reliable and durable 
with a reasonable procedure for loss or damage. TWIC reader hardware 
must also be durable and weather resistant and able to accommodate 
different terminal configurations. It is imperative that the data 
systems supporting the TWIC be able to accommodate limited integration 
into the systems being deployed to process cargo and truck drivers at 
marine facilities. Key to the success of the program will be in 
implementing a system that provides a timely and clear indication of 
the validity of the TWIC. This paper will provide recommendations to 
ensure that the eagerly-anticipated TWIC program does not negatively 
impact facility truck gate operations.
---------------------------------------------------------------------------
    \1\ Many of the issues identified in this paper as relevant to 
truck gate operations are also relevant to the gates where longshore 
and other workers gain access to the facility. While this paper solely 
focuses on truck gate operations, it is imperative that longshore 
workers and other individuals needing access to a marine terminal 
facility are also able to utilize a TWIC system that is secure and 
efficient and does not unduly delay these individuals at the gates they 
use for facility access.
---------------------------------------------------------------------------
Background
    There are a few ``guiding principles'' that frame our perspective 
on the TWIC program and they are as follows:

   We acknowledge that strong cooperation between the Federal 
        Government and the private sector is critical for security 
        programs such as TWIC to be effective.

   Fast and smooth flow of cargo through marine terminals is 
        not only important to terminal operators, it is critical to our 
        national economy.

   Improving velocity of goods flowing through ports and marine 
        terminals reduces environmental impacts to surrounding regions.

   The port drayage industry is a vital but challenged link in 
        the marine transportation system and must not be negatively 
        impacted.

   Inherent differences among terminal configurations and 
        operations suggest that some degree of flexibility in 
        implementing the TWIC program at truck gates will be important.

   The TWIC check at the truck gate must be simple and provide 
        timely and clear indication of the validity of the TWIC.

   TWIC regulations must not conflict with existing Coast Guard 
        regulations that provide terminal operators with discretion 
        regarding access to the terminal by any one including drayage 
        drivers.

A. The Port Drayage Industry--Needs Special Consideration
    The typical port drayman operating at a major U.S. port is an 
independent owner/operator. As owner of one truck, he or she generally 
has no administrative support for his or her operation. The port 
drayman is typically affiliated with one or more ``trucking companies'' 
that broker business between the cargo interest and the ocean carrier. 
Port draymen are generally compensated by the trip. As an independent 
operator, financial success is predicated on how many trips can be made 
during a given day. Delays at truck gates and inside marine terminals 
can devastate their operations. This can be arduous work with lots of 
pressure and low profit margins. Accordingly. the availability of port 
draymen is at risk at many port areas. Every effort must be made to 
ensure that the application process for obtaining a TWIC is convenient 
and efficient for these drivers.
    In past discussions about TWIC, the concept of ``sponsors'' has 
been mentioned. Sponsors may help identify persons who need to obtain 
TWIC cards for a legitimate business purpose. The term ``sponsor'' 
implies some responsibility and possibility even liability resulting 
from a process the potential sponsor has little or no control over and 
is an inappropriate designation for this function. While we support the 
concept of ``sponsors,'' we suggest using the term ``nominating party'' 
which more accurately reflects the business relationship. In the case 
of port draymen, due to their independent status, there are no 
companies or associations that can readily identify those who need 
TWICs. However, more than any other group of transportation workers, 
these drivers need an administrative entity to help them obtain TWICs 
and remain compliant with the program. The following suggestions may be 
of assistance in addressing the challenge of port draymen.
1. Utilize Third Party Contractors
    Many port areas are served by third party contractors in the 
business of facilitating information flow between trucking companies 
and terminal operators. This information flow allows terminal operators 
to notify trucking companies of the status of certain containers to 
improve efficiency for the trucking company and the terminal operator. 
This third party model could serve as a possible ``infrastructure'' for 
truck drivers servicing many ports. This model could also easily be 
expanded to other ports that do not currently have this service. These 
contractors could be the nominating party and provide an expeditious 
way of identifying port truck drivers who need a TWIC and provide 
certain administrative support. TWIC regulations must allow for the 
Federal Government to delegate this function to a responsible third 
party contractor.
2. Keep Enrollment Convenient But Not Located at Terminal Facilities
    The enrollment centers for the TWIC program should be accessible to 
port draymen as well as other port workers. In addition, it is likely 
that TWICs will be lost and damaged necessitating replacement. The 
location of facilities to handle such activities should be convenient 
and accessible but also a sufficient distance away from terminal 
facilities in order to avoid congestion at critical areas. 
Administrative TWIC issues should not be handled at the terminal and 
particularly at the terminal gate.
3. Timely Notification of Upcoming Renewals
    The TWIC should be valid only for a defined period of time after 
which it expires unless duly renewed according to regulations. It will 
be important to have an efficient easily understood procedure to notify 
drivers of impending expiration as well as procedure to renew the TWIC.
B. The TWIC Card--Must be Durable
    Port drivers spend most of the day in an industrial environment. 
They will make multiple calls at facilities which will require a TWIC 
card for entry. With typical usage, the card will be subjected to rough 
handling. It is also anticipated that TWICs will get damaged or lost.

        1. TWIC cards must be designed to withstand the environment and 
        the handling that will be typical with truck drivers.

        2. Regulations must address procedures for obtaining 
        replacement cards if lost or damaged. Because of the importance 
        of having a valid TWIC card, we suggest that regulations 
        require re-issuance of TWIC within 24 hours of report of loss 
        or damage.

C. TWIC Reader/Hardware
    Each marine terminal is designed differently to accommodate unique 
features of the property and nearby infrastructure. While the function 
of a truck gate at the various terminals is similar, the truck queuing 
lanes are often differently configured and the location of certain 
functions will vary from terminal to terminal. Design and configuration 
differences often dictate differences in operations. Therefore, while 
regulations should define performance specifications for the TWIC 
reader/hardware equipment, how they are incorporated into existing 
terminal gates should be a matter for the facility to determine.
    Truckers with a rig and cargo at a terminal truck gate present 
unique challenges to the system. Truckers denied access must have an 
easy way of getting out of the truck lanes and getting out of the way 
of other trucks. Equipment failure will quickly lead to hundreds of 
trucks backed up in grid lock in front of a marine terminal.
    TWIC reader equipment will also be exposed to harsh environment and 
rough handling. It must be robust, durable and reliable. Repairs and 
regular maintenance will be a critical issue.

        1. Regulations must make allowance for differences in terminal 
        configuration and operations. An optimal configuration of TWIC 
        equipment at one terminal may not be possible at another 
        terminal. Terminal operators must be given sufficient 
        flexibility, while working closely with TSA and Coast Guard, to 
        install equipment and operate in compliance with these 
        regulations.

        2. The reader equipment must be durable and reliable. Because 
        the terminal operator is the party closest to the equipment as 
        well as the party most impacted by equipment failure, the 
        terminal operator should be responsible for procurement, 
        installation, operation and maintenance of this equipment 
        consistent with specifications defined by TSA and Coast Guard. 
        To the extent TWIC regulations address program cost and 
        funding, we recommend that a portion of the application fee be 
        dedicated to reimbursing the private sector for the purchase 
        and operations of TWIC equipment.

        3. While allowances for differences in terminal configuration 
        must be considered, the prototype TWIC system pointed out the 
        need for similarity in the operation of the readers. Truckers 
        will need to be trained as to where to insert the TWIC and how 
        to respond to system prompts. The reader operability should be 
        similar from reader to reader and terminal to terminal so the 
        truckers will not have to learn different systems. Moreover, if 
        there are visual indicators, they should be clear enough to be 
        seen in all lighting conditions found at the gates. If there is 
        an audio element, it should be loud enough to be heard and yet 
        isolated enough so that it does not carry over to an adjacent 
        reader.

D. The TWIC System
    Beyond keeping our terminals secure of unauthorized truckers, the 
issue of greatest concern to terminal operators is how the TWIC might 
impact the speed at which truckers can get through the gates. This is 
also important in ensuring that shifts of longshore workers are not 
unduly delayed at their gates. As mentioned above, the overall 
efficiency of a given marine terminal is significantly determined by 
this function. Over the years, terminal operators have worked hard and 
invested millions of dollars to improve and refine this activity. In 
addition, within the past few years, there has been mounting pressure 
to speed trucker's gate transactions ever faster with the goal of 
reducing long lines of idling trucks and reducing diesel emissions. The 
result is that today, terminal operators have very efficient gates to 
process trucks quickly. It is possible that new technologies may enable 
terminal operators to further increase velocity through the gates.
    It is feared that the TWIC program may cause operators to give up 
the gains in efficiency that the terminal operators have worked so hard 
to secure. The TWIC validation at the facility gate must be 
incorporated in a way that does not impact speed and efficiency of the 
gates.

        1. If each entry by a TWIC holder is checked through a central 
        data base, there could be millions of checks being conducted at 
        any single moment. It is doubtful that this approach can 
        provide the service level necessary to support our needs. The 
        trucker check must be almost instantaneous to avoid congestion 
        and delays at the gates. Therefore, instead of checking a TWIC 
        card against a large data base for each entry, it may be more 
        efficient to use an ``exception approach'' where each card is 
        checked against a problem list only. Furthermore, if this 
        problem list is frequently updated and made available to the 
        terminal operator. the trucker check can be expedited and the 
        TWIC system can be greatly simplified.

        2. Decisions concerning who is eligible for and who is denied a 
        TWIC are matters for the Federal Government. To ensure 
        security, it is imperative that the Federal Government or its 
        trusted agent have the ability to routinely and periodically 
        update data bases as necessary. Fifteen minute intervals would 
        be appropriate.

        3. The system may experience failure from time to time. There 
        might be a power outage that brings down the entire system. 
        There must be a protocol established for such an incident. 
        While the system may have built in redundancy and terminals 
        have alternative power, there needs to be a fail safe backup 
        system of conducting the transaction by hand.

E. Flexibility in Use of Terminal Operating Systems (TOS) to Meet 
        requirements
    It is our understanding that the terminal operators may be asked to 
maintain and furnish records of who is on the terminal at any given 
time. Because terminal operators use terminal operating systems that 
encompass a wide range of alternative methodologies, regulations in 
regard to this provision must accord the terminal operator flexibility 
and discretion in order to comply with the intent of this requirement.
F. Appropriate Phase-In
    In certain areas of the country, depending on the final set of 
criteria established for qualification, it is possible that a 
significant number of port draymen may not be able to obtain a TWIC. As 
mentioned above, port drivers are a critical link in the Nation's 
marine transportation system and there is already a shortage in certain 
regions. Additional shortages of drivers will be devastating. We must 
make sure that this does not happen.
    There are numerous ways to phase in the program so that a sudden 
shortage does not occur. Our recommendation would be to mandate that 
all individuals apply for TWICs well in advance of the implementation 
date. The burden would be on the government to ensure that they are 
received. A significant penalty fee for late applications might be 
considered to create incentive for drivers to submit applications as 
soon as possible. This approach would give industry indication of a 
possible shortage of drivers as well as some time to mitigate. In 
addition, this would provide a window of opportunity to review appeals 
by drivers whose application for TWIC have been denied.
    This is a sensitive issue. Because their livelihood is at stake, 
those denied a TWIC are likely to seek an appeal. Such appeals must be 
handled judiciously and expeditiously or to ensure fairness and avoid 
driver shortages.
Conclusion
    The TWIC program must be implemented as soon as possible. It will 
be a significant enhancement to maritime security. There are numerous 
issues that need to be addressed as TWIC regulations are finalized, the 
marine terminal truck gate issue as addressed in this paper presents a 
significant issue that should be addressed prior to the issuance of 
regulations that might negatively affect the efficiency of port 
facility operations.

    The Chairman. Thank you very much. We've reviewed your 
statement, and we thank you for the comments about that pending 
legislation, and pleased that you agree with it. We're trying 
to move it as quickly as possible, as you heard.
    Our next witness is Christopher Koch, President and Chief 
Executive Officer of the World Shipping Council, in Washington.
    Mr. Koch?

 STATEMENT OF CHRISTOPHER KOCH, PRESIDENT/CEO, WORLD SHIPPING 
                            COUNCIL

    Mr. Koch. Thank you, Mr. Chairman.
    World Shipping Council's members are the international 
liner shipping companies that call at U.S. ports. Many of our 
members also have terminal operator subsidiaries or affiliates 
that operate at U.S. ports as terminal operators.
    Prior to my present position, I served at Sea-Land Service 
for 7 years, and prior to that, I was Federal Maritime 
Commission Chairman for a number of years. Presently, I serve 
as Chairman of the National Maritime Security Advisory 
Committee.
    The perspective I'd like to bring today is to try to put in 
broadbrush the fact that the United States has, this past year, 
imported 11 million containers. We will import 12 million this 
coming year. It's an immense amount of cargo that we're 
handling, and it requires an immense amount of investment to 
handle that well. We are keeping up with it, but it's a big 
job.
    We recognize, in the post-9/11 world, that we have to deal 
with the vulnerability that terrorism presents to this 
industry. So, the government has created a multilayered 
strategy to try to deal with that. We think the fundamental 
strategy is a good one.
    There's a ship security strategy, which is overseen by the 
Coast Guard, very professionally. There is a personnel security 
strategy put in place. There is a port security strategy 
overseen by Coast Guard, as well. That is the general issue of 
concern, certainly today. Obviously, the majority of U.S. 
terminal operators today are operated by private firms, and the 
majority of those private firms are foreign companies, 
affiliates or subsidiaries.
    The stevedoring marine terminal operations are a service 
industry that is open to foreign investment. Billions of 
dollars of foreign investment have been made in the U.S., in 
many of the ports represented by Senators on this panel, and 
that investment has contributed substantially to a 
transportation infrastructure that's critical to moving 
America's commerce efficiently and reliably. That investment 
has come from Japan, South Korea, Denmark, Britain, Chinese, 
French, Taiwanese, and Singaporean businesses, just as American 
companies have been allowed to invest in marine terminal and 
stevedoring businesses in foreign countries.
    I would note that I'm sure P&O Ports, in selling its 
present assets, would have been very happy to receive a higher 
bid from a U.S. interest. I don't think it received one.
    The substantial majority of American containerized commerce 
is handled by marine terminal operators that, as I said before, 
are subsidiaries or affiliates of foreign enterprises. This is 
an international, highly competitive industry providing 
hundreds of thousands of American jobs. The United States 
depends on it, and it, in turn, has served the needs of 
American commerce well, adding capacity and service as the 
needs of American exporters and importers have grown.
    Port facilities, such as those discussed today, must, and 
do, comply with all the Government's applicable security 
requirements. There is no evidence that terminal facilities 
operations conducted by foreign-controlled companies are any 
less secure, or in any way less compliant with security 
regulations, or in any way less cooperative with U.S. 
Government security authorities than U.S.-controlled companies. 
In fact, these companies work closely and cooperatively with 
the Coast Guard, Customs and Border Protection, the military, 
and other U.S. law enforcement agencies.
    The other part of the cargo security--or the Maritime 
security strategy--that the Administration has established is 
to deal with cargo. It's been discussed by some of the Senators 
already. The strategy here is not to just inspect 5 percent of 
the box. A hundred percent of all containers are screened by 
Customs and Border Protection before they are loaded on the 
ship in the foreign port. The ocean carriers give Customs all 
the information they have about those shipments. Customs 
screens it at the National Targeting Center in Northern 
Virginia, and they can issue any carrier a ``Do Not Load'' 
message before it's even put on a ship in a foreign port. The 
fact is that the strategy is to call for 100 percent inspection 
of any container CBP considers to be high risk. Whether that 
number is 5 percent or 6 percent is really not the issue, it's 
that they're trying to inspect 100 percent of everything that 
is a high-risk box.
    They also have other layers of the strategy, because 
they're not just waiting for these things to get to the U.S. 
There's a Container Security Initiative, where they have 
agreements with 42 different nations at their ports to 
cooperate with their customs authorities. There's a C-TPAT 
program, where they're working with major U.S. importers to 
improve supply-chain security. And they're also looking at 
other ways to improve inspection.
    I would like to commend Deputy Secretary Jackson and 
Assistant Commissioner Ahern, because they're in the process of 
looking at new technology being piloted in Hong Kong that could 
allow for expedited and fast inspection of containers at 
foreign ports before they ever get here, without disrupting 
trade. There's many difficult issues involved with that, but 
they're looking at it, they're focusing on it, and our industry 
is fully supportive.
    If there is good that can come out of this inquiry, we 
agree with a number of the statements of Senators to look at 
port security generally and figure out where our priority 
attentions ought to be from this point on, building on a 
successful strategy that has been established.
    Our recommendation would be, first, to improve the data 
that is presently being used to do risk assessment on 
containers. Presently, they're only using the ocean carriers' 
bill of lading in these foreign port assessments. That was a 
very good start, a very good rule. We don't think it's 
adequate. And it should be improved.
    Second, continue to expand CSI. We need a network of 
government-to-government agreements around the world, so that 
when we have questions about containers, they can be inspected 
in a cooperative manner.
    Third, continue to do what Customs is doing in 
strengthening the C-TPAT program.
    Fourth, DHS ought to establish the TWIC program which is a 
Transportation Worker Identification Card for U.S. ports. 
Congress mandated it in 2002. It hasn't been implemented. We 
know they're working on it, and that it's difficult, but it 
ought to proceed.
    And, finally, again, they ought to proceed with what 
they're doing on looking at the expanded ability to inspect 
containers at foreign ports with the ICIS type of expedited 
radiation gamma-ray inspection technology.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Koch follows:]

        Prepared Statement of Christopher Koch, President/CEO, 
                         World Shipping Council
Introduction
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to testify before you today. My name is Christopher Koch. I 
am President and CEO of the World Shipping Council, a non-profit trade 
association representing international ocean carriers, established to 
address public policy issues of interest and importance to the 
international liner shipping industry. The Council's members include 
the full spectrum of ocean common carriers, from large global operators 
to trade-specific niche carriers, offering container, roll-on roll-off, 
car carrier and other international transportation services. They carry 
roughly 93 percent of the United States' imports and exports 
transported by the international liner shipping industry, or more than 
$500 billion worth of American foreign commerce per year. \1\
---------------------------------------------------------------------------
    \1\ A list of the Council's members can be found on the Council's 
website at www.world
shipping.org.
---------------------------------------------------------------------------
    I also serve as Chairman of the Department of Homeland Security's 
National Maritime Security Advisory Committee, as a member of the 
Departments of Homeland Security's and Treasury's Advisory Committee on 
Commercial Operations of Customs and Border Protection (COAC), and on 
the Department of Transportation's Marine Transportation System 
National Advisory Council. It is a pleasure to be here today.
    In 2005, American businesses imported roughly 11 million loaded 
cargo containers into the United States. The liner shipping industry 
transports on average about $1.5 billion worth of containerized goods 
through U.S. ports each day. In 2006, at projected trade growth rates, 
the industry will handle roughly 12 million U.S. import container 
loads. And these trade growth trends are expected to continue after 
2006.
    The demands on all parties in the transportation sector to handle 
these large cargo volumes efficiently is both a major challenge and 
very important to the American economy.
    At the same time that the industry is addressing the issues 
involved in efficiently moving over 11 million U.S. import containers 
this year, we also must continue to enhance maritime security, and do 
so in a way that doesn't unreasonably hamper commerce.
    The Department of Homeland Security (DHS) has stated that there are 
no known credible threats that indicate terrorists are planning to 
infiltrate or attack the United States via maritime shipping 
containers. At the same time, America's supply chains extend to tens of 
thousands of different points around the world, and the potential 
vulnerability of containerized transportation requires the development 
and implementation of prudent security measures. Like many parts of our 
society, we thus confront an unknown threat, but a known vulnerability.
    What is the appropriate collection of measures to address this 
challenge?
    The Department of Homeland Security's maritime security strategy 
involves many different, but complementary, pieces.
    It includes the establishment of vessel security plans for all 
arriving vessels pursuant to the International Ship & Port Facility 
Security Code (ISPS Code) and the Maritime Transportation Security Act 
(MTSA).
    It includes the establishment of U.S. port facility security plans 
and area maritime security plans pursuant to the ISPS Code and MTSA, 
and the establishment by the Coast Guard of the International Port 
Security Program (IPSP) pursuant to which the Coast Guard visits 
foreign ports and terminals to share and align security practices and 
assess compliance with the ISPS Code.
    It includes the Maritime Domain Awareness program, under which DHS 
acquires enhanced information about vessel movements and deploys 
various technologies for better maritime surveillance. The challenge of 
effectively patrolling all the coasts and waters of the United States 
is obviously a large one.
    The MTSA directives and DHS efforts also include enhanced security 
for personnel working in the maritime area.
    And last, but certainly not least, these directives and efforts 
include an array of initiatives to enhance cargo security, including:

   Cargo Security Risk Assessment Screening
   The Container Security Initiative
   The C-TPAT Program
   Container Inspection Technology Deployment

    The liner shipping industry and the members of the World Shipping 
Council have fully supported these various initiatives. Ocean carriers' 
business depends upon the government having a security regime that 
provides adequate levels of security confidence, while continuing to 
allow for the efficient and reliable transportation of America's 
exports and imports.
    The government's multi-layer security strategy is a fundamentally 
sound one, and seeks to address cargo and maritime security on an 
international basis as early as is practicable. It does not wait to 
address security questions for the first time when a ship and its cargo 
arrives at a U.S. port. The strategy can be further developed and 
strengthened, however, and we appreciate the Committee's continued 
interest in these issues. The following is a brief description of the 
strategy's various layers.
1. Vessel Security
    Every vessel entering a U.S. port, whether of U.S. or foreign 
registry, has a ship security plan that is in accordance with the ISPS 
Code--a binding international convention developed under the leadership 
of the U.S. Coast Guard. The Coast Guard also ensures through its port 
state enforcement programs that vessels entering U.S. ports are in 
compliance with the Code. Vessels that are not in compliance are denied 
entry into a U.S. port by the Coast Guard.
    Under MTSA, the Coast Guard requires vessels to file advance Notice 
of Arrivals 96 hours before arrival in a U.S. port, providing relevant 
advance information about the vessel, its itinerary, its crew and its 
cargo. The Coast Guard and Customs and Border Protection (CBP) use this 
information for risk profiling.
2. Port Security
    Port facilities must also comply with the ISPS Code, and, in the 
U.S., the Coast Guard's MTSA regulations--the regulatory regime used to 
implement the ISPS Code domestically. All major U.S. ports are in 
compliance with the ISPS Code. \2\
---------------------------------------------------------------------------
    \2\ The Coast Guard's MTSA regulations estimated that the 
industry's compliance with the Code would cost more than $8 billion 
over 10 years, and that figure did not include foreign port or foreign 
vessel compliance costs.
---------------------------------------------------------------------------
    These port facilities or marine terminals may be operated by the 
state or local government public port authority, or they may be leased 
from the port authority by terminal operating service providers, with 
the port authority maintaining ownership and oversight of the port. The 
majority of U.S. marine terminals are operated by private marine 
terminal firms, who have leased the property from the port authority. 
Major ports generally have multiple terminals and terminal operators.
    Stevedoring and marine terminal operations are a service industry 
that is open to foreign investment. Billions of dollars of foreign 
investment has been made in the U.S. over recent years in this sector, 
and that investment has contributed substantially to a transportation 
infrastructure that is critical to moving America's commerce 
efficiently and reliably. The investment has come from Japanese, 
Korean, Danish, British, Chinese, French, Taiwanese, and Singaporean 
businesses, just as American companies have been allowed to invest in 
marine terminal and stevedoring businesses in foreign countries.
    The substantial majority of American containerized commerce is 
handled in U.S. ports by marine terminal operators that are 
subsidiaries or affiliates of foreign enterprises. This is an 
international, highly competitive industry, providing hundreds of 
thousands of American jobs. The United States depends on it, and it in 
turn has served the needs of American commerce well, adding capacity 
and service as the needs of American exporters and importers have 
grown.
    An important element of the U.S. Government's position in 
international trade negotiations for many years, under both Democrat 
and Republican administrations, has been the importance of securing the 
ability of international investment to flow into various international 
service industries. It is a principle of substantial importance to many 
sectors of the American economy.
    Port facilities, such as the ones operated by P&O Ports and to be 
purchased by DP World ports, must and do comply with all the 
government's applicable security requirements. There is no evidence 
that terminal facilities' operations conducted by foreign controlled 
companies are any less secure, or in any way less compliant with 
security regulations, or in any way less cooperative with U.S. 
Government security authorities than U.S. controlled companies. In 
fact, these companies work closely and cooperatively with the Coast 
Guard, Customs and Border Protection, the U.S. military, and other U.S. 
law enforcement agencies.
    The World Shipping Council and its member carriers are committed to 
the effective implementation of port security requirements around the 
world. In this regard, the Council and its member lines are in the 
final stages of establishing a cooperative program with the U.S. Coast 
Guard pursuant to which the industry's member lines may report port 
facility security status issues to the Coast Guard in order to assist 
with that agency's global maritime security efforts.
3. Personnel Security
    Maritime personnel security is addressed in various ways. Vessels 
must provide CBP and the Coast Guard with advance notice of all crew on 
the vessel 96 hours before the vessel arrives in a U.S. port for 
screening. U.S. seafarers are issued credentials by the U.S. Coast 
Guard and must go through a security vetting process. All foreign 
seafarers must have valid, individual U.S. visas if they are to go 
ashore while in the U.S.
    Regarding personnel working in U.S. ports, the Department of 
Homeland Security has indicated that it intends to promulgate proposed 
rules on the Transportation Worker Identification Credential (TWIC) in 
the near future, as required by MTSA. At the request of DHS, the 
National Maritime Security Advisory Committee, after intensive, open 
and constructive dialogue amongst diverse industry and government 
officials, approved a detailed set of recommendations to the Department 
for their consideration in the development of this initiative. The 
establishment of the TWIC should help meet one of the unaddressed U.S. 
port security imperatives identified by Congress and DHS as an 
essential element of the Nation's maritime security. The Council and 
its member lines strongly support DHS promulgating a regulation on this 
issue.
4. Cargo Security
    Particularly with respect to containerized cargo, the issues 
surrounding cargo security are challenges that require a multi-faceted 
strategy, which begins long before the cargo arrives at a U.S. port. It 
involves advance Customs security screening of all containers before 
vessel loading in the foreign port, cooperation with foreign customs 
authorities through the Container Security Initiative, use of container 
inspection technology, and the Customs Trade Partnership Against 
Terrorism initiative.
a. Risk Assessment and the National Targeting Center
    The stated and statutorily mandated strategy of the U.S. Government 
is to conduct a security screening of containerized cargo shipments 
before they are loaded on a U.S. bound vessel in a foreign port. The 
World Shipping Council fully supports this strategy. The correct time 
and place for the cargo security screening is before the containers are 
loaded on a ship. Most cargo interests also appreciate the importance 
of this strategy, because they don't want their shipments aboard a 
vessel put at risk or delayed because of a security concern that could 
arise regarding another cargo shipment aboard the ship.
    In order to be able to perform this advance security screening, CBP 
implemented the ``24 Hour Rule'' in early 2003, under which ocean 
carriers are required to provide CBP with their cargo manifest 
information regarding all containerized cargo shipments at least 24 
hours before those containers are loaded onto the vessel in a foreign 
port. The Council supports this rule. CBP, at its National Targeting 
Center in Northern Virginia, then screens every shipment using its 
Automated Targeting System (ATS), which also uses various sources of 
intelligence information, to determine which containers should not be 
loaded aboard the vessel at the foreign port, which containers need to 
be inspected at either the foreign port or the U.S. discharge port, and 
which containers are considered low-risk and able to be transported 
expeditiously and without further review. Every container shipment 
loaded on a vessel bound for the U.S. is screened through this system 
before vessel loading at the foreign port. Customs may issue the 
carrier a ``Do Not Load'' message on any container that is so screened 
if it has security concerns that need to be addressed.
    The Department of Homeland Security's strategy is thus based on its 
performance of a security screening of relevant cargo shipment data for 
100 percent of all containerized cargo shipments before vessel loading, 
and subsequent inspections of 100 percent of those containers that 
raise security issues after initial screening. Today, we understand 
that CBP inspects roughly 5.5-6 percent of all inbound containers (over 
500,000 containers/year), using either X-ray or gamma ray technology 
(or both) or by physical devanning of the container.
    We all have a strong interest in the government performing as 
effective a security screening as possible before vessel loading. 
Experience also shows that substantial disruptions to commerce can be 
avoided if security questions relating to a cargo shipment have been 
addressed prior to a vessel being loaded and sailing. Not only is 
credible advance cargo security screening necessary to the effort to 
try to prevent a cargo security incident, but it is necessary for any 
reasonable contingency planning or incident recovery strategy.
    Today, while the ATS uses various sources of data, the only data 
that the commercial sector is required to provide to CBP for each 
shipment for the before-vessel-loading security screening is the ocean 
carrier's bill of lading/manifest data filed under the 24 Hour Rule. 
This was a good start, but carriers' manifest data has limitations.
    Cargo manifest data should be supplemented in order to provide 
better security risk assessment capabilities. \3\ Currently, there is 
no data that is required to be filed into ATS by the U.S. importer or 
the foreign exporter that can be used in the pre-vessel loading 
security screening process. This occurs, even though these parties 
possess shipment data that government officials believe would have 
security risk assessment relevance that is not available in the 
carriers' manifest filings, and notwithstanding the fact that the law 
requires the cargo security screening and evaluation system to be 
conducted ``prior to loading in a foreign port.'' \4\ Today, cargo 
entry data is required to be filed with CBP by the importer, but is not 
required to be filed until after the cargo shipment is in the United 
States, often at its inland destination--too late to be used for 
security screening purposes.
---------------------------------------------------------------------------
    \3\ See also, ``Homeland Security: Summary of Challenges Faced in 
Targeting Oceangoing Cargo Containers for Inspection,'' General 
Accounting Office Report and Testimony. March 31, 2004 (GAO-04-557T).
    \4\ 46 U.S.C. section 70116(b)(1). Section 343(a) of the Trade Act 
also requires that cargo information be provided by the party with the 
most direct knowledge of the information.
---------------------------------------------------------------------------
    In September 2004, the COAC Maritime Transportation Security Act 
Advisory Subcommittee submitted to DHS a recommendation that importers 
should provide CBP with the following data before vessel loading:

        1. Better cargo description (carriers' manifest data is not 
        always specific or precise)

        2. Party that is selling the goods to the importer

        3. Party that is purchasing the goods

        4. Point of origin of the goods

        5. Country from which the goods are exported

        6. Ultimate consignee

        7. Exporter representative

        8. Name of broker (would seem relevant for security check), and

        9. Origin of container shipment--the name and address of the 
        business where the container was stuffed, which is often not 
        available from an ocean carrier's bill of lading

    The Council agrees with this recommendation. The government's 
strategy today is to inspect containerized cargo on a risk-assessment 
basis. Accordingly, the government should improve the cargo shipment 
data it currently uses for its risk assessment. An ocean carrier's bill 
of lading by itself is not sufficient for cargo security screening. 
Earlier filing of these shipment data elements would improve CBP's 
cargo security screening capabilities. If a risk assessment strategy is 
to remain the core of the government's cargo security system, the 
government needs to decide what additional advance cargo shipment 
information it needs to do the job well, and it must require cargo 
interests, and not just carriers, to provide the relevant data in time 
to do the advance security screening. While this is not a simple task, 
a next step forward requiring shipper interests to provide more data on 
their cargo shipments before vessel loading is appropriate.
    I would like to note and commend the Committee Chairman, Senator 
Stevens, and the eleven other Senators cosponsoring S. 1052, for their 
inclusion in that bill of a requirement that importers provide CBP with 
such advance customs entry information for security screening purposes 
before vessel loading, just as carriers provide the information they 
have before vessel loading.
    CBP and DHS officials are currently reviewing this issue.
b. Container Security Initiative
    No nation by itself can protect international trade. International 
cooperation is essential. For ships and port facilities, the 
International Maritime Organization (IMO), a U.N. regulatory agency 
with international requirement setting authority, has responded to U.S. 
leadership and created the International Ship and Port Security Code 
(ISPS). These IMO rules are internationally applicable and are strictly 
enforced by the U.S. Coast Guard. There is no comparable international 
regulatory institution with rule writing authority for international 
supply chain security. For a variety of reasons, the World Customs 
Organization (WCO) has not acquired such an authority.
    At the WCO, CBP continues to work diligently with other governments 
on a supply chain security framework that can be used by all trading 
nations. This framework will be useful, but will remain at a fairly 
high level and will be implemented on a voluntary basis by interested 
governments. Consequently, U.S. and foreign customs authorities must 
also create a network of bilateral cooperative relationships to share 
information and to enhance trade security. This is the Container 
Security Initiative. The Council fully supports this program and the 
strategy behind it.
    Today, 72 percent of U.S. containerized imports passes through 42 
operational CSI ports (including Dubai, which became a CSI participant 
in March 2005), with further program growth expected. CBP hopes to 
expand the CSI program to 50 ports by the end of this year, which could 
cover roughly 85 percent of U.S. containerized imports.
    The liner shipping industry is fully supportive of these efforts by 
CBP authorities and hopes the program will continue to expand as 
expeditiously as possible. A listing of operational CSI ports follows:

----------------------------------------------------------------------------------------------------------------
                                          Port Name                                 2004 U.S. Imports TEUs (000)
----------------------------------------------------------------------------------------------------------------
        Yantian (Shenzhen)                                                                              1,982.79
        Hong Kong                                                                                       1,866.32
        Shanghai                                                                                        1,278.50
        Kaohsiung                                                                                       1,127.27
        Busan                                                                                             971.49
        Singapore                                                                                         494.30
        Rotterdam                                                                                         427.75
        Bremerhaven                                                                                       392.18
        Antwerp                                                                                           304.60
        Tokyo                                                                                             267.53
        Laem Chabang                                                                                      201.06
        Nagoya                                                                                            174.94
        Le Spezia                                                                                         159.67
        Hamburg                                                                                           150.01
        Santos                                                                                            146.26
        Genoa                                                                                             144.57
        Le Havre                                                                                          139.67
        Kobe                                                                                              119.97
        Colombo                                                                                           117.08
        Yokohama                                                                                          109.02
        Gioia Tauro                                                                                       104.48
        Livorno (Leghorn)                                                                                  92.33
        Algeciras                                                                                          81.75
        Felixstowe                                                                                         69.51
        Buenos Aires                                                                                       52.40
        Tanjung Pelepas                                                                                    45.96
        Durban                                                                                             43.94
        Liverpool                                                                                          39.37
        Port Kelang                                                                                        39.26
        Southampton                                                                                        38.62
        Thamesport                                                                                         32.34
        Naples                                                                                             29.88
        Lisbon                                                                                             26.91
        Halifax                                                                                            24.38
        Gothenberg                                                                                         18.81
        Vancouver                                                                                          13.59
        Piraeus                                                                                            11.58
        Tilbury                                                                                             2.56
        Dubai                                                                                               1.11
        Marseille                                                                                           1.07
        Montreal                                                                                            0.72
        Zeebrugge                                                                                           0.02
----------------------------------------------------------------------------------------------------------------
              Total CSI Ports                                                                          11,344.55
----------------------------------------------------------------------------------------------------------------
              Non-CSI Ports                                                                             4,460.93
----------------------------------------------------------------------------------------------------------------
              Total All Ports                                                                          15,805.48
----------------------------------------------------------------------------------------------------------------

c. C-TPAT
    Customs' Trade Partnership Against Terrorism (C-TPAT) is an 
initiative intended to increase supply chain security through 
voluntary, non-regulatory agreements with various industry sectors. Its 
primary focus is on the participation of U.S. importers, who are in 
turn urged to have their suppliers implement security measures all the 
way down their supply chains to the origin of the goods. This approach 
has an obvious attraction in the fact that the importer's suppliers in 
foreign countries are beyond the reach of U.S. regulatory jurisdiction. 
In return for participating in the program, importers are given a 
benefit of reduced cargo inspection. The C-TPAT program invites 
participation from other parties involved in the supply chain as well, 
including carriers, customs brokers, freight forwarders, U.S. port 
facilities, and a limited application to foreign manufacturers.
    CBP has been working to strengthen the C-TPAT program and to 
increase validations of participants' performance. C-TPAT is not a 
regulatory program, and it is not a guarantee of security. It does, 
however, provide for a creative partnership approach between government 
and industry as one element of a multi-layered strategy to improve 
security. It clearly has value, even though it can't be easily measured 
or quantified; and, because its principal purpose is to try to affect 
the conduct of parties outside U.S. regulatory jurisdiction, it has a 
reach that regulations alone could not have.
    Many maritime and supply chains security issues can be, should be, 
and are addressed through regulatory requirements, not C-TPAT. For 
example, vessel security plans and port security plans are regulated by 
Coast Guard regulations implementing the ISPS Code and MTSA. The data 
that must be filed with CBP to facilitate cargo security screening must 
be addressed through uniformly applied regulations. Seafarer 
credentials and the Transportation Worker Identification Card must be 
addressed through uniformly applied requirements.
    C-TPAT, however, is a program that can try to address matters that 
are not or cannot be addressed by regulations, such as supply chain 
enhancements beyond U.S. regulatory jurisdiction, or matters that 
aren't covered by regulations.
d. Container Inspection Technologies
    Technology clearly has a role in increasing both the efficiency of 
inspecting containerized cargo shipments and the number of containers 
that could be inspected. Container inspection technology is of 
substantial interest because--unlike so many other technologies--it 
helps address the container security question of paramount importance, 
namely: ``What's in the box?''
    X-ray and gamma ray non-intrusive container inspection (NII) 
equipment is being deployed at U.S. and foreign ports. At U.S. ports, 
CBP has deployed 170 large scale non-intrusive inspection devices. NII 
inspection equipment allows Customs authorities to have a visual image 
of a container's contents, is a relatively easy way to review a 
container's contents in contrast to physically devanning the container, 
and is usually adequate for inspecting a container considered to be of 
security interest.
    A particular security concern is the potential use of a container 
to transport a nuclear or radiological device. While there is no 
evidence that terrorists have nuclear weapons or devices, or that a 
shipping container would be a likely means to deliver such a device, 
the consequences of the potential threat--including those from a low-
tech ``dirty bomb''--are sufficiently great that, in addition to the 
targeted inspection of containers discussed above, CBP is deploying 
radiation scanning equipment at all major U.S. container ports. CBP has 
deployed between 180-190 radiation portal monitors at U.S. ports and we 
understand that these presently cover approximately 37 percent of the 
imported containers. CBP has also deployed thousands of hand-held 
radiation detection devices. CBP and the Department of Energy are also 
working with foreign ports to install radiation scanning technology 
abroad as well. Availability of such technology is one of the criteria 
that a foreign port must meet to become a CSI port, for example.
    Container inspection technology may be evolving to the point that 
it may be deployed in the foreseeable future to allow radiation and NII 
inspection of all containers entering a port facility without 
significant delay to commerce. If this were to prove true, and if the 
radiation and image readings are of sufficient quality for security 
screening purposes, this capability would allow a new and significantly 
more effective supply chain security strategy to be deployed. Such 
capability could enable governments to ``flex'' their security 
screening capabilities, to inspect more containers, even from a remote 
location, without having to inconvenience terminal operators or other 
customs authorities, and to more effectively handle a response to a 
transportation security initiative, including the NII inspection of 
every container being loaded at a particular port, if needed. Such a 
capability would also have the advantage of being able to inspect more 
containers before vessel loading, rather than waiting until they arrive 
in the United States discharge port.
    CBP and DHS officials are presently reviewing this technology and 
the pilot application of radiation-NII inspection technology to all 
containers entering two different Hong Kong port facilities. The 
technology is conceptually attractive, but a real world evaluation of 
the technology, its effect on operations, and its integration into and 
use by the government is clearly needed. For example, numerous nuisance 
alarms are likely to occur on a daily basis, and there will need to be 
clear protocols for how such situations will be addressed and resolved 
in the foreign ports. Other operational issues need to be clearly 
understood and addressed, including how such technology might be 
applied at transshipment ports, where cargo does not arrive through a 
terminal gate. While it is true that under this pilot program 
containers entering the truck gates of two Hong Kong container 
terminals have passed through these scanning and radiation detection 
devices, no one is actually using the Hong Kong pilot container 
inspection readings or images, or transmitting them to Customs, or 
applying the results of the technology in the operating environment. We 
are at the beginning stages of working through the issues involved, 
including determining whether and how CBP would like to embrace this 
technology.
    If the government determines that the technology works 
satisfactorily, it will be necessary to determine how the information 
produced by this technology would be transferred to the government and 
used and analyzed, and by whom and when. In addition, the technology 
obviously must be physically sited on marine terminals around the 
world. This would be a challenge, but may be possible if the proper 
foundation is negotiated and laid with foreign governments and terminal 
operators and provided the correct incentives are established. This 
will require addressing roles and responsibilities, substantial data 
transfer protocols, and issues of liability.
    It is also relevant to note that this kind of system would be 
impossible to deploy without the full cooperation and agreement of 
foreign terminal operating companies and their governments. It is also 
relevant to note that global application of this technology would 
almost certainly involve its installation and application at U.S. ports 
to U.S. export cargo, and sharing the resultant data with other 
interested foreign governments.
    There are significant and legitimate issues that need to be 
addressed in considering this technology and its possible deployment; 
however, the capability for governments to call up and review radiation 
and NII images of any container before vessel loading without delaying 
commerce could potentially provide a significant improvement in 
security capabilities. Furthermore, it could allow governments the 
flexibility to change their container security strategies in a way that 
would provide increased security assurance for all legitimate commerce, 
including the capacity to provide sufficient assurance of security to 
keep commerce flowing in the event of a container security incident.
Summary
    When addressing the issue of international maritime security, we 
find ourselves dealing with the consequences of two of the more 
profound dynamics affecting the world today. One is the 
internationalization of the world economy, the remarkable growth of 
world trade, and the U.S. economy's appetite for imports--a demand that 
fills our ships, our ports, and our inland transportation 
infrastructure, a demand that produced more than 11 million U.S. import 
containers in 2005, and will produce roughly 12 million this year, and 
a demand that will increasingly test our ability to move America's 
commerce as efficiently as we have in the past.
    The other dynamic is the threat to our way of life from terrorists 
and the challenge of addressing the vulnerabilities that exist in the 
free flow of international trade, even when the specific risk is 
elusive or impossible to identify.
    Finding the correct, reasonable balance between prudent security 
measures and overreacting in a way that impairs commerce is a tough 
challenge.
    Foreign equity in the international maritime transportation 
business is not the security challenge. It has been and continues to be 
a major, long-standing and positive contributor to an infrastructure 
that is essential to the American economy and to U.S. national 
security, and its interest in ensuring the safety and security of 
maritime commerce is very strong. After all, without a reliable, secure 
and efficient maritime transportation system, these companies' 
businesses are in jeopardy.
    The maritime security challenge is to build on the fundamentally 
sound strategic framework that DHS has developed and to continue to 
make improvements on what has been started. Specifically, we believe 
that priority DHS consideration should be given to:

        1. Improving the cargo shipment data collected and analyzed by 
        CBP's National Targeting Center before vessel loading. If cargo 
        risk assessment is to be a cornerstone of DHS policy--which we 
        believe is a correct approach, and cargo security screening is 
        to be performed before the cargo is loaded onto a ship destined 
        for the U.S.--which we also believe is a correct approach, it 
        should be using more complete cargo shipment data to perform 
        the risk assessment than only the ocean carriers' bills of 
        lading;

        2. Expanding international cooperation through the Container 
        Security Initiative network;

        3. Continuing to improve and strengthen the C-TPAT program;

        4. Promulgating regulations to implement the MTSA mandate of 
        maritime Transportation Worker Identification Cards; and

        5. Undertake a close examination of the merits and feasibility 
        of widespread application of ICIS-type X-ray inspection and 
        radiation screening equipment and the interface and use of such 
        equipment by Customs authorities. While not a simple issue, 
        this might hold the potential to significantly improve 
        governments' confidence in the security of importers' and 
        exporters' cargo shipments.

    Mr. Chairman, the World Shipping Council and its member companies 
believe that there is no task more important than helping the 
government develop effective maritime and cargo security initiatives 
that do not unduly impair the flow of commerce. We are pleased to offer 
the Committee our views and assistance in this effort.

    The Chairman. Thank you, Mr. Koch.
    Our next witness is Mr. Michael Mitre. Is that right?
    Mr. Mitre. Mitre.
    The Chairman. Port Security Director of the International 
Longshore and Warehouse Union, ILWU, in Los Angeles. The 
Committee enjoyed a visit to Los Angeles. However, as I said, 
it's a monstrous place. We're pleased to have your testimony.

     STATEMENT OF MICHAEL MITRE, DIRECTOR, PORT SECURITY, 
       INTERNATIONAL LONGSHORE AND WAREHOUSE UNION (ILWU)

    Mr. Mitre. Thank you very much.
    Mr. Chairman, I'd like to thank you for holding this 
hearing and inviting me to testify here.
    I'm Director for Port Security for the International 
Longshore and Warehouse Union. I am also a full-time worker. I 
drive one of the cranes that takes the containers off the ships 
and puts it on the dock. I was a dock and vessel foreman, and I 
have worked for 30 years in the port.
    I work inside the terminals, and have firsthand knowledge 
regarding the security situation on these terminals. We 
represent almost 20,000 longshoremen in Los Angeles, alone, 
full-time and casual workers.
    In 2004, terrorists hiding in a cargo container entered the 
Israeli Port in Ashdod, Israel, and 26 people were killed and 
wounded. All of them were port workers, like myself and my co-
workers. As that incident made very clear, port security 
equates to worker safety in the most fundamental sense. Our 
lives, and those in the port communities, are on the line. 
We're the closest to the action. We'll be the first ones 
impacted.
    The controversy over Federal approval to permit Dubai Ports 
World, owned by a foreign government, to operate within the 
United States is of the utmost importance. The ILWU fully 
supports the 45 days to fully consider this. But we also urge 
that the Federal Government, including Congress, focus its 
attention beyond this controversy and recognize and correct 
immediate major deficiencies in port security. They exist today 
in our ports and within our port terminals. It is the lack of 
effective port security, especially since 9/11, that is the 
real concern of dockworkers and, I'm sure, millions of 
Americans who live in close proximity to our ports, as well as 
all over the United States.
    The MTSA was initiated by this committee, and passed in 
2002. The Coast Guard was designated as the lead enforcement 
agency under the MTSA. They issued comprehensive, detailed, 
and, we believe, effective port security regulations.
    Unfortunately, as the MTSA security regulations have been 
implemented, many terminal operators, both foreign and 
domestic, continue to ignore many of the required measures 
designed to improve port security.
    As the current case over the Dubai contract has shown, the 
problem of systemwide noncompliance with existing port security 
regulations arises from allowing commercial interests many 
times, to override security interests.
    The ongoing port security crisis in this country stems from 
the lack of adequate Coast Guard funding and training necessary 
to meet the obligations that were imposed by the MTSA. The 
overarching problem is creating an effective enforcement 
mechanism capable of ensuring that essential port security 
measures that were mandated by Congress are fully implemented.
    The real question is, What's going to be the U.S. Coast 
Guard's defined enforcement role, and how is it going to differ 
from what's happened in the past, especially since 2002? How is 
the U.S. Coast Guard going to force terminal operators to 
conform, when budgetary constraints limit USCG landside 
manpower training initiatives? What is going to be the 
compliance trigger? And, most important, who is going to create 
the procedures and the protocols to instruct the Coast Guard in 
the basics of terminal operations? To me, and to my co-workers, 
this is critical.
    The Coast Guard today does not have an effective landside 
enforcement capability. It's almost like telling them, ``Hey, 
we want you to do this job, but we're going to tie your hands 
behind your back, and not going to give you the money, funding, 
and training to do it.''
    I work within the ports, and I work every day. I see how 
much Coast Guard presence there isn't. And it's not because of 
the lack of them wanting to do it, it's because of a lack of 
them having the manpower and the budget to do it.
    In the Port of L.A./Long Beach, in the last 4 years, almost 
every case where there's been a security incident, it's been 
longshoremen that have found it, whether it be people that are 
smuggled inside containers, or a container that has explosive 
mixtures in it. We had one case where a longshoreman was 
driving a container that exploded. It was allowed through a 
gate without placards, and even after we asked to be able to 
open it, and the terminal operator refused (to allow us to open 
it). In the past, our marine clerks at the gate would see 
something wrong, they'd say, ``Wait a minute, let's sidetrack 
that, or it doesn't have a seal, let's open it up.'' We don't 
do that anymore. We've been told, ``That's not our job anymore. 
We're not going to do that.'' Because of this, the container 
was allowed to come in, was loaded onto a truck, and was on its 
way to the ship when it blew up. It was loaded in Arizona, had 
no placards, and contained HAZMAT. It had butane and a car with 
a leaky gas tank inside.
    These are just some of the problems that we're facing when 
working within the ports, and I really hope that this case will 
create the environment necessary to either give the Coast Guard 
the ability to enforce MTSA or, to create a joint Customs/Coast 
Guard mechanism for compliance.
    Like I said, I really thank you for inviting me here today, 
and I'd be really glad to answer any questions you might have.
    Thank you very much.
    [The prepared statement of Mr. Mitre follows:]

     Prepared Statement of Michael Mitre, Director, Port Security, 
           International Longshore and Warehouse Union (ILWU)
    Chairman Stevens, Ranking Member Inouye and members of the 
Committee, my name is Mike Mitre. I am the Director of Port Security 
for the International Longshore and Warehouse Union (ILWU). In this 
capacity, I have had the privilege to provide testimony to committees 
of the U.S. Senate and the House of Representatives, and advice to the 
U.S. Coast Guard and other Federal agencies concerning port security 
matters for the West Coast. I also live and work in the Ports of Los 
Angeles and Long Beach, and so know first hand the security situation 
in the busiest seaport in America. Together the Ports of Los Angeles 
and Long Beach constitute the 3rd largest port in the world. My Union, 
the ILWU, represents about 60,000 working Americans, not just in the 
longshore and maritime industry, but also in warehouse, hotel-
restaurant, health care, mining, office clerical and a variety of other 
industries in California, Oregon, Washington, Alaska, Hawaii and 
Canada.
    Mr. Chairman, thank you for holding this important hearing. We are 
at a critical time in the history of our country. The threat of a 
terrorist attack against the marine transportation system is the new 
reality. On March 14, 2004, suicide bombers, hiding in a metal cargo 
container, entered the Israeli port of Ashdod to commit terrorism. They 
killed 10 people and wounded another 16. All the victims were port 
workers like myself and other ILWU members.
    As the tragedy in the Port of Ashdod has made chillingly clear, 
port security equates to worker safety in its most fundamental sense. 
Our lives and those in our port communities are literally on the line. 
In the event of a terrorist incident in an American port, the 
dockworker is the first one who is going to be killed or injured. Most 
dockworkers live within close proximity of the port and certainly 
within the impact-radius of any incident or explosion, be it chemical, 
biological or radioactive. We are talking about our families here, our 
children and our homes. It is in our own best interest to make sure 
American ports are secure; our family's lives and our livelihoods are 
at stake. Our commitment to port security is real, and it is not 
watered down or diluted by cost or commercial concern. This, Mr. 
Chairman, brings me to the immediate issue at hand.
I. Summary of Comments
    The controversy over Federal approval to permit Dubai Ports World, 
which is owned by a foreign government, to operate marine terminals at 
six East Coast ports is of the utmost importance for our country. The 
ILWU fully supports bipartisan calls in Congress for the Bush 
Administration to direct the Committee on Foreign Investment in the 
United States (CFIUS) to conduct a full 45-day investigation of the 
Dubai contract. Although our seaports are part of the global economy, 
the ILWU believes that we should not rush to open the doors of such 
national assets to companies owned and operated by foreign governments 
where serious concerns exist regarding terrorist activities and 
funding. We, therefore, urge that the decision for approval be based on 
the national security interests of the United States rather than the 
commercial interests of any one company or country.
    But we also urge the Federal Government, including Congress, to 
focus its attention beyond the controversy over one future, commercial 
contract and to recognize and correct the immediate, major deficiencies 
of security that exist today in America's ports. It is the current lack 
of effective port security since the terrorist attacks of 9/11 that is 
the real concern of dockworkers and millions of Americans who live in 
close proximity to our Nation's ports.
    The Maritime Transportation Security Act (MTSA), initiated by this 
committee and passed in 2002, provides the foundation for the Nation's 
port and cargo security. In 2004, the Coast Guard--designated as the 
lead enforcement agency under MTSA--issued comprehensive, detailed 
and--we believe--effective port security regulations for marine 
terminal and vessel operators to follow. Unfortunately, the MTSA 
security regulations have been implemented and honored in the breach, 
with both foreign and domestic companies ignoring most of the required 
measures designed to improve port security. Just like the current case 
over the Dubai contract, the problem of system-wide noncompliance with 
existing port security regulations arises from allowing commercial 
interests to override security interests.
    MTSA regulations allow terminal operators to write their own 
facility security plans. This is a mistake and yet another example of 
commercial interests overriding security concerns. We allow terminal 
operators to create their own security rather than having one model and 
enforcement mechanism for all terminals at all ports.
    The ongoing security crisis in our ports also stems from the lack 
of funding, training, and infrastructure. The overarching problem we 
now face is making the enforcement mechanism effective and capable of 
ensuring that essential port security measures mandated by Congress are 
fully implemented. However, the Coast Guard is a waterside and vessel 
enforcement specialist. They are not a ``landside'' or ``terminal'' 
enforcer of container terminal regulations and operations. What is 
going to be the USCG's defined enforcement role and how is it going to 
differ from the past? How is the USCG going to ``force'' terminal 
operators to conform? What is going to be the compliance trigger if and 
when terminal operators are found to be non-compliant? Most 
importantly, who is going to create the procedures and protocols to 
instruct the Coast Guard in the basics of terminal operations? 
Effective port security regulation compliance will require a 
comprehensive, fully funded, land-side compliance program employing 
large numbers of Coast Guard personnel who must be trained in terminal 
container operations and complex information systems format. This is a 
complex industry, and the volumes are astronomical.
    In conclusion, the ILWU believes that the debate over Dubai will do 
little to protect America's seaports unless the Federal Government 
takes this opportunity to recognize and correct the glaring, major 
defects in port security that exist today.
    In our written testimony, we have laid out specific security 
protocols at marine terminals that must be followed to ensure real port 
security. I look forward to answering questions about these 
recommendations.
    Thank you.
                               Attachment
ILWU Recommendations for Marine Terminal Security
    Security mandates may impose significant and additional operating 
costs on the maritime industry. However, port facility operators have 
repeatedly refused requests to implement some of the following, all of 
which are mandated by the Coast Guard regulations, because of cost and/
or commercial concern:

        (1) Access control procedures for the positive identification 
        of people, vehicles and cargo before entering a port facility 
        must be immediately implemented as required by regulation 33 
        CFR 105.255(a), (e)-(g), and 105.265 (a)-(d).--Presently, truck 
        drivers are the largest single occupational group working 
        within the terminals. Access is granted with little 
        authentication of identity and virtually no inspection of their 
        ``sleeper cabs,'' which frequently house friends and family. 
        Ironically, these drivers, once inside the terminals, have 
        unlimited access to all areas of the terminals without 
        oversight or supervision. Any of the fourteen terminals in the 
        Ports of LA/Long Beach may have hundreds of drivers on each of 
        the terminals at any one time.

        (2) Proper documentation, placarding and separation of all 
        dangerous cargo and hazardous material must be performed as 
        required by regulation 33 CFR 105.265(a)(9).--Presently, 
        hazardous cargo is frequently unmarked and integrated with 
        other cargo.

        (3) The integrity and correctness of all seals on containers 
        must be checked as they enter a port facility and as they are 
        placed in inventory on the docks to detect and deter any 
        tampering, as required by regulation 33 CFR 105.265(b)(4) and 
        105.265(c)(4).--Presently, this is not being done at most port 
        facilities. In fact, since September 11, many facility 
        operators have discontinued the past practice of checking these 
        seals.

        (4) All port workers must be trained as to the basic 
        requirements of the port facility security plan, the detection 
        of security problems and, most importantly, the proper response 
        and evacuation procedures during a security incident as 
        required by regulation 33 CFR 105.215.--As of today, port 
        facility operators refuse to share with dockworkers any parts 
        of their security plans on grounds of ``confidentiality''; 
        dockworkers cannot protect themselves or our ports if they are 
        excluded from security initiatives.

    Most of the deficiencies in port security can be corrected through 
continuous and rigorous enforcement of and adequate funding for the 
Coast Guard regulations. In this regard, we applaud the introduction of 
Senate Bill 1052, the Transportation Security Improvement Act (TSIA), 
which would improve the examination of cargo shipments overseas before 
they reach U.S. shores, provide procedures for the speedy resumption of 
commerce in the event of a seaport attack, and expanded the use of 
interagency operations centers (IOCs).
    However, there are at least two additional security measures, not 
specifically covered in the existing or proposed regulations that 
should be immediately implemented in order to protect our ports.

   Empty Containers--The inspection of all containers marked as 
        ``empty'' upon entering a port facility is a no-brainer. On any 
        given day, as much as forty percent of the containers delivered 
        into West Coast ports consist of ``empty'' containers. Many 
        facility operators presently receive and process ``empty'' 
        containers without confirming that they are truly empty. 
        Containers marked as empty provide a golden opportunity. The 
        good news is that unlike containers filled with cargo, the 
        inspection of empty containers is quick and easy. It is a 
        relatively cheap and painless way of confirming the absence of 
        a dangerous substance or device, and the absence of persons 
        illegally attempting to gain access. This, of course, makes the 
        inspection of ``empty'' containers all the more compelling and 
        an absolute necessity in any port security program. There have 
        been assertions made by industry officials that all West Coast 
        terminal operators are inspecting empty containers. This is 
        simply not true. The ILWU has furnished the Coast Guard with 
        formal letters from both stevedores and terminal operators 
        informing the union that, at certain facilities, empty 
        containers will no longer be inspected.

   24 Hours Advance Notice ``Export Cargo''--Requiring the 
        proper documentation of export cargo 24 hours in advance of its 
        receipt at the port facility is logical and follows the rule 
        for import cargo. While U.S. Customs requires twenty-four-hour 
        advance notice of the contents of all containers arriving 
        aboard vessels, see 19 CFR 4.7(b), current Federal regulations 
        require no comparable notice for export containers arriving by 
        truck or rail. Imposing a 24-hour detailed notice rule on 
        inbound cargo, but not trucks or trains delivering ``outbound 
        export cargo'' into the terminals makes little sense. Requiring 
        such notice would provide facility personnel additional time to 
        spot errors relating to the misidentification of cargo, fix the 
        honest mistakes, and determine what containers require further 
        inspection. It would also lead carriers to spot more 
        unidentified HazMat materials before they are transported.

    It is important to understand that while ``empty'' containers and 
export cargo are ultimately destined for other countries, they also 
pose immediate security risks for our seaports and the country. This is 
a national security issue for two reasons:

        1. Once the cargo within the container has been unloaded at its 
        eventual destination, there is no system, protocol, or 
        requirement in place making the last shipper responsible for 
        closing and sealing the doors. As a result, this empty 
        container will travel over-the-roads of the U.S. unlocked and 
        open. It may serve as a platform or vehicle for anything or 
        anyone who may desire to do harm to our country. It may lie 
        unattended on city streets or even within the port for days or 
        even weeks until it is returned to the terminal for shipment 
        (usually back to Asia.) Who knows what has been stored or 
        smuggled inside? Who knows what kind of plan someone may come 
        up with utilizing this empty container?

        2. Once loaded onto a vessel, empty containers travel with that 
        vessel between and among U.S. ports until they are eventually 
        off-loaded, whether in a foreign port, or still here in the 
        U.S. At any point along the vessel route, a weapon of mass 
        destruction, planted inside an ``empty'' container or among 
        export cargo, could be later detonated at the next American 
        port-of-call. The al Quaeda terrorists executed their September 
        11 attacks from within the United States. The same strategy may 
        well be used again and should be anticipated. Prevention with 
        respect to cargo and containers in our marine transportation 
        system depends on a thorough knowledge of containers and cargo 
        handling methods and operations. The 9/11 terrorists exhibited 
        an amazing ability to gather intelligence, and then plan, fund 
        and execute a successful operation. The defense of our country 
        demands no less.

    The Chairman. Thank you very much.
    We're dwindling in numbers. I'm inclined to think it would 
be a better part of valor to hear from Mr. Jackson and the 
Admiral before we ask any questions. What's the feeling of the 
Committee? Any of you wish to ask questions now?
    Gentlemen, could we ask you just to slide over to the left, 
and we'll bring Mr. Jackson and Admiral and Mr. Ahern back, if 
they will join us.
    Senator Burns. Could I ask just one question?
    The Chairman. Yes, sir.
    Senator Burns. Mr.--is it Mitre?
    Mr. Mitre. Mitre.
    Senator Burns. Mitre? Since that incidence of this one 
automobile and you had that explosion, do you see us making any 
progress yet on port security, both from the workers on the 
docks and other folks around, watching for such, I guess, 
inappropriate actions or inappropriate shipping? Do you--have 
we made any progress in that respect?
    Mr. Mitre. I don't want to be----
    Senator Burns. I know you do it for--I know why you do it. 
You do it for self-preservation. And I don't blame you.
    Mr. Mitre. And we have a vested interest here.
    Senator Burns. Yes, you have a vested interest. But do you 
see us making any progress in that respect?
    Mr. Mitre. To be honest, not a lot. Because this is what 
happens at the Port of L.A./Long Beach, which is--the two, by 
far, biggest in the country. The Coast Guard simply doesn't 
have the assets. So, what happens is, many times we'll call the 
Coast Guard. The captain of the port--we have a direct hotline. 
And, by God, he responds. The Coast Guard's really good about 
that. They're our primary waterside enforcer. But they were 
not, and never have been, a landside enforcement team. If we're 
not going to provide the budget that they need to do this, it's 
like fighting the battle with your hands behind your back. You 
don't see teams of Coast Guardsmen on the terminal looking for 
compliance. And I think that's what the problem is.
    Senator Burns. OK, thank you very much. I appreciate that.
    The Chairman. Now, if you all would move down a little bit 
to the left, we'll put Mr. Jackson--I meant your--pardon.
    Senator Boxer. Mr. Chairman, could I just ask you what your 
plan----
    The Chairman. It's your right, my left.
    Senator Boxer. Mr. Chairman, could I just ask you what your 
plan is? Will we each have a chance to do two rounds, then, 
when we get to the questions, since you're doing two panels? 
Will we each have a chance to do two rounds of questioning?
    The Chairman. We will have as many rounds as you want. Each 
member will----
    Senator Boxer. Oh, excellent.
    The Chairman.--have 5 minutes as we go around.
    Senator Boxer. Thank you.
    The Chairman. Sorry about this, gentlemen. I appreciate 
your courtesy. There's meaning in my madness. There's several 
people here who wouldn't have been here if we had gone the 
other way.
    Mr. Jackson, you're the one to testify for this group. As I 
understand it, Admiral Ahern was here--there's Admiral--pardon 
me, Admiral Gilmour and Mr. Ahern is your support, right? Is 
that correct?
    Mr. Jackson. Yes, sir.
    The Chairman. We'd like to have your statement, please.

         STATEMENT OF HON. MICHAEL P. JACKSON, DEPUTY 
SECRETARY, U.S. DEPARTMENT OF HOMELAND SECURITY; ACCOMPANIED BY 
 REAR ADMIRAL THOMAS H. GILMOUR, U.S. COAST GUARD, AND JAYSON 
                       AHERN, ASSISTANT 
     COMMISSIONER FOR FIELD OPERATIONS, CUSTOMS AND BORDER 
              PROTECTION, DEPARTMENT OF HOMELAND 
                            SECURITY

    Mr. Jackson. Thank you, Mr. Chairman.
    I'm grateful to be back before this committee. And thank 
you for your consideration in bringing us here.
    In the interest of time and because some of my colleagues 
have already covered material that I had planned to discuss in 
my opening statement, I'll try to be brief and then be happy to 
answer any questions.
    I'll talk about, just briefly, two things. First, I'm going 
to try to summarize a little bit of the transaction regarding 
Dubai Ports World from the point of view of the process that 
CFIUS went through. And, second, I would like to just say a few 
words about the context for maritime security and global 
supply-chain security, which is part of this hearing, but also 
something that's very importantly raised in the context of this 
acquisition.
    First, I would say that my colleague from DP World was 
absolutely right in talking about the discipline, the rigor, 
the completeness, and the systematic nature in which this 
transaction was reviewed. We spent more time on this, if you 
start from the initial prefiling discussions, than we would 
have under many other CFIUS transactions, even if we had gone 
through the full 45-day period that's allowed under the law. 
So, we had ample opportunity to discuss these issues, and to 
work with the firm, and to work within the 12 agencies of the 
government that did the CFIUS review. We added Transportation 
and Energy to that review to get their views on this process, 
as well.
    I'm going to just say that DHS is the newest formal member 
of CFIUS. We are not at all bashful about raising issues 
related to these transactions. We're not at all bashful about 
asking for a 45-day review period, if we think that we need the 
additional time. But I would say just a word about this 
process.
    There, I think, is a misunderstanding about what happens 
during these transactions and the review of them. This period 
of time is not unlike what would happen in a corporate merger 
and acquisition. You don't start from stating objections, you 
start by learning and listening about the nature of the 
transaction. The nature of the firm, the nature of the business 
they're engaged in, an assessment of the security of all of the 
transaction is the goal and the objective here. So, we try to 
learn as much as we can, and, as you begin to learn and unfold 
the contours of the particular deal, we either get more 
comfortable or less comfortable.
    In this case, the entire CFIUS participation roster got 
quite comfortable, but after we had gone through, listened, 
talked, learned, and then had an opportunity to ask for some 
specific assurances, which have been described, in general, by 
the gentlemen who have spoken earlier. And we received the 
company's voluntary assent to those assurances. We have more 
visibility into the operations of DP World, if this transaction 
is consummated, than we do in any other terminal operating 
company. We have the capacity to bring their records to the 
table quickly and comprehensively to assess the operations. 
And, in fact, the Coast Guard, subsequent to the approval in 
January, has begun to do reviews of the assets that are in 
P&O's inventory, prior to the transaction being completed.
    So, I would say that--did we have enough time? Absolutely. 
Do we have enough resources? Yes. What happened? I've described 
it. It was a systematic review. Did we consult adequately and 
fully with this Congress? No. I think we needed to have done a 
better job of that. We will do a better job of that. We're 
eager to talk to the Congress about these types of transactions 
and about how we can better inform you of the details of this 
work.
    Let me switch, then, to say just a word about where we've 
been since 9/11. Again, much has already been noticed about the 
nature of a terminal operator. This is not a transaction that 
is purchasing a port. It's not a transaction that is gaining 
control over a port. A terminal operator is an important and 
valued partner in the process of managing the flow of 
international supply chains. But we believe that this deal is 
appropriately bounded and constrained by a tremendous amount of 
work that's been done since 9/11. There has been a 
transformation in what we've done in port security since 9/11. 
This committee played a vital role in instituting just that. I 
had the pleasure of working with you, in my previous 
appointment at the Department of Transportation, as you set out 
on that course.
    I would tell you that this job of transformation is not 
over. I'm not here to tell you we've done everything we can. 
I'm not here to tell you we've done everything that needs to 
happen. I'm not here to tell you anything other than port 
security has to be a commitment to continuous innovation. But 
not to acknowledge what has been instituted since 9/11 is to 
lose control of some important facts about what we've done to 
improve security.
    So, I don't want to leave anyone with the impression that 
we are simply, willy nilly, ignoring security. There is a 
layered system of controls that we have instituted since 9/11 
that is growing in depth and complexity. You heard, from the 
World Shipping Council, a discussion of many of those 
components, and they begin in the foreign ports, they begin 
with the C-TPAT program, with the shippers, some 8,000 strong 
now, partners who help move the supply chain goods globally.
    So, we have new rules. The advance manifest 24-hour rule, 
the Container Security Initiative, the advance notice of 
arrival in which we receive 96 hours notice, the importer bill 
of lading 24 hours before, the automated targeting system, the 
shipside inspection routine that Coast Guard has put in place, 
the radiation portal monitors that have been put in place so 
that we, today, have 37 percent of containers screened in this 
fashion, the CSI ports are screening 80 percent of inbound 
containers. There is nonintrusive X-ray inspection, security 
measures that are comprehensive as a result of C-TPAT.
    So, there are these broad measures in place. I'm happy to 
answer questions about it, also happy to talk a little bit 
about the future of how we've proposed to grow, deepen, and 
strengthen our security measures in place in the maritime 
domain.
    The Chairman. Well, thank you very much.
    For the information of members that are still here, any 
member who comes back, other than Senator Ben Nelson, who told 
me he's right outside the door, will take their turn after 
those of us who have stayed. All right? The limit is 5 minutes 
per Senator.
    Let me start off with you, Mr. Jackson. There are at least 
20 foreign-owned companies from 11 different nations, including 
those owned by governments such as China, Singapore, Taiwan, 
and perhaps others, who are operating in 25 states, 11 of them 
in States represented by Senators on this committee. Can you 
tell us, is there some special security threat that DP World 
poses that these other companies, foreign-owned companies, do 
not pose?
    Mr. Jackson. No, sir. Our judgment is that DP World does 
not pose a unique security threat.
    The Chairman. We're told that the Coast Guard had a 
classified document that was going through the Department of 
Homeland Security concerning DP World. Were you aware of that?
    Mr. Jackson. The Coast Guard did an internal assessment of 
this transaction. The document that they created was for their 
internal review, so that they could render a judgment about----
    The Chairman. That's not the question I asked you. Were you 
aware of it?
    Mr. Jackson. At the time it was written, I was not. No, 
sir.
    The Chairman. Were you aware of it at the time you passed 
on the approval of DP World?
    Mr. Jackson. No, sir, I was not.
    The Chairman. Do you think you should have been?
    Mr. Jackson. In this transaction, in retrospect, I wish I 
had learned more.
    The Chairman. Were you cleared for that access?
    Mr. Jackson. Yes, sir.
    The Chairman. Do you think Congress needs to legislate 
further in any way regarding these terminal operators who are 
foreign-owned, in terms of the operations within our ports?
    Mr. Jackson. No, sir. I believe the general security regime 
that Congress has established will adequately allow us to work 
with foreign-owned operators, as well as domestically-owned 
operators.
    The Chairman. Mr. Mitre, you know, I go back a long way, 
and I have a union card, myself, as a matter of fact, from a 
long time ago. But can you tell me, What effect does this 
really have on your people who own this company?
    Mr. Mitre. It's very interesting. And, as Mr. Yoshitani 
said, it looks simple, but it's a little more complex than 
that. There's a couple of things going on. One, you have 
contract stevedores that run terminals. Then you have foreign 
vessel owners that run terminals. Contract stevedores are 
American stevedores--MTC and SSA on the West Coast, basically, 
with Pasha, a small company. The rest are the Singaporean-owned 
APL, Maersk, many. But they own ships. It's in their vested 
interest to make sure that their terminals are ideal terminals, 
because they need to make sure those ships turn as fast as 
possible.
    If you don't own ships and you're a contract stevedore, you 
don't have the same interest as a terminal operator that does 
own ships. And I think, in this case--and this is just in my 
own opinion, you asking me--you've got a foreign company coming 
in that's a contract stevedore, and it's a little bit different 
than ones that own ships and have a vested interest.
    The Chairman. Well, it was foreign-owned at the time. It's 
foreign-owned today, by a British company. What difference does 
it make if it's owned by Dubai?
    Mr. Mitre. To me, Dubai doesn't matter. And I'm just 
talking about a foreign-owned, it doesn't matter.
    The Chairman. OK. Thank you.
    Mr. Koch, if we're to bar all foreign ownership in U.S. 
port terminals, as some have suggested, would we possess the 
maritime-related assets to continue to accommodate the needs of 
our waterborne trade?
    Mr. Koch. Absolutely not. Roughly--our guess is somewhere 
around 75 percent or more of U.S. trade is handled by terminal 
operators that are foreign-owned.
    The Chairman. Mr. Yoshitani, what would be the effect of 
Congress precluding foreign investment in terminal operations 
in U.S. ports?
    Mr. Yoshitani. Well, there's quite a bit of foreign 
investment in terminal operators already. I'm not sure that 
additional----
    The Chairman. I think the suggestion is, is government-
owned foreign operations. I take it that would include China, 
Singapore, Taiwan, as well as the Emirates, if it passed. That 
has been suggested, as I understand it.
    Mr. Yoshitani. Yes, sir. I'd like to answer that in two 
parts, if I may. Number one, from a commercial aspect, I don't 
think there would be any problems with it. Now, we, as terminal 
operators or the association, feel that it's totally 
inappropriate for us to be making any judgments as to the 
security profile of Dubai, or any other company, for that 
matter. So, we'd like to take a pass on that.
    The Chairman. Thank you.
    Senator Vitter, you're the first up, the people that are 
here. He's not here, all right. I'm sorry. I'm looking down 
there, can't quite see down there. Sorry about that.
    Senator Boxer. They look alike, though.
    The Chairman. No.
    The first person that's here, then, is Senator Pryor.

                 STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Pryor. Thank you, Mr. Chairman.
    If I may----
    The Chairman. I just see the back of his head. I didn't 
know which one----
    Senator Pryor. If I may, Mr. Jackson, I'd like to start 
with you--that is, my understanding, is that DP World has 
volunteered to undergo, I guess, a voluntary additional review 
of the port terminal acquisition. But, as I understand, the way 
that would work is, the review would take place after the 
transaction is completed. Is that right?
    Mr. Jackson. That's my understanding.
    Senator Pryor. And what purpose does that additional review 
serve if the port has already changed hands?
    Mr. Jackson. Well, I would defer to the owners and the 
potential owners to talk about the structure of that 
transaction, but they have made representations that they are 
insulating any change during this period of 45 days.
    Senator Pryor. Does anybody want to take a stab at 
answering that? Because when you do a review after the 
transaction is done, I'm not sure if you can undo the 
transaction.
    Mr. Bilkey. Senator, I'd be glad to explain. There have 
been some questions about why we said we had to continue the 
acquisition. This acquisition was governed by the takeover laws 
of the United Kingdom. And in that process we are not in a 
position now to stop this. As actual fact, by September of--
March 15th, we have to mail checks worth $6.8-plus-million to 
the present shareholders--billion dollars--that's a slight 
change, thank you, Rob--to the shareholders. And in view of 
that, we voluntarily tried to make a scheme that would put us 
in a ``hold separate'' situation. We will have no influence, 
take no action, give no directions whatever to the present P&O 
North American assets. And, frankly, it's a rather interesting 
thing, because in our acquisition we had a merger plan, and we 
were actually planning to merge with the U.S. assets--as we 
said before, we're going to keep it as a separate company--we 
were going to merge our Caribbean assets, where we have two 
terminals. But in view of what is happening in this 45-day 
period and our proposal, we are obviously going to keep those 
out of the system. But it would be our intent, actually, to put 
our Caribbean assets within the North American company in the 
future.
    Senator Pryor. OK. Well, I may want to follow up on that in 
a moment.
    Mr. Jackson, let me ask you, if I may--again, I have a list 
here of at least four deadlines that the Administration has 
missed in regards to complying with port security laws. And--I 
can read them if you'd like. But I'm wondering if you have an 
explanation on why these deadlines were not met. And it seems 
to me there might be a pattern with this Administration, on not 
meeting port security deadlines.
    Mr. Jackson. Well, without knowledge of the four that you 
have in mind----
    Senator Pryor. Well, let me tell you what they are, just 
very quickly, so you can answer: National Maritime 
Transportation Security Act, that was April 1, 2005; 
Comprehensive Strategic Management Plan, March 17, 2005; 
Establishment of the Performance Standards for Cargo Seals and 
Locks, March 17, 2005; and Section 70116 in the Secure System 
of Transportation Program.
    Mr. Jackson. Well, I'd be happy to look into each of those 
specific ones and provide for the record an explanation, as 
best as possible. But let me just tell you that there is 
absolutely no lack of focus, or lack of interest in these 
marine security activities. There is a lot on the plate of a 
very new department. We have had literally thousands of 
deadlines that were allocated to us for work as a result of the 
creation of the Department. We are working very hard through 
this, and I can just tell you that Secretary Chertoff makes 
this an extraordinarily high priority.
    This is an area very close to my heart. I told you I 
believe that marine security is a very, very vital thing for us 
to focus on at the Department. And we're committed to doing 
that. If we're behind on things, we'll try to get ahead.
    Senator Pryor. Thank you, Mr. Chairman. That's all I have.
    The Chairman. Thank you.
    The next person that's here would be Senator Cantwell.
    Senator Cantwell. The Senator from New Jersey, because of 
his age--and only because of his age--can----
    The Chairman. I thought that might appeal to you, Senator.
    [Laughter.]
    The Chairman. Senator Lautenberg?
    Senator Lautenberg. Thanks very much, Mr. Chairman. I am 
still just a freshman--or sophomore, at most--Senator, after 
having been here 21 years.
    Thank all of you. And thanks, Mr. Chairman and my 
colleagues, for their tolerance here.
    Mr. Chairman, we have quite a corps of witnesses here: 
people who have knowledge and experience. That doesn't mean 
that we should avoid doing what comes naturally. And Mr. Bilkey 
and our colleague Mr. Scavone--forgive me for the lack of 
pronunciation, but I don't have it quite in front of me----
    Mr. Scavone. Mr. Scavone. Rob Scavone, Senator.
    Senator Lautenberg. Mr. Scavone, I recognize you, and also 
Mr. Yoshitani. I worked with the longshoremen and the port 
folks for many years before I came to the U.S. Senate. I was a 
member, as I mentioned, a Commissioner of the Port Authority of 
New York and New Jersey. I lived in the port area all my life. 
And I just want to say this. If there's an error in semantics, 
it's not, Mr. Bilkey, that people don't understand that it's 
not the port. Even if this transaction goes through exactly as 
it will after Thursday's closing, I know very well, and I think 
my colleagues do, in all due respect, understand that you're 
not buying the port, you're buying access to important 
facilities. In this case, it's a giant container terminal, as 
you very well know. And there is no accusation here that the 
United Arab Emirates, particularly Dubai, is an avowed enemy of 
the United States.
    And I've got to tell you, it touches a little bit of a 
nerve in me when we get a lesson in morality or character 
coming from people who may have a disagreement with them. And I 
happen to be very concerned. I don't know whether you live in 
New Jersey anymore. I know your family has very proud roots, 
very long roots, in this country. Mine have not been here quite 
that long, but there's 100 years behind that. And the memory of 
9/11--I worked in the World Trade Center as Commissioner of the 
Port Authority--is seared so deeply in my mind, because they 
were friends and neighbors, young and middle-aged people, and 
fathers and mothers, and sisters and brothers. We're just not 
going to give up our vigilance as easily as the Administration.
    And I don't care what our colleagues say on any side of 
this discussion about racial profiling. I know this, that if 
you're Jewish, you can't get in the countries. My own passport 
was denied access by Saudi Arabia when I went there. I was the 
first legislator to go there during Gulf War I, because there 
were people from our airbase in New Jersey who were ferrying 
cargo and people to that country. Saudi Arabia wanted to deny 
my passport entry--me, a United States Senator and former 
soldier. So, I want to clear the record of these things when 
our colleagues bring up the term ``racial profiling.''
    Now, I want to ask a couple more serious questions.
    The Chairman. I just wanted it quiet----
    Senator Lautenberg. OK.
    The Chairman.--so you can be heard.
    Senator Lautenberg. All right. Anyway, the fact is that 
much of the complaints that I have are against the lack of 
recognition by our own government, in that more had to be done. 
As of Thursday, the transaction between World Port and the 
United States--and the British company--P&O--will have been 
executed. The contract is done. Is that the way any of you 
recommend doing business? You first sign a contract, and then 
you get all of the understandings that follow? Absolutely not. 
I wouldn't do it, and I ran a big company. And I don't think 
any of you would do it. So, why, here, are we taking that kind 
of risk?
    You may feel very comfortable, Mr. Bilkey, about the fact 
that there is no risk, but I don't care what you say about 
that, I'm going to act to protect my family, my constituents, 
my country, and my state as much as I can. And your assurances 
are nice to hear, but that's not enough for me, or for them.
    President Reagan said, ``Trust, verify.'' And that's what 
my bill does. I support Senate bill 1052. I think it's a good 
start. But I also want to have another layer of scrutiny, and I 
want the ports themselves, the port management, to have to do a 
little bit of vetting on their own.
    Mr. Chairman, thanks for permitting me this recasting of 
time.
    The Chairman. Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman.
    Mr. Bilkey, in my understanding, you have about 30 percent 
of the marketplace, and if this deal goes through, you'll end 
up being the world leader in this area. So, I have a question 
about--at what point in the process, if any, were you made 
aware of the Coast Guard's concerns to the Department of 
Homeland Security in regards to intelligence and security gaps?
    Mr. Bilkey. Senator, first--I'm learning about this--first 
of all, we're not going to be the largest, by far. Hutchison 
Whampoa, with their large Chinese operations, are the first, 
and a very fine operator. We will have, actually, the most 
terminals, individual terminals in the world in this portfolio, 
when this goes through.
    The answer to your question is, I found out about it last 
night.
    Senator Cantwell. Do you think there are any documents that 
were given by the company to the Committee for review that you 
don't know about? Do you think that, in asking these questions, 
in this process of review, and the Coast Guard raising these 
questions--do you think that the company responded in any way, 
or was asked to respond in any way?
    Mr. Bilkey. I know they were. But I don't know every single 
document that they were given, that's for sure.
    Senator Cantwell. Is it possible for us to get a copy of 
the documents that were provided, to prove to the Committee 
that this should be approved?
    Mr. Bilkey. If Homeland Security and the Treasury agrees, 
it's fine by us.
    Senator Cantwell. OK, thank you.
    Mr. Jackson, who actually made this decision at Homeland 
Security? I saw in the press that Secretary Chertoff said that 
he did not know his agency had signed off on this proposal. Who 
within Homeland Security is responsible for making the 
decision?
    Mr. Jackson. Assistant Secretary Stewart Baker was the 
senior official involved in this transaction.
    Senator Cantwell. And do you know the specific response 
that was asked by Dubai Ports World in response to the concerns 
that the Coast Guard brought up?
    Mr. Jackson. Let me try to frame this a little bit. And 
partially we're talking about a classified document, so I'll 
talk about it as much as I can. And I'd be happy to talk about 
it in another fora, if that's helpful to you, ma'am.
    The portion of the text that has become public was an 
unclassified portion of a classified document. And this is a 
standard section in reviews of this sort that assesses any gaps 
in available information. When you start a transaction of this 
sort, there are a multiplicity of gaps that you then go seek to 
fill. And, at the end of the day, what I can say about the 
conclusion of this intelligence assessment is that the Coast 
Guard found no reason not to approve the transaction, based 
upon the totality of its work. And they, therefore, recommended 
the same to DHS.
    Senator Cantwell. Can you--you or Admiral Gilmour, tell me 
exactly when, on that timeline of this process, those issues 
were resolved? Was that the final days of this decision, very 
early on, in the middle?
    Admiral Gilmour. Yes, Senator, the classified document was 
done very early on in the CFIUS process.
    Senator Cantwell. And the questions were raised and 
answered in the same very early timeframe?
    Admiral Gilmour. In our interagency--or, I should say, 
interdepartmental working group that we had, we raised certain 
questions that would certainly address those concerns, yes.
    Senator Cantwell. Well, I know that we have a standing 
request from Senator Snowe and myself to go further on that 
question, so I'm sure we'll have an opportunity to do that.
    Mr. Jackson, are you aware that the President's FY 2007 
budget recently submitted to Congress proposes a 45 percent cut 
in funding for the Megaports Initiative?
    Mr. Jackson. I'm familiar with the general contours of the 
Energy Department program, but I don't know the details of it.
    Senator Cantwell. Do you agree with that? I mean, I know 
it's probably hard for you, at your level, to answer that, but, 
given what everybody has said about how important the Megaport 
Initiative is, and how we want to move forward on more port 
security, do you think it's time to have a cut in funding for 
that Megaport Initiative?
    Mr. Jackson. I would have to review the specific details of 
the proposal and understand what the laydown in the procurement 
cycle looks like for that particular initiative. That's a 
Department of Energy program, and I have not had a chance to 
review the details of it.
    Senator Cantwell. Do you think we're----
    Mr. Jackson. I'd be happy to do so.
    Senator Cantwell. Do you think we're spending enough on 
port security, just yes or no?
    Mr. Jackson. I think we are spending a tremendous amount 
and----
    Senator Cantwell. Are we spending enough?
    Mr. Jackson.--an appropriate amount for the many things 
that we are balancing. We're spending about $2.5 billion at DHS 
alone on port-security/maritime-security-related things. This 
is the whole--the whole mix of Coast Guard operations that are 
specific to port security. It's CBP operations specific to port 
security. It's a grant program, which this year will be----
    Senator Cantwell. So, you think it's appropriate----
    Mr. Jackson.--160 million.
    Senator Cantwell.--you think it's appropriate level.
    Mr. Jackson. I think it's a fair balance, given the many 
competing priorities that we have to manage in the homeland 
security world.
    Senator Cantwell. Well, I know my time is expired, so we'll 
go to the next round and come back on this question. But I'd 
just--I'll tell you where my constituents are. They want to 
know why we spent billions of dollars on Star Wars defense and 
yet we don't have the security to guarantee that there's not 
going to be a nuclear device in a cargo container that comes to 
the Port of Seattle.
    So, when you talk about balance, I think that's where the 
American public is concerned, when they think it's going to 
come right through to their city waterfront, which is where it 
is in Seattle, and could impact millions of people.
    Now--so, maybe in the second round, we can----
    Mr. Jackson. There are many----
    Senator Cantwell.--go into that in more detail.
    Mr. Jackson.--many risks that we're trying to manage within 
the Department of Homeland Security, but if you take the 
budgets from 2004 to the proposed budgets of 2007, we, at DHS, 
will have spent $10 billion on maritime security investments. 
This is not a paltry sum. It's a very considerable investment 
in securing our Nation's maritime system.
    Senator Cantwell. I'll look forward to the details on that.
    Mr. Jackson. I'm happy to give them to you.
    The Chairman. The next person is, I believe, Senator Boxer.
    Senator Boxer. Thank you.
    Let me first say I'm sorry that Senator DeMint isn't here, 
because he said there was a vote, and I was one of four people 
to vote on something. There was no such vote. He was talking 
about a Feinstein-Hollings bill, and, at the end of the day, 
there was no vote on it, and it would have said that, for San 
Francisco Airport, if you're in the process of becoming 
naturalized, and the Attorney General says you're OK, you could 
continue in that work. So, I wanted to--but it was a very 
bizarre attack.
    But, anyhow, let me get to the case at point here.
    I want to go, Mr. Bilkey, to you, because you were very 
eloquent, and you said, ``with malice toward none and charity 
for all,'' and we all carry that in our hearts. Except I 
wonder, do--your company doesn't seem to have any charity 
toward Israel. What do you do at the Port of Dubai if there's 
some package going there, a container going there? You don't 
take it, do you?
    Mr. Bilkey. Well, we don't know what--excuse me--we 
actually don't know what's in a container.
    Senator Boxer. No, if it's headed toward Israel, what do 
you do about it?
    Mr. Bilkey. We wouldn't know about it.
    Senator Boxer. Isn't your policy to respect the boycott of 
Israel? That's what we've been told, via a Jerusalem Post 
article. You talk about ``malice toward none and charity toward 
all.'' We have it--in today's Jerusalem Post, an admission that 
the company respects the Israeli boycott. Is that true?
    Mr. Bilkey. DP World is not involved in state-to-state 
matters.
    Senator Boxer. Who owns you? Who owns DP World?
    Mr. Bilkey. The Government of Dubai.
    Senator Boxer. And what about them? Is it their policy to 
respect the boycott, the Israeli boycott?
    Mr. Bilkey. I do not have influence on----
    Senator Boxer. I didn't ask----
    Mr. Bilkey.--the Government----
    Senator Boxer.--you if you----
    Mr. Bilkey.--of Dubai.
    Senator Boxer.--have influence. I wish you did. But I asked 
you if they respect the boycott, yes or no.
    Mr. Bilkey. I would imagine----
    Senator Boxer. Do they support----
    Mr. Bilkey.--they would.
    Senator Boxer.--and respect the boycott? Say it again?
    Mr. Bilkey. I would imagine they would.
    Senator Boxer. OK. Well, the point is, I think getting 
speeches about ``malice toward none and charity for all'' ought 
to be tempered with a little bit of reality here.
    Now, I looked through all of your company's chief, top 
positions. I don't see any women in there. Who is the--do you 
have any women in top positions here in your company?
    Mr. Bilkey. Yes. Selma Harab is the CEO of the Jebel Ali 
Free Zone, which is a--one of--the largest free zone in the 
world.
    Senator Boxer. Well, she's----
    Mr. Bilkey. And also----
    Senator Boxer.--not listed on your top list, which I have 
here, and I ask unanimous consent to place into the record.
    [The information referred to follows:]
    
    
    Senator Boxer. I'm glad you have a woman at a high level, 
but she's not one of the top executives listed in--off your 
website. So, when we talk about ``malice toward none and 
charity to all,'' let's just try to be honest here about the 
way we live our lives. None of us are perfect. I'm not. You're 
not. And I just think being lectured when you have a country 
where women don't have very many rights and there's--they 
boycott a country, for whatever reason I can't fathom, I think 
it's a little bit dangerous for you to do that, because I think 
that you open yourself up to criticism there.
    Is it your understanding that, as part of this deal of 
running these ports, that you get to see the security plan for 
the various ports in which you are operating?
    Mr. Bilkey. We don't get involved in the security plans in 
ports, other than America, and we would not get there--and I'd 
turn to my colleague Rob Scavone.
    Senator Boxer. Well, let me just----
    Mr. Bilkey. They are involved in working with the Coast 
Guard and Homeland Security----
    Senator Boxer. Yes, they are. And----
    Mr. Bilkey.--to develop a facility security plan. But I am 
not an expert on U.S.----
    Senator Boxer. OK, let's----
    Mr. Bilkey.--security----
    Senator Boxer.--let's move on. Did your company buy out 
CSX's port business?
    Mr. Bilkey. Yes, that's correct.
    Senator Boxer. And for how much was that?
    Mr. Bilkey. $1.1 billion.
    Senator Boxer. And when did you start negotiating that 
buyout?
    Mr. Bilkey. Uh----
    Senator Boxer. To the best of your memory. I can't----
    Mr. Bilkey. It was a very quick operation. I believe we 
started the investigation in early November.
    Senator Boxer. OK.
    Mr. Bilkey. Early November of 2004.
    Senator Boxer. Of 2004. Were you aware that Dave Sanborn 
had been named by George Bush to be the Maritime 
Administrator--he worked for your company? Were you aware of 
that?
    Mr. Bilkey. Well, that--the CSX World Terminal was 2004. 
Dave didn't join our----
    Senator Boxer. No, no, I'm not asking that--that's--because 
my time is a-wasting, I'm shifting to another subject, which 
is, were you aware of Mr. Sanborn's being nominated by George 
Bush?
    Mr. Bilkey. I was made aware that he was approached, I 
believe, in October, and he declined the job, at that time. And 
I would like to go on record about Mr. Sanborn.
    Senator Boxer. Please. Please.
    Mr. Bilkey. He is one of the finest knowledgeable 
operations, terminal, and shipping people that I've known. I've 
known him for years. He worked for Sea-Land for many, many, 
many years.
    Senator Boxer. I know, but he--he worked for you. Did you 
encourage him to take this job?
    Mr. Bilkey. No, I knew nothing about it. And he called me 
one day and said he had been called again--I believe it was in 
January 15th--and said, ``I have been asked, and I am going to 
accept.''
    Senator Boxer. OK.
    Mr. Bilkey. As a matter of fact, it was very disappointing 
for us, because we were about to move him into the highest 
position in Hong Kong.
    Senator Boxer. But I'm sure that having one of your own 
people as the Maritime Administrator here in America has to be 
considered a plus by you. Is that correct?
    Mr. Bilkey. No, it doesn't make----
    Senator Boxer. Well, you----
    Mr. Bilkey.--any difference.
    Senator Boxer.--certainly----
    Mr. Bilkey. I've known the--I've known the man----
    Senator Boxer. Well, you certainly----
    Mr. Bilkey.--for 25 years.
    Senator Boxer.--said it in your website. You bragged about 
how wonderful it was.
    Thank you, Mr. Chairman.
    The Chairman. Senator Burns?
    Senator Burns. Mr. Bilkey, I just have, along those same 
lines--and not--not this. I get very nervous about state-owned 
corporations. I've served on this committee for the last 17 
years, and we've looked at a lot of state-owned corporations 
that I've had--I really have a problem with that. If they were 
investor-owned and away from the government, I don't--no red 
flags go up, as far as I'm concerned. And I'll be real quick.
    What matters is does DP World consult with the Dubai 
Government?
    Mr. Bilkey. Absolutely not, sir.
    Senator Burns. And--in other words, it has no impact on the 
day-to-day operations on these ports that they operate?
    Mr. Bilkey. Not at all. And all our investments are all 
done on our own balance sheet. We don't even turn to the 
government.
    Senator Burns. And it has no role in the overall terms of 
the overall operations of these terminals. Is that correct?
    Mr. Bilkey. Absolutely none. I wouldn't be----
    Senator Burns. OK.
    Mr. Bilkey.--there if they did.
    Senator Burns. Thank you very much, and I appreciate the 
time.
    Mr. Chairman, I yield back what I have left.
    The Chairman. Yes, sir.
    Senator Allen?
    Senator Allen. Thank you for answering a question that I 
had. Mr. Bilkey, DP World is owned by the UAE Government, is 
that correct?
    Mr. Bilkey. No, by the Dubai Government, sir.
    Senator Allen. All right. What percentage by the Dubai 
Government?
    Mr. Bilkey. Excuse me?
    Senator Allen. What percentage?
    Mr. Bilkey. A hundred percent.
    Senator Allen. And they have absolutely no impact on the 
operations or any of the decision-making of the company?
    Mr. Bilkey. Absolutely none. Never--I've never discussed a 
single word with them on any of--issue to do with anything 
about our company.
    Senator Allen. Mr. Sanborn, by the way, lives in 
southeastern Virginia, and I introduced him to the Committee, 
oh, gosh, a few weeks ago, and he is a man of outstanding 
reputation, character, and competence.
    Let me ask this. Can you, Mr. Bilkey--or maybe it'll come 
from the Department of Homeland Security. Are there any 
conditions that DP World has agreed to, in terms of enhanced 
security or information-sharing?
    Mr. Jackson. I can answer that, Senator Allen. There are 
several.
    First, they have agreed to participate, and continue to 
participate, in ongoing cargo inspection and security programs 
principally here, the Customs Trade Partnership Against 
Terrorism, and our Container Security Initiative, two key 
programs of the Department. Second--and they've also, by the 
way, agreed to participate in the Megaports Initiative at the 
Energy Department. We have extensive experience with this firm 
in their--in the UAE--and we are absolutely persuaded that they 
are excellent security partners.
    Senator Allen. Could you share with the Committee and the 
American people, any added conditions, security transparencies, 
and so forth----
    Mr. Jackson. There are a couple of extra details that 
enhance the security.
    Senator Allen. All right.
    Mr. Jackson. They have made a specific assurance to assist 
the U.S. with any law enforcement agency--Federal, State, and 
local--to disclose information concerning the operation of the 
company's facilities, equipment, or services, and to provide 
any relevant records that may exist of foreign efforts to 
control U.S. facilities. So, they have opened their books.
    In addition, they agreed to maintain the--P&O's existing 
security policies and procedures at the facilities, as they 
would be obliged to do by Coast Guard and CBP regulations. And 
they have agreed to have a great deal of transparency into the 
recordkeeping of who's employed and what their operations are 
inside these terminals in the United States.
    Senator Allen. In the event that this transaction's 
consummated, they're keeping certain management and U.S. 
citizens and so forth. How do you see the governance of it 
after it's turned over to DP World?
    Mr. Jackson. We see it looking very similar to what we're 
working with today under the P&O ownership.
    Senator Allen. Do you find a difference in dealing with an 
entity in such operations that is owned by a government, as 
compared to one that is owned by a private concern?
    Mr. Jackson. I think, as a general matter, you'd have to 
ask the specifics about the nature of the organization and the 
transaction. In this case, we did not at all have difficulty 
with this particular transaction, and we are very grateful for 
the partnership that the UAE has shared with the United States 
in counterterrorism efforts. So, there's a very substantial 
layer of familiarity with operations in Dubai, and also with 
the counterterrorism work of the UAE.
    Senator Allen. In the event that the UAE or Dubai was not 
as friendly and supportive as they have been in the last 3 
years, do you have assurances that insofar as these operations, 
security would be maintained?
    Mr. Jackson. Yes. The agreement requires them, and multiple 
U.S. statutes require them, to maintain security plans, 
security protocols, the continued access to the information 
that was provided in the assurances letter and this 
transaction.
    Senator Allen. All right.
    Mr. Koch, since you were once with Sea-Land and they sold 
it off for some reason, why are there not so many--these 
companies are from Denmark, from Taiwan, Korea--South Korea, 
China, which is government-owned, Japan, privately owned--but, 
regardless, why are there so few American companies interested 
in this? Somebody's making a profit. They're paying Americans 
to do this work. Give us a business perspective why there are 
so few American companies interested.
    Mr. Koch. I think experience has shown it's a very capital-
intensive business, as you know. Maersk, investing the hundreds 
of millions in this new facility in Portsmouth, it's a very 
expensive----
    Senator Allen. Portsmouth, Virginia.
    Mr. Koch. Portsmouth, I'm sorry. Very expensive business. 
It's a very cyclical business.
    CSX was punished on Wall Street for holding Sea-Land. It 
was a discount on the stock, and they had to constantly explain 
the liner shipping industry to the market. APL found some of 
the same situations. And our tax laws are higher. And so, it is 
an industry that American enterprise has simply found very 
difficult to compete in, and has chosen to--those companies 
that were pioneers have chosen to sell to others who have a 
longer-term view of the business.
    Those companies, I would add, have made billions of dollars 
of investment in the U.S. in our transportation infrastructure, 
without which we would have a very difficult time moving the 
goods of American importers and exporters as efficiently as 
move today.
    Senator Allen. Are they not subject to the same U.S. tax 
laws as U.S. companies?
    Mr. Koch. It depends on what part of the operation is 
concerned. If it's a terminal operating company based in the 
U.S., it would be subject to the same tax laws. If it's a 
carrier operating international commerce, it'll be subject to 
the tax laws of that nation.
    Senator Allen. Which are lower.
    Mr. Koch. Which are lower.
    Senator Allen. Thank you, Mr. Chairman.
    Thank you for your testimony.
    The Chairman. Yes, sir.
    Senator Sununu would be next.
    Senator Sununu. Thank you.
    Mr. Bilkey, you're COO, Chief of Operations, for DP World. 
You have operating responsibility for all of their 
international terminals? Is that--30--how many was it, 35, 40?
    Mr. Bilkey. Well, we're 19 today, and when we make this 
acquisition, we'll be 50 or 51, depending on if you start to 
decide on greenfield sites.
    Senator Sununu. So, your operating responsibility, it's 
owned by the Emirates, but you are the chief operating officer.
    Mr. Bilkey. Yes, sir. And it's a big daytime job.
    Senator Sununu. I imagine. It's a--you're a U.S. citizen, 
is that correct?
    Mr. Bilkey. Yes, sir.
    Senator Sununu. You're not a citizen of--of any other 
country.
    Mr. Bilkey. No, sir.
    Senator Sununu. If I get your family tree right, am I 
correct in assuming you are a cousin to Congressman Rodney 
Frelinghuysen?
    Mr. Bilkey. Yes, sir.
    Senator Sununu. Excellent. How many employees--if--once the 
acquisition is completed, how many employees will the company 
have in the United States?
    Mr. Bilkey. Now, I'm not an expert on that, but I've been 
reading up on it, so it's 402, I believe, but----
    Senator Sununu. Roughly 400. That's fine. You don't--I'm--
--
    Mr. Bilkey. And, of that, I can tell you I believe they're 
all U.S. citizens, but about seven or eight. Three British, and 
there's some Australians and one or two others.
    Senator Sununu. So, all but seven or eight are U.S. 
citizens.
    Mr. Bilkey. Correct.
    Senator Sununu. And seven or eight hold citizenship from 
Britain, Australia----
    Mr. Bilkey. Yes. It's----
    Senator Sununu. OK.
    Mr. Bilkey.--a handful, about seven. But they--you know, we 
employ hundreds and hundreds of people, but they're 
longshoremen.
    Senator Sununu. I understand. Will that change? Will that 
makeup of the workforce, 400 employees, 98 percent U.S. 
citizens----
    Mr. Bilkey. We have----
    Senator Sununu.--2 percent----
    Mr. Bilkey.--no plans to--we're very glad to have a very 
able management and systems in place. And that's one of the 
reasons why we're acquiring the company.
    Senator Sununu. You mentioned Ms. Harab. And I know some 
members of the Committee asked about her. This is a picture of 
her here, the head of the Free Zone, is that correct, that you 
handed out?
    Mr. Bilkey. Oh, yes.
    Senator Sununu. And----
    Mr. Bilkey. Yes, sir.
    Senator Sununu.--is this chairman of your company, sort of 
following her----
    Mr. Bilkey. He's----
    Senator Sununu.--off to the----
    Mr. Bilkey.--in the----
    Senator Sununu.--gangplank?
    Mr. Bilkey.--background, way in back.
    Senator Sununu. Thank you. There's also a picture here of a 
Navy officer in the tower. And, granted, one Navy officer 
looking--holding--or being present in the control tower isn't 
the be-all and end-all, but I'm curious to know, are Navy 
officers located in the control towers of any U.S. ports, to 
the best of your knowledge?
    Mr. Bilkey. I don't know. And that's actually a very 
privileged place, because that was built especially for Sheikh 
Rashid, who actually built the port. And they coordinate with 
our harbor master and his crew in the movement of the vessels.
    Senator Sununu. Earlier, someone asked about access to 
documents. And I know there are some agreements we have here. 
Will access to relevant documents be provided to law 
enforcement officers? I think this is a very important area, 
personnel records, manifests, and the like. Is that material 
made readily available to Homeland Security, should the need 
arise?
    Mr. Bilkey. Yes, sir. And we made formal undertakings in 
that regard.
    Senator Sununu. Are subpoenas or warrants or advance notice 
required to get access to that material?
    Mr. Bilkey. No. To the best of my ability, I don't know.
    Senator Sununu. OK. And is that the gist of the letters 
that were provided to us? In other words, you referenced a 
number of agreements and assurances that were made.
    Mr. Bilkey. Correct.
    Senator Sununu. This documentation references those 
agreements. In your experience--well, could you talk generally 
about the level of sophistication of the port operation in 
Dubai? And I know it's a larger port. Singapore was mentioned, 
Hong Kong, these are very large ports--I suppose along the 
lines of Long Beach, in California. I'm curious to know their 
relative sophistication in terms of technology that's employed 
and how that compares to the ports in the U.S. in which you 
will have some lease arrangements.
    Mr. Bilkey. Well, we have the ten largest container cranes 
in the world. Someone will catch up to us, I'm sure. And they 
also have the highest productivity in the world and can pick up 
four 20-foot containers at a time. We talk in 20-foot 
equivalent units in our business. And they can do over 600 20-
foot equivalent units an hour on a large ship with seven cranes 
over it.
    We work on a number of things, and technology is one, and 
security is another. I was very serious, and the company is 
serious, when we said, OK, this has come up. But isn't this an 
opportunity? We have--going to have 51 ports. We can engage in 
all those 51 ports in any way the U.S. would like to. And we 
have a very big incentive to do that.
    Now, I'm looking at something. And I'm glad the date is on 
it, because it's September 19th. And that's before any of--we 
even approached the U.S. for permissions or anything like that. 
And we are taking the initiative ourselves to go forward with 
NII--excuse me, nonintrusive inspection gear, which exists--the 
technology exists today, and this is equipment that I believe 
that some Congressmen and Senators have looked at. And we're 
taking the initiative. CSI actually is supposed to take the 
initiative and actually put this type of equipment into place. 
We're taking the initiative on our own. I'm looking at the--at 
a response to an RFP in September that--and these are not 
inexpensive machines, they're $2.6 million apiece, the whole 
setup with it, which allows gamma rays and radiation detection 
and optical scanning and all the bells and whistles all at 
once. So--I mean, the big problem in the ports today is--and I 
would like to see something like this in all the CSI ports, and 
there were more CSI ports--that's what's really needed, to push 
the borders out of the U.S. I would check them again here and 
have a second layer.
    But this is the type of equipment--and I don't want to tout 
anyone's particular equipment, because we haven't made our 
decision yet--but this is the type of thing that is 
commercially practical. The problem today is speed. And the 
present type of equipment that you have, it actually runs like 
a car wash, and, takes minutes to run over a container. You can 
only do 20 containers an hour. These can do up to 400-and-more 
containers an hour. They store the image. And the image can 
actually be transported to the Customs center here in the U.S.
    So, this is the type of thing--to me, if, out of these 
hearings, that something like this is pushed forward and 
mandated, it's going to increase the security tremendously. And 
security is big business for us. It's a marketing tool for us. 
We couldn't afford, spending the money we do, to have anything 
go wrong with our operations. It would be catastrophic. And 
that's why it's not just words when we say ``security is 
everybody's business.'' It's all--and all shipping companies 
and everybody is interested it.
    Senator Sununu. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Ben Nelson?
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Mr. Jackson, you were asked by my colleague if enough was 
being spent. You didn't quite--I heard you answer, but I didn't 
find an answer in it. Is enough being spent on port security, 
period?
    Mr. Jackson. Yes, I think we're spending the balance that 
we can afford to spend----
    Senator Ben Nelson. Not----
    Mr. Jackson.--in a prudent way.
    Senator Ben Nelson. Well, no, you're--I understand 
balancing, if you have enough--if you have a--if you have a 
piece of pie, you cut it into five pieces. And I understand 
trying to balance that. But do you need a bigger pie? I guess 
that's the question. I'd like to know that answer.
    Mr. Jackson. I think that we have got an adequate-sized pie 
for the mission that we have right now.
    Senator Ben Nelson. And is enough of it going to the ports? 
Because you're only----
    Mr. Jackson. Two and a half----
    Senator Ben Nelson.--getting five----
    Mr. Jackson.--billion dollars out of DHS this year.
    Senator Ben Nelson. No, my question is, Are we spending 
enough money if we're only looking at 5 percent of the 
containers? And is that enough? And if it isn't enough, why 
isn't it enough?
    Mr. Jackson. Senator, it's an excellent question. Let me 
answer it for you this way. There's a widespread distinction 
that is not being made routinely, and I'd like to make it this 
way. We screen 100 percent of all containers inbound into the 
United States. We inspect 5 percent of the containers, roughly. 
We inspect all the ones that we identify as high-risk or high-
concern containers. This is a smart way to make an investment. 
What we're trying to do is aggregate data from up and down the 
supply chain and over historical time of who's touched this 
container, what's in this container, where it's going, who 
shipped it, and all of the history that we can. And, on the 
basis of a very sophisticated system of risk analysis, we are 
identifying the ones that need physical inspection.
    This is the wave of the future. This is the next 
generation. This is how we need to do this. And if it means 
that we inspect 12 percent or 3 percent or 6 percent, we'll 
inspect what we need to, and the investment here on screening 
is really the key to the security.
    Senator Ben Nelson. Well, I guess I'm still a little bit 
confused, but perhaps we'll go on, except to say I believe in 
risk assessment and cost-benefit analysis. No question about 
it. But if you had more money, would you inspect more--actually 
physically inspect more containers?
    Mr. Jackson. If I had more money to spend right now, I 
would spend it on the algorithms and the work up and down the 
supply chain to gather information. That is the place where you 
can go to get greater depth. And that's exactly what Secretary 
Chertoff has proposed as part of our Secure Freight Initiative, 
to go to the next generation of tool which creates an 
intermediary institution that can aggregate data from up and 
down the supply chain, do more than just scrape the weigh bill, 
gather information about the shipper and all of the people who 
have touched the thing for----
    Senator Ben Nelson. Well, more risk----
    Mr. Jackson.--purposes of----
    Senator Ben Nelson.--assessment--more risk assessment, in 
other words.
    Mr. Jackson. Yes, sir.
    Senator Ben Nelson. OK. We have Union Pacific and 
Burlington Northern Railroads--the rail lines passing through 
the state. And, of course, I-80 is a major corridor for 
trucking cargo cross-country. Can you talk a little bit about 
the security process for cargo coming off ships and onto rail 
trucks--rail cars and trucks? For example, do security measures 
differ at ports than at border crossings at the Mexican and 
Canadian borders? Is it easier to screen a train crossing the 
border, which I understand they do, versus cargo being loaded 
on a train at a port?
    Mr. Jackson. Senator, I've asked Mr. Ahern to answer that 
question, if he could. This is his specific area of expertise 
at CBP.
    Senator Ben Nelson. Uh-huh.
    Mr. Ahern. Thank you very much. I am the Assistant 
Commissioner for Customs and Border Protection.
    The Chairman. Pull that up to you, will you, Mr. Ahern? 
Pull it up. Put the mike----
    Mr. Ahern. Is that better, sir?
    And, as part of our responsibility, not only do we have the 
overseas responsibility under the Container Security 
Initiative, putting assets there, and the technology 
deployment, but also at our land border ports of entry. One of 
the key features that we have along the borders--and when we 
made our first radiation portal monitor deployment, we made the 
conscious decision to go ahead and deploy those along the 
Canadian border, because we felt as though, given the lack of 
information that we have through the prescreening process under 
the maritime model, and given the fact that we did not have 
Container Security Initiative assets to place overseas, so we 
have to put our radiation portal monitors on the northern 
border with Canada. We have many of those that actually are in 
our rail facilities. In fact, one of them actually is on the 
other side of the border, where we have our officers screening 
it for--radiation portal detection before it actually----
    Senator Ben Nelson. When it comes----
    Mr. Ahern.--enters in----
    Senator Ben Nelson. When it comes in.
    Mr. Ahern. Yes, sir. Yes, sir, that's correct. And we also 
have them deployed along the northern border. I think that the 
total right now for radiation portal monitor screening trucks 
coming into the United States from the northern border is 
actually around the 90 percent rate. And on the southern 
border, we're about the 85 percent rate from trucks coming into 
the United States from Mexico.
    We also have large-scale imaging devices, because certainly 
we have the knowledge that we need to make the ability to look 
at a container and also to screen for radiation capabilities, 
as well.
    Senator Ben Nelson. Thank you.
    Before I go, Mr. Chairman, I want to compliment Admiral 
Gilmour personally for an outstanding job in--with the Coast 
Guard in Katrina. I think we all saw the heroic efforts and 
great successes of your troops in New Orleans, and I want to 
personally thank you.
    I want to also ask you if you have enough money to do the 
kind of security that needs to be done.
    Admiral Gilmour. Well, again, as the Deputy Secretary said, 
we need to live within our budget. And certainly we have some--
many of the same risk-based systems that we use, not only to 
look at vessels, but also it's based on the crew members of the 
vessels and the record of vessels. So, I think we have adequate 
funding to do the job that we need.
    Senator Ben Nelson. Well, Mr. Mitre doesn't seem to think 
so, so maybe you can work that out between you.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you.
    Senator Bill Nelson?
    Senator Bill Nelson. Thank you, Mr. Chairman.
    Mr. Bilkey, good afternoon. Dubai Ports World is owned by a 
holding corporation owned by the Government of Dubai, named 
Ports Customs and Free-Zone Corporation, PCZC, is that correct?
    Mr. Bilkey. PCFC, we call it, sir.
    Senator Bill Nelson. OK, a Free Zone Corporation.
    Mr. Bilkey. Yes.
    Senator Bill Nelson. That's correct. Are you aware that 
that same holding company also owns a company that is called 
the Dubai Customs Department?
    Mr. Bilkey. Yes, sir.
    Senator Bill Nelson. Are you aware that the Dubai Customs 
Department--that there is an office in that department called 
the Office for the Boycott of Israel?
    Mr. Bilkey. No, sir.
    Senator Bill Nelson. Well, there is. The sole job of that 
office is to enforce a boycott against Israel. That office, as 
a matter of fact, in the year 2003 had 100 incidents where it 
engaged American corporations that--on the containers that they 
were shipping, that there could be no products with any element 
that was made in Israel. And again, in the year 2004 there was 
another hundred incidents with American corporations, and 
you're not aware of that. Are you aware--well, let me ask you, 
first, is the Jebel Ali Free Zone area--is that also owned by 
the PCFC?
    Mr. Bilkey. Yes, sir.
    Senator Bill Nelson. Are you aware that they have advised 
all importers that they must comply with the terms of the 
boycott that is enforced by the Dubai Customs Department?
    Mr. Bilkey. No, sir.
    Senator Bill Nelson. Well, therein lies a problem. Both of 
you are--all three--are owned by the holding company PCFC, and 
that's owned by the Government of Dubai, and it's enforcing 
that boycott.
    And that is just something that as a matter of policy, we 
need to have that out here on the record, Mr. Chairman, in the 
consideration of this whole issue that has come to our 
attention.
    Let me ask you one other question. In the interest of time, 
I'll stop. Your company obviously is a very good one, and does 
a good job, and you do a lot of business in U.S. ports. Is that 
correct?
    Mr. Bilkey. No, sir. I mean, P&O does. The business we're 
acquiring, yes.
    Senator Bill Nelson. Yes.
    Mr. Bilkey. But, at the present time, we do not.
    Senator Bill Nelson. So, with the acquisition of the P&O 
company, you would be operating the ports in those six ports 
that have been listed----
    Mr. Bilkey. Yes, and the other--and the other general 
stevedoring services and general cargo that was brought up 
during the meeting.
    Senator Bill Nelson. And Mr. David Sanborn is an executive 
with your company.
    Mr. Bilkey. Yes, and an excellent one, too, sir.
    Senator Bill Nelson. Yes, I understand. And I'm sure he 
must be. What is your personal opinion? Do you think that an 
officer of your company should be the head of the U.S. Maritime 
Administration?
    Mr. Bilkey. Sir, I think this individual--an individual in 
such a position should be based on his experience, knowledge, 
and integrity, and I couldn't speak any higher for Dave 
Sanborn's integrity. I've known this man a long time, and he's 
had positions of responsibility all over the world. He brings a 
great deal of cross-section and ability to the job, of an 
international nature, which is the type of things that I think 
probably is needed in the Maritime Administration.
    Senator Bill Nelson. Yes, sir. And you indicated that you 
were going to promote him as the head of Hong Kong. And 
obviously you do think a lot about him. My question is more in 
terms of the perception of a potential conflict of interest. Do 
you have an opinion on a perception of that conflict of 
interest, were he to be the head of the Maritime 
Administration?
    Mr. Bilkey. No, sir, I don't. But I can tell you, it would 
have been the second Maritime Administrator that came under my 
jurisdiction, because one, a number of years ago, worked for 
another company, Norton Lilly before he became a Maritime 
Administrator, and it wasn't felt that it was a conflict then.
    Mr. Jackson. Senator, I might just add to this one that 
standard government recusal regulations would require this 
individual, if confirmed, to be recused from this particular 
firm for at least a year.
    Senator Bill Nelson. I understand. I'm trying to get all of 
the information out here for this committee to evaluate, 
because this was not an issue that came up when his hearing was 
held, February 7.
    With regard, Mr. Bilkey, of the gentleman that you had 
referred to that you knew before, that was the head of the 
Maritime Administration, was he an employee of a company that 
was owned by a foreign country?
    Mr. Bilkey. No, sir.
    Senator Bill Nelson. Thank you, Mr. Chairman.
    The Chairman. Well, it's up to Senator Cantwell whether 
you're recognized.
    Senator Lautenberg?
    Senator Lautenberg. Thanks very much, Mr. Chairman. I'll 
try to be brief.
    Mr. Koch, when you talked about the knowledge of what is in 
the containers, did I understand you to say that 100 percent of 
the cargo in those containers is known?
    Mr. Koch. A hundred percent of the information about the 
containers that the carriers have in their bill of lading data 
is transmitted to Customs before vessel loading.
    Senator Lautenberg. OK. So, we know only what they said was 
in there.
    Mr. Koch. The carrier knows----
    Senator Lautenberg. Yes, OK.
    Mr. Koch.--what the shipper says was in there, that's 
correct.
    Senator Lautenberg. OK. So, it might pay to take a peek 
along the way, if we can do that. Thanks.
    Anyway, the----
    Mr. Ahern. Senator, could I add to that answer, please?
    Senator Lautenberg. Sure.
    Mr. Ahern. Because that is part of my area of 
responsibility, as well. And the Trade Act of 2002 did require 
the carrier to electronically transmit the information to 
United States Customs and Border Protection. We think that's a 
good thing for us to have 24 hours in advance of lading, so 
that we have the ability to screen 100 percent of that manifest 
information prior to lading overseas----
    Senator Lautenberg. Would that----
    Mr. Ahern.--take that information----
    Senator Lautenberg. Would that include parts for nuclear 
weapons, do you think----
    Mr. Ahern. Well, sir----
    Senator Lautenberg.--if they were--if somebody was going to 
put it in a container?
    Mr. Ahern. I think what is important, sir, is for me to be 
able to lay the entire strategy out so that we have the ability 
to introduce the technology layers, the screening layers, and 
also the personnel that we deploy as part of this protocol, as 
well. No single solution is going to be acceptable to the 
potential threat we face.
    Senator Lautenberg. I thank you for that add-on, because 
that's important. I come out of the computer business. I was 
there before the computers, and I left there since the 
computers, but I just wanted to be sure that there are no 
illusions created here, because we don't really know for sure 
what is in all of these containers. And we do inspect very few 
of these things, just 5 percent. I'm not saying it's an easy 
job, it's a very complicated job. We can't do something which 
will bring commerce to a standstill. On the other hand, we have 
to do whatever we can to protect ourselves and our families.
    Secretary Jackson, did any other agencies in your 
Department, beside the Coast Guard, raise concerns about the 
deal before or during the CFIUS review?
    Mr. Jackson. The Coast Guard did not raise, ultimately, an 
objection to the transaction. They were part of the review 
process that we undertook at the Department of Homeland 
Security. There were other parts of the Department that engaged 
in the same.
    Senator Lautenberg. But there was--you say they were part 
of the information-gathering, but there--did anyone raise any 
concerns about taking a second look here? Because the contract 
is going to go into place on Thursday, and I'm not even sure 
what the remainder of 45 days--or the remaining 45 days will do 
for us. What can happen, would you think, in those 45 days? 
Where does this go? This was at the request, I believe, of 
Dubai Ports World, who said that they would submit for another 
review.
    Mr. Bilkey. Yes, Senator, that's correct.
    Senator Lautenberg. Yes. Mr. Jackson, what----
    Mr. Jackson. Well, in part it gives us a chance to do what 
we're doing here today, which I welcome very much and think is 
absolutely appropriate and necessary to help the Congress 
understand, the American people understand, this transaction. 
It is not easy to get your arms around the entire set of issues 
here, and we think it's very important to spend the time with 
you and to work through this and help the Congress understand 
better, and to be able to execute your absolutely appropriate 
oversight functions in this area.
    Senator Lautenberg. Yes. Well, do you think that giving the 
ports, or the ports authorities--port authorities some 
responsibility here to try to determine, as closely as they 
can, whether there is anything of suspicion or concern that's 
in those containers, in particular?
    Mr. Jackson. The port authorities are an important partner 
in this security equation. Through our captain of the port at 
the Coast Guard, we work very, very closely with them. And, as 
I know from your history, you know well in the Port Authority 
of New York and New Jersey----
    Senator Lautenberg. Yes, I have great----
    Mr. Jackson.--and----
    Senator Lautenberg.--respect for that Coast Guard group.
    Mr. Jackson. Yes, he's good--there's--it's an important 
partnership, and we are absolutely in agreement that it's 
important for the port authority to be engaged with the 
terminal operators in helping us manage security. They do that 
in many-layered ways, not only just in the planning, but in the 
execution of these plans and using assets on the marine side 
and on the land side, and pulling together law enforcement 
authorities to help that system of systems work.
    Senator Lautenberg. Thanks, Mr. Chairman. And thanks, 
Senator Cantwell. I appreciate it.
    The Chairman. Yes, thank you.
    For the information of the Committee, I'm going to adjourn 
this hearing at 5:45.
    Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman.
    Mr. Yoshitani, could you--you represent the port--National 
Port Workers Association. Could you just concisely give me a 
review point on why U.S. companies are a smaller percentage of 
the marketplace today?
    Mr. Yoshitani. In terms of terminal operators----
    Senator Cantwell. Yes.
    Mr. Yoshitani.--Senator? Well, I would concur 100 percent 
with what Mr. Koch said, but I would add just one element to 
that, and that is that a large percentage of the ocean carrier 
business is foreign-owned. And so, for them to get into the 
stevedore--or the terminal operations business is actually a 
natural integration, if you will, vertical integration of what 
they already do. So, I think that plays into it, largely. But, 
other than that, I think Mr. Koch did a great job of outlining 
why it's happening.
    Senator Cantwell. Do you think U.S. companies who want to 
be a world player ever get asked by governments or ports--
international port structures to do certain things to get the 
deal?
    Mr. Yoshitani. I can't comment on that. I don't know what 
foreign governments would ask of our companies. So----
    Senator Cantwell. Mr. Koch, do you have any comments on 
that?
    Mr. Koch. I'm not sure, Senator, I understand the----
    Senator Cantwell. Well, part of the challenge is, 
obviously--sure, vertical integration, which is a question, and 
big players, but part of the challenge is, U.S. companies have 
to go to foreign ports in foreign countries and get business, 
as well, right?
    Mr. Koch. Correct.
    Senator Cantwell. And I just wondered if you thought, in 
that process that there were times in which the government ever 
put conditions on, or the government ever asked, or the port 
structure, itself, asked for certain accommodations.
    Mr. Koch. The foreign government?
    Senator Cantwell. Yes, uh-huh, or foreign port.
    Mr. Koch. I'm sure it's a case-by-case example. I know 
Maher Terminals, based in New York, is investing in an 
enterprise in British Columbia, at Prince Rupert. SSA has 
invested in Panama and other places. I believe Crowley Maritime 
has got a venture going now in Russia.
    Senator Cantwell. Don't you think the governments asked 
them to do certain things? Or, no? Wouldn't you think that's 
part of standard practice, or----
    Mr. Koch. I don't know what specifically it is that might 
be asked for. I'm sure governments often approve permits for 
expansion or facilities, just as the U.S. Government does.
    Senator Cantwell. Mr. Bilkey, what about the worker 
identification program, the TWIC program, and the International 
Maritime Organization, and the shipping and facilities ISPS 
organization? Would you make, as part of, you know, being part 
of the world leadership, an agreement to implement some of 
those recommendations, the worker background check and security 
clearance and electronic seals?
    Mr. Bilkey. Yes, I'm not aware of the details, though. In 
principle, you know, the answer is yes.
    Senator Cantwell. What if somebody asked you to do this as 
part of this requirement of getting in this secure--getting 
this for the United States? I know there's a process here that 
the Administration's going through, but what if somebody said, 
``Let's make these security improvements for worker background 
check, for electronic seals''----
    Mr. Bilkey. You know, in the--for the people in the U.S.? I 
would----
    Senator Cantwell. Or even for your 41 ports. I mean, 
obviously, I'm a big believer in point of origin. When you wait 
until something gets to the United States, whether it's a cargo 
container or a person who wants to do ill will, it's a little 
late. So----
    Mr. Bilkey. I agree with you.
    Senator Cantwell. So, would you put, at your 41 ports 
around the globe, the radiation detection, the state-of-the-art 
devices that would help us? And would you do the background 
checks on the workforce that would give people much more 
certainty and security about what was happening to a cargo 
container once it leaves those various international ports?
    Mr. Bilkey. Yes. Actually, containers today that come to 
the U.S. have a special security seal. It gives much greater 
protection than the normal security seal. And, therefore, 
people actually don't access a container, and they actually 
don't know what's in the container. But as far as the business 
of putting in nonintrusive inspection equipment, we're actively 
involved in that right now. As a matter of fact, we have a port 
in the Dominican Republic, it's a brand-new port, it's got 
every piece of bell and security whistle you could think of----
    Senator Cantwell. And so, if somebody said, ``Why don't you 
do this as a part of a requirement to''----
    Mr. Bilkey. Well, actually, we initiated--we'd like to have 
it CSI regulated, and that's a matter between governments. The 
governments sign the agreement. The Dominican Republic and the 
U.S. Government sign the agreement, and----
    Senator Cantwell. So, if our Government required that, you 
would comply with it.
    Mr. Bilkey. Absolutely.
    Senator Cantwell. Thank you.
    And if just--Mr. Jackson, if I could get an outline of 
where you think this $10 billion is being spent, we can do 
this----
    Mr. Jackson. Sure I'd be happy to submit----
    Senator Cantwell.--for the record.
    Mr. Jackson.--it for the record.
    Senator Cantwell. Thank you.
    The Chairman. Senator Boxer?
    Senator Boxer. Thanks, Mr. Chairman, again.
    Mr. Jackson, I'm going to say a string of things here that 
aren't going to make you happy. This is not personal to you.
    I want to tell you what my people think of the Department 
of Homeland Security when I go home. They think you don't know 
what you're doing. They don't understand, in this deal, why you 
didn't ask for a 45-day review, even though the former 
inspector general of Homeland Security wrote a clear op-ed 
piece and said it triggered when you have a state-owned 
company. They don't understand, if this was such an important 
thing, and so important to commerce, which you say it is, and 
it was so great, why you didn't tell--not you, personally--why 
the bureaucrats didn't tell Mr. Chertoff about it, why Mr. Snow 
didn't know about it, why Mr. Rumsfeld didn't know about it.
    I mean, how much of a tin ear can you have over there? You 
have a country that is written up, in article after article, as 
being a place--and I'll read you just this one. This is from 
the Gary Milhollin, director of Wisconsin Project on Nuclear 
Arms Control, who says, ``Dubai's involvement''--and this was 
in a Mr.--``Dr. Khan's atomic bazaar,'' he called it--he said 
it's no surprise--Dubai's involvement is no surprise to those 
who follow the murky world of nuclear technology sales.''
    What kind of tin ear do you have? Forty-five days. That 
should have been a no-brainer beyond no-brainers.
    They see the face of Katrina, and they'll never forget that 
as long as they live. And now we're being told, in California, 
there's no plan, at the Federal level, if we have an 
earthquake. They actually put that in writing. I give them 
credit for admitting it. No plan. You haven't met your port 
security deadlines. You sit here and tell us how important it 
is, bless your heart, and try to cover up for a budget that 
isn't big enough, at least the Coast Guard--bless the Coast 
Guard every day--they say, ``Well, we're working within the 
budget.'' That's another way of saying, ``We'll live with what 
we get.''
    And a lot of this is the Congress's fault, that we haven't 
done more. I'm the first one to admit it. I have a chart here. 
Would you hold up the chart? Do we still have it? It shows the 
bills, Mr. Chairman, that passed this committee which never 
made it through the Congress. Let's look at that. We had 
important bills that never made it through, because they were 
either stopped in the House or they were stopped in the Senate, 
Mr. Chairman. This Committee has done its work.
    We had a series of amendments on port security, another 
chart. ``No. No.'' This Congress, ``No, no, no.'' And you sit 
here and say how terrific everything is going. Well, I guess 
what I'm saying is, it's not going well. And this particular 
deal, which some of my friends on the other side think is good 
for America--and I bless their heart; I mean, it's their 
right--just symbolizes the incompetence, the tin ear, the 
putting commerce before security after we use security as a 
threat every other day.
    So, it's a problem here that your Department has, and I 
hope I can help you, in further days, work on these issues, 
because it doesn't make me feel any better.
    Now, I just want to go back to this whole thing of--that we 
talked about, ``with malice toward none and charity to all.'' 
And I want to ask you, Mr. Bilkey, Isn't it true that DP World 
is 100 percent owned by the Emirate of Dubai?
    Mr. Bilkey. Yes, Senator.
    Senator Boxer. Who does the CEO report to?
    Mr. Bilkey. My CEO reports to our Executive Chairman, 
Sultan Ahmed bin Sulayem.
    Senator Boxer. Sultan and----
    Mr. Bilkey. Ahmed bin Sulayem.
    Senator Boxer.--who represents the--I assume, the Emirate 
of Dubai. It's his person that he's----
    Mr. Bilkey. No. No, he's----
    Senator Boxer. Are there shareholders, or is this the only 
shareholder? The----
    Mr. Bilkey. No, the--he's not the shareholder.
    Senator Boxer.--Emirates----
    Mr. Bilkey. The Government of Dubai is the shareholder. The 
ruler of Dubai is the shareholder.
    Senator Boxer. The ruler of Dubai. OK. I'm an old 
stockbroker, so I--when you sit here and say, ``Oh, we don't 
have to ever talk to anyone, and--blah, blah,'' first of all, 
of course you--you may not, personally, sir--and I'm sure--I 
like you. I think you try to do the right and just thing. But 
you can't just sit here and divorce yourself from the fact that 
there is someone at the top here, and that they set up a 
holding company in which I think--I really thank Senator Nelson 
for doing due diligence on this--that has a subsidiary, just as 
you're a subsidiary of the holding company, that does nothing 
but move forward the boycott of Israel, our greatest ally and 
friend in the world--one of our greatest, for sure, among some 
wonderful others.
    Now, I want to ask you--and I only have 9 seconds. Let me 
quickly ask you this. On the issue of Dr. Khan, how many years 
was Dr. Khan smuggling nuclear weapons components through the 
Port of Dubai?
    Mr. Bilkey. I would have no idea, because we don't--as a 
port operator, we just don't know what's in a container. The 
only people who know----
    Senator Boxer. You don't----
    Mr. Bilkey.--what's in----
    Senator Boxer.--what's in a container, as a port operator? 
You've got to be kidding.
    Mr. Bilkey. Absolutely not.
    Senator Boxer. Well, then you ought to read what our people 
expect of you, because they definitely expect that you will 
know--you will be involved in security, sir. So, you--you have 
no answers on this. Well, I will tell you. All through the 
1990s, Dr. Khan was smuggling nuclear components. And, Mr. 
Chairman, they wound up in Iran, and they wound up in North 
Korea. And you think--and you're--and you think, Mr. Jackson, 
you didn't need a 45-day review? I don't know if I'm in 
``Barbara in Wonderland,'' but sometimes I feel that way.
    Mr. Chairman, thank you.
    Mr. Bilkey. Senator--could I respond to that, Mr. Chairman?
    The Chairman. Yes. I was supposed to have 5 minutes, 
myself. You can use part of it. There's not much left.
    Mr. Bilkey. No, sir, I defer to the Chairman, sir.
    The Chairman. After you, sir.
    Mr. Bilkey. Thank you, Mr. Chairman.
    Senator one of the things that's happening today, which I 
think is important, as we've known--and, frankly, this 
situation that's happened is bringing security to the 
forefront, which--we're very glad that it's happening, because 
when we get into business about being too secure, some of our 
clients complain that we're slowing the process down. But in 
Dubai today we have U.S. Customs on the ground. And--under the 
CSI program--and we do something that practically no other 
country that I know of is doing today. We also have a 
transshipment hub, we have transshipment hubs in other places 
of the world. But we actually, today, apply and provide the 
manifest of the ship--I mean, the shipowner does--to the 
Customs and--to U.S. Customs. And if U.S. Customs wants to look 
at any box, any box from anyplace, we have the legal right, and 
they will tell us, ``Go and get that box,'' and U.S. Customs 
will look at what it is.
    Now, this is something unique. I would like to see it in 
many places of the world. But we actually are there and doing 
it in almost a voluntary basis. So, we are very concerned with 
the security of the U.S., and actually are a great partner with 
them.
    Senator Boxer. But you don't check any containers.
    The Chairman. Madam----
    Senator Boxer. I'm done.
    The Chairman. I'm sorry about that----
    Senator Boxer. I'm done.
    The Chairman.--but there comes a time when----
    Senator Boxer. I'm done.
    The Chairman.--other people should have a chance to talk.
    I would commend to you the Wall Street Journal commentary 
from former Senator Cohen and former Admiral--well, Admiral 
James Loy, about the situation today, entitled, ``Fact, Not 
Fear,'' Mr. Bilkey. I do think that there are some things that 
we can do to calm these waters. I hope we can.
    I, for one, really deplore the position of the UAE on 
Israel. I don't know of any Senator that doesn't. But, on the 
other hand, I do greatly admire what this country has done to 
assist us following the great difficulty that we had in finding 
a secure port in that region. So, I do hope that we can find a 
way to let this process go through a further review, and 
recognize the fact that, after all, it is a purchase of a 
contract from a British company by the Government of Dubai. And 
I hope that the processes we're pursuing now will strengthen 
our American laws, as both Senator Cohen and Admiral Loy have 
suggested. But they make some suggestions to you, as your 
company, and I would commend them to you, because they seem to 
be very reasonable suggestions that could be made, could be 
pursued, particularly with regard to some kind of transparency 
with regard to DP World's running of their systems that they 
use in the ports, and helping us understand how they affect 
hiring practices and security procedures. Both of those 
suggestions really merit, I think, your consideration.
    Now, let me thank all of you. Admiral Gilmour, we're sorry 
to keep you all afternoon, but we know your agency was 
involved. I appreciate your courtesies, Secretary Jackson, Mr. 
Ahern. And I look forward to seeing you sometime when out in 
Los Angeles again Mr. Mitre. The rest of you, thank you very 
much for your contribution.
    The statements that have been submitted will be in the 
record. As Senator Kerry indicated, he might have some 
questions. I have no request from any other Senator. But I do 
hope that you'll respond.
    Yes, sir?
    Mr. Bilkey. Mr. Chairman, I just wanted to make one point, 
since it's been brought up on a number of occasions. We serve 
everyone. The largest Israeli shipping company is one of our 
largest customers.
    The Chairman. I didn't hear, what did you say?
    Mr. Bilkey. The largest Israeli shipping company is one of 
our largest clients.
    The Chairman. Where?
    Mr. Bilkey. We serve everyone.
    The Chairman. Where?
    Mr. Bilkey. In many of our terminals around the world.
    The Chairman. That's interesting. Do you have any Jewish 
members of your board?
    Mr. Bilkey. No, sir.
    The Chairman. I didn't expect any.
    Thank you all very much for your patience. Thank you.
    [Whereupon, at 5:50 p.m., the hearing was adjourned.]
                            A P P E N D I X

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
    Dubai Ports World's pending acquisition of U.S. port assets has, in 
1 week, achieved something that Congress has not been able to do over 
the past 5 years. It made America's port security a topic of household 
conversation. And it is a conversation this country must have.
    My concerns about this deal are too numerous to list right here.
    But I find it amazing that an agency like the Department of 
Homeland Security, which once was so intensely sensitive about having 
the smallest of items--such as forks and spoons--go through airport 
metal detectors, is now most enthusiastically supporting this deal to 
have a state-run United Arab Emirates company, Dubai Ports World, 
operate some of our Nation's most valuable ports and become embedded in 
our infrastructure.
    Given this Administration's poor record on port security and its 
poor judgment on this deal, I am left wondering what it will take for 
this Administration to take port security seriously.
    Our national economy depends on port security, yet amazingly, the 
Administration has not made it the priority that it needs to be. It has 
consistently submitted inadequate funding requests and has routinely 
missed critical security deadlines that were required by law. In fact, 
the Department of Homeland Security has yet to submit its National 
Maritime Transportation Security Plan, which was due in April 2005.
    If there is one silver lining to this sorry episode, it is that the 
country is now paying close attention to port and cargo security. The 
American public knows that more needs to be done, and this committee 
has given Congress an opportunity to improve the situation.
    In November, our Committee unanimously approved the Transportation 
Security Improvement Act, which addresses a litany of security 
shortcomings across all modes of transportation. Title V of our bill 
specifically tackles port and cargo security.
    It improves the examination of cargo before it reaches our shores, 
ensures the resumption of commerce in the event of an attack, and takes 
greater advantage of coordinated, interagency port security efforts.
    I am hopeful that the Senate will take up Title V of our bill and 
pass it as soon as possible. Our approach has broad bipartisan support, 
and it will improve security while maintaining the jurisdiction and 
transportation expertise of this committee. The time is right to pass 
these needed security improvements, and I am hopeful that, with the 
help of the members of this committee, we can make it happen.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
                            H. Edward Bilkey
    Question 1. Even though there was an announcement of a ``45-day 
review,'' will the deal still go through this week?
    Answer. Yes, in reliance upon CFIUS's final and legally binding 
approval granted on January 17, 2006, the condition in the purchase 
agreement regarding CFIUS no objection was lifted, which caused the 
sale to proceed. The transaction is a global one, with only 
approximately 10 percent of the assets located in the United States. 
The purchase received court approval on March 8, 2006 with payment of 
about $6.8 billion made to selling shareholders on or about March 16, 
2006.

    Question 2. Does DP World own P&O's U.S. facilities and operations 
as of Tuesday March 7, 2006?
    Answer. DP World owns P&O's U.S. facilities as of Wednesday March 
8, 2006. However, those facilities are subject to a Hold Separate 
Commitment by DP World and P&O Ports North America, Inc. under which DP 
World will exercise no management or control over the U.S. assets so 
acquired until they are sold to a U.S. buyer.

    Question 3. Do you consider your deal ``approved'' by CFIUS? If so, 
then what significance do you ascribe to this new 45-day CFIUS review?
    Answer. DP World complied with all applicable U.S. legal 
requirements in obtaining review by CFIUS of the transaction. CFIUS 
issued a letter of no objection to the transaction on January 17, 2006. 
DP World is confident that any further CFIUS review would have a 
similar result.

    Question 4. What will your companies do if the President rejects 
the takeover because of security concerns after this 45-day 
investigation?
    Answer. DP World would address that situation if it occurs but is 
confident that valid grounds do not exist for such a rejection. DP 
World has publicly stated that it is in the process of selling the U.S. 
assets of P&O Ports North America, Inc. to a U.S. buyer.

    Question 5. Do you feel the President has the authority to somehow 
undo the deal after Thursday?
    Answer. No. The deal took place under U.K. law and regulations and 
DP World must abide by such laws as it would any other laws applicable 
to it. That is the reason DP World gave the Hold Separate Commitment so 
it could assist the U.S. Government in addressing its concerns yet 
remain in compliance with U.K. law.

    Question 6. Does your parent company--the Ports, Customs and Free 
Zone Corporation (PCFC)--participate in the Arab boycott against 
Israel?
    Answer. PCFC complies with laws of the jurisdiction to which it is 
subject.

    Question 7. What law will prevent you from hiring stevedores who 
are not longshoremen? How will you ensure that background checks are 
performed on any new employees?
    Answer. P&O Ports North America, Inc. is party to the ILA Master 
Contract, which requires longshore labor for all container and roll-on/
roll-off cargo operations in all U.S. locations in which P&O Ports 
operates. For other types of cargo, P&O Ports uses its same longshore 
workers. Nothing about this is going to change, because the contractual 
obligations of P&O will survive under the labor law doctrine of 
``successor employer,'' even if the business should be transferred to a 
different owner.

    Question 8. What background checks are conducted when new employees 
are hired, and who conducts those checks?
    Answer. In New York and New Jersey, the Waterfront Commission 
conducts background investigations on all harbor workers and 
management. This practice varies at other ports, and many ports are 
awaiting the issuance of the proposed Transport Worker Identification 
Credential, or ``TWIC,'' regulations, expected mid-2006, which will 
standardize this practice throughout the country. However, in the 
interim, security for P&O Ports terminals is typically outsourced to 
private firms who conduct their own background checks.

    Question 9. Will DP World make a binding commitment to keep copies 
of all its business records on U.S. soil so that they are subject to 
U.S. court orders? How enforceable is DP World's commitment to 
cooperate with investigations?
    Answer. DP World gave a commitment regarding maintenance and 
availability of books and records in the January 6, 2006 Letter of 
Assurances that it and P&O Ports North America, Inc. entered into with 
the Department of Homeland Security as part of CFIUS's approval of the 
acquisition. That letter has been publicly released, and the Committee 
should have a copy of it. However, the question is now overtaken by 
events because DP World is in the process of selling the assets.

    Question 10. Will DP World commit not to discriminate against any 
Israeli company or product?
    Answer. DP World will comply with all laws and regulations 
applicable to it including those applicable to Israeli companies and 
products.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to
                             Robert Scavone
    Question 1. We learned that DP World has agreed to a ``Hold 
Separate Commitment'' regarding management and operations of U.S. 
ports, and, so, the current P&O personnel will remain intact during a 
requested 45-day investigation by the Committee on Foreign Investments 
in the United States. What happens after the 45-day investigation?
    Answer. In the ``Hold Separate Commitment,'' dated February 26, 
2006, DP World made a unilateral commitment to ``Hold Separate'' all 
U.S. ports operations as an independent business unit, entirely 
separate, distinct, and apart from all its other operations, and not to 
exercise control over or otherwise to influence the management of the 
U.S. operations.
    Subsequent to the announcement of the Hold Separate Commitment, on 
March 15, DP World and P&O Ports issued a press release (attached) 
outlining in detail the process and the parties that will be involved 
in the planned sale of the U.S. operations of P&O Ports to a U.S. buyer 
that will be unrelated to DP World. In the press release, the following 
statement was made:
    ``Until the sale is completed, P&O Ports North America will be 
operated independently from DP World in accordance with the Hold 
Separate Commitment announced on February 26, 2006.''
    The intent, therefore, is that the ``Hold Separate Commitment'' 
will remain in place beyond the current 45-day investigation period, up 
to and including the date that the ownership of the U.S. operations is 
sold. In fact DP World has made no attempt to control or influence the 
manner in which I or, to my knowledge, any of the officers or directors 
of P&O Ports North America conduct the U.S. business.
    The professional bankers and lawyers identified in the press 
release announcing the sale expect that it may require 4 to 6 months to 
reach agreement with a buyer. This is due in large part to the fact 
that the U.S. operations are varied and complex, and a considerable 
effort is underway to assemble the information that any buyer logically 
would expect to see before making a responsible offer for the business. 
Among other things, a buyer would of course expect to see audited 
financial statements for Fiscal Year 2005, which P&O Ports has 
commissioned to be done on an expedited basis. (The annual audit of the 
global P&O group did not explore the level of audit detail that will be 
required for the U.S. operations standing alone.) After this 
information is made available, time will be required for a shorter list 
of qualified buyers to obtain access to more detailed financial 
records, leases, contracts, joint venture agreements, and the like. 
Thereafter, a purchase agreement will have to be negotiated with the 
winning bidder. All of these activities have been scheduled, and 
considerable resources have been dedicated to complete this process in 
a reasonable time frame, consistent with normal commercial practices 
for a deal of this nature.

    Question 2. Are there provisions in the contract that address what 
happens to P&O personnel if, after the 45-day investigation, the 
transaction is declined?
    Answer. While there are no provisions that explicitly address the 
disposition of P&O's U.S. personnel, the logical and practical result 
of the written commitments of DP World will be that, if DP World is 
permitted to complete the sales process that it has now begun, then 
until such time as a new U.S. buyer is found, the U.S. personnel will 
remain employed under the direction of the U.S. management that was 
already in place before the sale to DP World occurred. (See Chronology, 
attached.)
    On the other hand, if DP World were required simply to cease the 
U.S. operations until a buyer can be found, thousands of U.S. staff and 
labor will experience both short and long-term negative effects. P&O 
Ports employs approximately 6,000 union workers, and moves thousand of 
containers, automobiles, passengers, and tons of break-bulk cargo, 
every day. Not only would those workers and P&O staff become 
unemployed, but thousands of vessel operators, cargo owners, vendors, 
merchants, wholesalers, distributors, and consumers would suffer undue 
disruption.
    There would be no easy means to handle the cargo that thereby would 
become stranded, because the mere fact that P&O would not be able to 
operate the facilities that it leases would not lead to the result that 
some other operator immediately takes over. While those kinds of 
details were being addressed, a number of ports will not have the 
capacity in neighboring terminals to handle the overflow that would 
otherwise be destined for the P&O terminals. In the case where those 
activities are actually joint ventures with other partners, such as 
Philadelphia (Stevedoring Services of America), Miami (Eller & Co. and 
Florida Stevedoring, Inc., both American companies), or Newark (Maersk 
Line), the termination of the facility lease will negatively impact 
those companies equally.
    Moreover, the value of the U.S. operations in such a scenario would 
diminish so rapidly that it would be questionable whether, in the end, 
there would be any business to sell.
    It should be borne in mind that DP World unilaterally requested the 
additional CFIUS review and stated in writing that it would abide by 
the outcome of that review. Since that time, DP World has retained an 
investment banking firm in New York to manage a sale as quickly as is 
reasonably practical. It has undertaken to maintain the current staff 
and labor force with no influence or control over the U.S. operations, 
which continue to be managed in the same way that they were before the 
acquisition.
    Therefore it is respectfully submitted that the interests of the 
U.S. staff and labor would best be served by allowing a reasonable time 
for the announced sale of the U.S. operations to take place.

    Question 3. Are there employment assurances for P&O personnel 
currently employed at U.S. ports?
    Answer. Under the Hold Separate Commitment of DP World, existing 
U.S. Management retains the exclusive right to hire or fire personnel 
at the U.S. operations. Therefore, until such time as the U.S. 
operations are sold, DP World will exert no control over those 
decisions. However, as stated above, should the operations be 
discontinued before the operations are sold, obviously there will be no 
employment, because there will be no business.

    Question 4. Will they retain their jobs if DP World has to divest 
the U.S. ports from the acquisition?
    Answer. Not necessarily, in the case of non-union workers. After 
the sale of the global P&O group to DP World was announced in 2005, DP 
World also announced its intention to retain the management of P&O 
Ports around the world. When the transaction became an issue in the 
U.S. in February, DP World executed the Hold Separate Commitment that 
formalized this obligation as it related to the U.S. Ironically, after 
DP World sells the U.S. operations, the continued employment of the 
current managers and staff of P&O in the U.S. will be entirely up to 
the discretion of the new owner. The situation is different for our 
longshore union workers. Any buyer of P&O Ports will become subject to 
the existing collective bargaining agreements to which P&O Ports is a 
party, and will continue to be obligated to use our longshore workers, 
just as, indeed, DP World is obligated to do by virtue of its ownership 
of P&O.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
                             Robert Scavone
    Question 1. What is your understanding of the significance of the 
new 45-day review called for in March by DP World?
    Answer. The original mention of a 45-day investigation occurred 
when a number of Members of Congress stated that the supplemental 45-
day investigation period that is contemplated in the CFIUS process 
should have been utilized. There was a practical problem, however, in 
that, after the original 30-day review period elapsed and DP World was 
legally authorized by CFIUS to proceed, it obligated itself under the 
laws of the United Kingdom to proceed with the purchase of the global 
P&O group for $6.85 billion. (See Chronology, attached.)
    Nevertheless, in view of the high level of concern that had been 
expressed in Congress, DP World and P&O Ports North America 
unilaterally volunteered to undergo an additional 45-day investigation 
period, and to abide by its outcome.
    It was originally anticipated that, during that 45-day 
investigation period, some realistic possibility existed to demonstrate 
what both DP World and P&O Ports knew to be true: that no U.S. security 
issue is raised by the purchase of P&O Steam Navigation Company, the UK 
owner of P&O Ports North America, by DP World. However, it was always 
understood that the new CFIUS process might reach a different 
conclusion, and that some alternative arrangement relative to the U.S. 
operations would have to be worked out with DP World. However, the 
details of any such arrangement were never clearly known, since, to my 
knowledge, this is a process that has never occurred before, where a 
deal goes forward on the basis of a formal, legally binding CFIUS 
approval, and only thereafter is the approval rescinded in an ex post 
facto manner, for reasons having nothing to do with the representations 
or behavior of the acquiring company.
    As indicated in the attached Chronology, both of these theoretical 
possibilities were superseded by events, and DP World subsequently 
unilaterally undertook to divest itself of the U.S. operations, 
regardless of the outcome of the 45-day investigation.

    Question 2. What will your companies do if the President rejects 
the takeover because of security concerns after this 45-day 
investigation?
    Answer. Since the sale of the U.S. operations is currently 
underway, both companies would hope to be able to complete that process 
in a reasonable and orderly manner, in order to preserve the value of 
the business and to maintain some semblance of stability for our 
workers, our vessel operating customers, cargo owners, vendors, port 
officials, and the consumers of America. (See also response to QFR #2 
of Senator Inouye, submitted jointly with this response.) Since DP 
World is exercising no influence or control over the U.S. operations, 
which continue to be managed in the same manner and with the same 
personnel that managed them before the DP World purchase, and since the 
end result will be a complete divestiture by DP World of the U.S. 
assets, we believe this is a reasonable expectation.

    Question 3. Do you feel the President has the authority to somehow 
undo the deal at this point?
    Answer. The global sale of the P&O group in the U.K. is, of course, 
now completed and I am aware of no practical or legal way to reverse 
it. With respect to the U.S. portion, I myself am not an expert on the 
legal authority the President may have, but in view of the fact that 
the U.S. operations are actively being sold, and in the interim the 
previous managers continue to run those operations with no external 
influence by DP World, it would seem to me that this would become an 
issue only if the process of selling the U.S. company should extend 
well beyond the period in which most experts reasonably believe the 
orderly sale of a business of this nature can be consummated.
                                 ______
                                 
Press Release (For Release 10 A.M., Wednesday March 15th)--Sale of P&O 
                          Ports North America
    Further to DP World's announcement last week, DP World and P&O 
Ports North America have announced further details of the process by 
which all of its business will be sold to an unrelated U.S. buyer.
    The sale process will be supervised by executives from P&O's group 
head office in London. The New York office of Deutsche Bank Securities, 
Inc. has been mandated as financial adviser for the sale of the whole 
of P&O Ports North America. New York law firm Sullivan & Cromwell LLP 
has been appointed as legal advisers for the sale, with the Washington, 
D.C. office of Alston & Bird LLP assisting on regulatory matters.
    Preparation of financial, corporate and legal information required 
for the sale has commenced. Interested parties will be furnished with 
information on the business and invited to make offers. Offers will be 
assessed by reference to value, deliverability and the continuity of 
management, employees and customers. In parallel with this sale 
process, discussions will take place with port authorities, joint 
venture partners and labor representatives to facilitate a smooth 
transition of the business to a new owner.
    An expedited sale process is underway and with the cooperation of 
the port authorities and joint venture partners, it is expected that a 
sale can be agreed within 4 to 6 months. Until the sale is completed, 
P&O Ports North America will be operated independently from DP World in 
accordance with the Hold Separate Commitment announced on February 26, 
2006.
Notes to Editors

        (1) DP World completed the acquisition of the UK based P&O 
        Group last week. This followed an offer process governed by the 
        UK Takeover Code and approval by the UK's High Court.

        (2) P&O owns 100 percent of P&O Ports North America which has 
        operations in a number of U.S. east coast ports including New 
        York/New Jersey, Baltimore, Philadelphia, Miami and New 
        Orleans.

        (3) Deutsche Bank Securities Inc. member NYSE, NASD and SIPC is 
        the investment banking and securities arm of Deutsche Bank AG 
        in the United States.
                                 ______
                                 
  Acquisition of Peninsular & Oriental Steam Navigation Company By DP 
World: Chronology of Key Dates as They Relate to the U.S. Subsidiary of 
                       P&O and the CFIUS Process
    October 17, 2005: Representatives of DP World meet with 
representatives of CFIUS to advise of the intent of DP World to acquire 
the global P&O group, and to inquire as to the requirements of CFIUS to 
obtain the requisite approvals for the indirect acquisition of P&O 
Ports North America, Inc., a subsidiary of Peninsular & Oriental Steam 
Navigation Company in the U.K.
    November 29, 2005: DP World and Peninsular & Oriental Steam 
Navigation Company announce in London the planned purchase of the 
global P&O group by DP World, pending regulatory approvals in various 
countries, including CFIUS approval in the U.S. DP World also announced 
its intention to retain the management of P&O Ports around the world. 
Both companies issue press releases, and the story receives wide 
coverage, including the Wall Street Journal and the New York Times.
    December 6, 2005: Senior DP World officials and senior officials of 
P&O Ports North America, Inc. meet with numerous representatives in 
Washington, D.C. to further outline the proposed acquisition, to answer 
specific questions, and to clarify the requirements for the anticipated 
CFIUS process, which had not yet formally commenced.
    December 15, 2005: Formal CFIUS application submitted by DP World.
    January 17, 2006: Formal CFIUS approval issued to DP World.
    January 26, 2006 (AM): PSA Venture (UK) Limited, a wholly owned 
subsidiary of PSA International Pte Ltd, announces a competing offer 
for the global P&O group.
    January 26, 2006 (PM): DP World announces a new, higher offer for 
the global P&O group.
    February 13, 2006: Having met the preconditions to the DP World 
offer, including the approval of the transaction by CFIUS, the offer is 
put to the private shareholders of Peninsular & Oriental Steam 
Navigation Company at a shareholders meeting, at which more than 95 
percent of the shareholders vote to accept the offer, at which point DP 
World is contractually and legally obligated to go forward with the 
purchase of the company for $6.85 billion.
    February 26, 2006: In view of the concerns of the Congress with 
respect to the transaction and the CFIUS process, DP World unilaterally 
undertakes a ``Hold Separate Commitment'' to leave the U.S. port 
operations of P&O as an independent business unit, entirely separate, 
distinct, and apart from all its other operations, and not to exercise 
control over or otherwise to influence the management of the U.S. 
operations. Simultaneously, DP World and P&O Ports North America 
unilaterally request that the CFIUS process be reopened for an 
additional 45-day period, and agree to abide by the outcome of that 
review.
    March 8, 2006: Pursuant to the requirements of English law, 
ownership of the publicly traded shares of Peninsular & Oriental Steam 
Navigation Company is transferred to DP World. P&O Ports North America 
continues in existence, as had always been contemplated. In keeping 
with its commitment, DP World exercises no control or influence over 
U.S. management of P&O Ports, and this arrangement remains in place 
today.
    March 8, 2006: Despite the re-commencement of the CFIUS review 
process, and the implementation of the Hold Separate Commitment, the 
House Appropriations Subcommittee passes 62-2 an amendment to 
Supplemental Appropriations Bill, 2006, prohibiting the acquisition of 
any leases, contracts, rights, or other obligations of P&O Ports North 
America, Inc. by DP World.
    March 9, 2006: DP World elects to discontinue its attempts to 
obtain Congressional approval of its acquisition of P&O Ports North 
America, Inc., and announces that it will divest itself of the U.S. 
port operations of the global P&O group.
    March 15, 2006: Having retained the requisite team of investment 
bankers and lawyers in a period of three business days, DP World issues 
a press release (attached) outlining in detail the process and the 
parties that will be involved in the planned sale of the U.S. 
operations of P&O Ports to a U.S. buyer that will be unrelated to DP 
World. In the press release, the following statement was made:

        ``Until the sale is completed, P&O Ports North America will be 
        operated independently from DP World in accordance with the 
        Hold Separate Commitment announced on February 26, 2006.''
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to
                             Tay Yoshitani
    Question 1. The national economy is dependent upon maritime 
commerce, and no state is more dependent on it than Hawaii. Strong 
security must be balanced with operational efficiency. What do you feel 
are appropriate goals for the Federal Government to set regarding the 
screening and inspection of ocean cargo?
    Answer. There has been public debate about the current 5-6 percent 
inspection versus increasing that to 100 percent inspection. The 
direction we go on this critical issue may well define whether we move 
forward with an effective cargo security regimen or not. No doubt, 100 
percent inspection will have a huge adverse impact on operational 
efficiency. But the more compelling impact will be that 100 percent 
inspection will ultimately degrade our overall security program. We 
cannot dissipate our efforts across 100 percent of containers entering 
and exiting our ports without relegating each inspection into a cursory 
look. We must be able to screen all containers and do an effective job 
of identifying those containers that warrant an intensive inspection. 
At the very heart of this approach is the practical recognition of the 
difficulty in conducting an effective inspection. It requires extensive 
training and constant 110 percent attention to details. This attention 
must be directed not at all containers but only those that represent 
some risk.
    No question that the Federal Government should set the goal of 100 
percent of containers to be screened. The percentage to be inspected 
should not be arbitrarily set. It should be a floating percentage that 
reflects the percentage of containers that are found to warrant an 
inspection upon being carefully screened. As a practical matter, the 
Federal Government will find that most of the containers follow a very 
secure routing from well established shippers and warrant only random 
inspections.

    Question 2. What can we do to improve cargo screening in the 
immediate future?
    Answer. Currently, the screening is done using a commercial ocean 
carrier's manifest that has much information about the cargo. However, 
we believe there is additional information that should be made 
available by the importers such as advanced shipment information based 
on recommendations made by the Commercial Operations Advisory 
Committee. This additional information would improve the screening 
process and enable better targeting.
    Because of sensitivity to security, our members are not privy to 
the ultimate effectiveness of the current automated targeting system. 
However, it is our understanding that the system could use substantial 
upgrades. We note that S. 1052 includes a provision to not only improve 
data as I note above, but also ``address deficiencies in its automated 
targeting system strategy identified in a GAO report.'' This is a 
important element of our layered security approach and should be 
improved and enhanced as soon as possible.

    Question 3. What is your organization's opinion of the 
Transportation Worker Identification Card (TWIC) program?
    Answer. The National Association of Waterfront Employers (NAWE) has 
always been in full support of the concept and early implementation of 
the TWIC program. However, at this point, draft regulations have not 
been published by the CG/TSA. We recognize that this is a complex 
program that may incorporate some technologies that have yet to be 
commercially proven. We have expressed concerns about how certain 
aspects of the program will be implemented. We reserve specific 
comments on TWIC until we have an opportunity to review the draft 
regulations. But subject to specific concerns we may have, NAWE is a 
strong supporter of the TWIC program.

    Question 4. What steps need to be taken to ensure that the program 
is viable and as effective as possible?
    Answer. There are several areas of concern that will impact the 
overall effectiveness of the TWIC program:

        a. Enrollment must be phased so that we do not inadvertently 
        but suddenly lose a significant percentage of workers in a 
        given sector such as truckers.

        b. Technologies to be incorporated must be commercially proven. 
        We are particularly concerned about the biometric scan 
        technology.

        c. Data base for TWIC must be structured in a way that allows 
        for secure facility owners to access easily and quickly.

        d. Protocol for various situations must be clearly defined and 
        established.

        e. This program will need constant monitoring and updating to 
        retain credibility. Once a number of cards cannot be accounted 
        for, the entire program will lose credibility.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Frank R. Lautenberg to
                             Tay Yoshitani
    Question 1. Do your member terminals have local security concerns? 
For instance, does a terminal in Port Newark have the same security 
concerns as a terminal in Memphis?
    Answer. Marine terminals could logically be grouped into several 
categories. Terminals within each of these categories would have 
similar security concerns. However, terminals from different categories 
would have different security concerns. For example, a terminal at the 
Port of Newark would deal almost exclusively with foreign cargo in 
containers. Other marine terminals with similar profiles would have 
similar security concerns. A terminal in Memphis likely handles mostly 
domestic cargo that is not containerized. But they would share similar 
security concerns with other terminals that have the same operating 
profile.
    With the above as background, each of our member terminals share 
common security concerns that are very broad in nature but also have 
specific concerns that may be unique to their location and surrounding 
area. For example, broader concerns would include such issues as cargo 
chain security and secure facilities access. These two issues are 
correctly under the purview of the CBP and TSA/Coast Guard 
respectively. On the other hand, port authorities typically have a port 
police or contract with a local police force or private security firm 
to provide port specific security. These arrangements may reflect 
specific security issues for that port area. For example, in the Los 
Angeles/Long Beach area, containers with high value cargo were being 
hijacked and the contents sold at various flea markets. To address this 
specific issue, the two ports formed a joint task force that included 
the police, highway patrol, Coast Guard, and CBP.
    In conclusion, while there are similarities, not all marine 
terminals are alike. One size does not fit all. However, with respect 
to terminal operators of these facilities, the constant is that they do 
not have a significant role in terminal security. But because it is 
absolutely in their best interest, they have in the past and will 
continue to in the future to cooperate with all Federal, state, and 
local municipalities on matters of security. But to achieve maximum 
security at each terminal level, there must be a combination of 
implementing broad Federal programs as well as specific programs that 
are local in nature.
                                 ______
                                 
   Response to Written Question Submitted by Hon. Daniel K. Inouye to
                            Christopher Koch
    Question. Your testimony implies that the needs of cargo security 
are larger than the nationality of a terminal operator. What are the 
most urgent cargo security issues that need to be addressed?
    Answer. Stevedoring and marine terminal operations are a service 
industry that is open to foreign investment. Billions of dollars of 
foreign investment has been made in the U.S. over recent years in this 
sector, and that investment has contributed substantially to a 
transportation infrastructure that is critical to moving America's 
commerce efficiently and reliably. The investment has come from 
Japanese, Korean, Danish, British, Chinese, French, Taiwanese, and 
Singaporean businesses, just as American companies have been allowed to 
invest in marine terminal and stevedoring businesses in foreign 
countries.
    The substantial majority of American containerized commerce is 
handled in U.S. ports by marine terminal operators that are 
subsidiaries or affiliates of foreign enterprises. This is an 
international, highly competitive industry, providing hundreds of 
thousands of American jobs. The United States depends on it, and it in 
turn has served the needs of American commerce well, adding capacity 
and service as the needs of American exporters and importers have 
grown.
    Port facilities must and do comply with all the government's 
applicable security requirements. There is no evidence that terminal 
facilities' operations conducted by foreign controlled companies are 
any less secure. or in any way less compliant with security 
regulations, or in any way less cooperative with U.S. Government 
security authorities than U.S. controlled companies. In fact, these 
companies work closely and cooperatively with the Coast Guard, Customs 
and Border Protection, the U.S. military, and other U.S. law 
enforcement agencies.
    Rather than focusing on the nationality of the terminal operator, 
the challenge is to build on the cargo security framework that the 
Department of Homeland Security has put in place and to continue to 
make improvements on what has been started.
    Specifically, the World Shipping Council believes that priority 
consideration should be given to:

        1. Improving the cargo shipment data collected and analyzed 
        before vessel loading by CBP's National Targeting Center. Cargo 
        security risk assessment is a cornerstone of DHS strategy. In 
        order to enhance the effectiveness and value of the risk 
        assessment system, CBP should obtain and use more complete 
        cargo shipment data than ocean carriers' bills of lading, which 
        today provide the only required commercial shipment data used 
        by the government for cargo risk assessment;

        2. Expanding international cooperation through the Container 
        Security Initiative;

        3. Continuing to improve and strengthen the C-TPAT program;

        4. Promulgating regulations to implement the Maritime 
        Transportation Security Act mandate of maritime Transportation 
        Worker Identification Cards; and

        5. Giving priority attention to the merits and feasibility of 
        possible widespread application of ICIS-type X-ray inspection 
        and radiation screening equipment and the interface and use of 
        such equipment by Customs authorities. While admittedly not a 
        simple issue, this concept holds the potential to significantly 
        improve governments' confidence in the security of American 
        importers' and exporters' cargo.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to
                             Michael Mitre
    Question 1. As you know, the Maritime and Transportation Act of 
2002 was developed by this committee. How have the security 
requirements for terminal operators changed since the passage of the 
Maritime Transportation Security Act?
    Answer. Since the MTSA implementation, security on marine terminals 
has changed in several areas including access control and cargo 
handling methodology, but security loopholes have been inadvertently 
created within both.
    As terminal operators have increased security at their in-gates for 
automobiles and walk-in longshoremen, vigilance of truckers has 
remained weak. Large trucker queue lines have caused some terminals to 
admit them without Identification or truck inspection. In some cases, 
automated in-gates allow ``non-placard'' HAZMAT loads to enter unseen 
and unknown. Additionally, personal padlocks on containers that once 
automatically sparked a ``set aside'' inspection now are allowed to 
enter with no inspection or other action.
HAZMAT
    Special requirements calling for HAZMAT containers to be parked 
away from standard loads are not being followed. Many operators are not 
keeping daily updated records concerning the hazardous loads.
Empty Containers
    The largest volumes of all cargo units being shipped to Asia are 
empty containers. As they are returned to terminals, these empties are 
often never opened; with no way of verifying that they are indeed 
empty. Considering that the 9/11 terrorists began their terrible act 
from within the United States, why would we ever allow supposedly empty 
containers back into our terminals without verifying whether an 
explosive, dirty bomb or dangerous chemical or radioactive material has 
been concealed inside? Considering it takes less than 1 minute to open 
the doors of a container, it is inconceivable and irresponsible that 
terminal operators continue to refuse to inspect empty containers.

    Question 2. What do you feel is the best option for improved 
security at our ports?
    Answer. The best option for improving security at our Nation's 
ports is to ensure that truckers (the largest occupational group at our 
ports) are carefully and completely identified and their trucks and 
truck cabs inspected. This option is a common sense approach to 
security that is not occurring now. The ILWU is concerned that while 
basic approaches to security are not taking place, while Congress and 
the Department of Homeland Security are relying on technology to solve 
all our security problems.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to
                             Michael Mitre
    Question. What background checks are conducted when new employees 
are hired, and who conducts those checks?
    Answer. I am not aware of any background checks performed on new 
workers when hired. However, the Graham Commission that preceded 9/11 
(looking at the issue of crime at our Nation's ports), could not find 
one instance where ILWU workers in the United States had participated 
in internal conspiracies to commit serious crimes at our ports.
    In the case of truck drivers, most are owner-operators who will not 
show up on any master employer list.
                                 ______
                                 
        Written Questions Submitted by Hon. Daniel K. Inouye to
                          Michael P. Jackson *
---------------------------------------------------------------------------
    * Responses to these questions were not available at the time this 
hearing went to press.
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    Question 1. To make the public feel better about this deal, the 
Administration was forced to contend that regardless of who operates 
the ports, security will be handled by the Federal Government. 
Essentially, the Administration finally had to admit, on no uncertain 
terms, that the Federal Government is responsible for port security. 
However, based on the Administration's budget requests over the past 
several years and the long list of security deadlines it has ignored, 
the Administration does not appear to take port security very 
seriously. Can you give me specific examples to prove to this committee 
why you believe any of the 6 ports in question are secure? Which of the 
6 ports have their requisite security plans in place? Do they have 
cargo screening infrastructure that works?

    Question 2. Fifteen of this committee's 22 members have ports in 
their states. We know first hand how important port security is to the 
Nation's physical and economic security. This committee unanimously 
approved our transportation security bill, S. 1052, last November. 
While we would like to see the entire bill considered by the Senate, 
many of us believe the time is right to consider, at a minimum, the 
port and cargo security title. Our legislation would help to alleviate 
concerns about foreign operations at U.S. ports, because it provides 
for a better process and enhanced infrastructure. Specifically, S. 1052 
improves the process for examining cargo before it reaches our ports. 
It expedites the resumption of commerce in the event of an attack, and 
it expands the collaborative approach to port security currently used 
at the ports of San Diego and Charleston. Do you support these 
improvements to your existing authorities?

    Question 3. The Maritime Transportation Security Act required the 
Coast Guard to develop a National Maritime Transportation Security 
Plan. In the Plan, the Coast Guard is to assign duties and 
responsibilities among Federal agencies, establish procedures to 
prevent an incident from occurring, and plan for the speedy resumption 
of commerce in the event of an attack. This plan was due in April last 
year. When will the National Plan be completed and submitted to 
Congress?

    Question 4. In response to concerns about the Department of 
Homeland Security (DHS) review of the DP World transaction, the 
Department has distributed information indicating that it has taken 
steps to ``dramatically strengthen port security since 9/11.'' However, 
the Department has missed several deadlines for congressionally 
mandated port and cargo security requirements including the issuance of 
container seals and locks standards, and submission of the National 
Maritime Transportation Security Plan, to name a few.
    Given the lack of attention to fundamental programs such as the 
Transportation Worker Identification Credentialing Program (TWIC), the 
Secure Systems of Transportation Program and Port Security Grant 
Program, how can we be assured that this Administration is prioritizing 
port and cargo security?

    Question 5. We recently learned that the Coast Guard found 
``serious intelligence gaps'' in the information it had about the DP 
World transaction. Given this information and the security assurances 
requested of the parties, how is it that the Department of Homeland 
Security gave its approval to this transaction? Specifically when in 
the process were the concerns of the Coast Guard resolved?

    Question 6. Was the Coast Guard's risk assessment based on current 
concerns and risks? The public document mentions concerns over 
personnel, operations, and foreign influence. How are potential future 
concerns addressed in the report?

    Question 7. On one of the Sunday morning shows this past weekend, 
participants noted that while we would like to treat all of our allies 
equally, we do not necessarily do so. Senator Biden cited weapon sales, 
noting that we sell certain products to NATO allies that we would not 
sell to other allies. The proposed deal replaces one foreign owner, the 
British, for another, the U.A.E. Do you believe the risks associated 
with British ownership are the same as the risks associated with U.A.E. 
ownership?

    Question 8. The Department of Treasury press release on the CFIUS 
history of the DP transaction indicates that CFIUS requested an 
intelligence assessment of DP World on November 2, 2005 and was 
provided a threat assessment 30 days later. What was the result of the 
intelligence assessment? Did the U.S. Coast Guard raise any concerns 
about security vulnerabilities regarding the transactions or the Coast 
Guard's ability to adequately make a threat assessment of DP World and 
the merger?
    If so, how was this concern resolved?
                                 ______
                                 
         Written Questions Submitted by Hon. Maria Cantwell to
                          Michael P. Jackson *
---------------------------------------------------------------------------
    * Responses to these questions were not available at the time this 
hearing went to press.
---------------------------------------------------------------------------
    Question 1. In your testimony before the Commerce Committee on 
February 28, you stated ``if you take the budgets from 2004 to the 
proposed budgets of 2007, we, at DHS, will have spent $10 billion on 
maritime security investments.'' Can you please provide a breakdown and 
itemized account for the $10 billion figure you referenced?

    Question 2. How many cargo containers entered the U.S. through a 
seaport last year? How many containers entered the U.S. through a 
seaport each year, over the last 5 years?

    Question 3. How many containers of the total that entered the U.S. 
through a seaport last year were scanned for nuclear materials using 
non-intrusive scanning technology at the port of origin? Was this 
scanning done by Customs and Border Protection? What role does CBP play 
in screening containers that are destined for the U.S. at foreign ports 
for nuclear and radiological materials?

    Question 4. What are the different non-intrusive technologies that 
DHS uses to screen containers entering and leaving our domestic ports? 
Please describe each separate monitoring technology and its screening 
capabilities. What threats are these respective technologies positioned 
to identify?

    Question 5. How many containers entering the U.S. at a seaport were 
scanned using radiation portal monitors (RPM's)? How many foreign ports 
have 100 percent of its outbound cargo containers screened using RPM's?

    Question 6. Who conducts the scanning of containers destined for a 
U.S. seaport, at foreign ports? Are background checks conducted on 
individuals involved in the scanning of containers at foreign seaports? 
If background checks are conducted, does DHS have access to the names 
of these individuals and the results of their respective background 
checks?

    Question 7. Who physically inspects a container and its contents if 
an alarm is raised by non-intrusive scanning at foreign ports? At 
domestic ports? What role does CBP play?

    Question 8. What information is DHS provided on individuals who are 
scanning and inspecting cargo and containers destined for U.S. seaports 
at foreign ports?

    Question 9. Does an international standard exist for conducting 
background checks on individuals scanning containers at our foreign and 
domestic ports?

    Question 10. How many foreign ports are currently participating in 
the Container Security Initiative? Please identify these ports and the 
countries in which they are located.

    Question 11. Is CBP currently working to negotiate participation of 
any additional ports in the CSI program?

    Question 12. How many ports are slated to receive RPM's through the 
Megaports Initiative in 2006?

    Question 13. How many U.S. ports currently have RPM's?

    Question 14. When will all U.S. ports be equipped with RPM's to 
scan cargo flowing through their terminals?

    Question 15. What is the current standard for performing background 
checks on individuals with access to our ports, port terminals, docks 
and holding facilities? Can DHS insure that individuals on a terrorist 
watch list are not able to gain access to our ports, port terminals, 
docks, or holding areas? Why or why not?

    Question 16. What is the current standard for performing background 
checks on truck drivers delivering containers to our ports? What is the 
process for screening containers arriving at our seaports by truck? Are 
non-intrusive technologies to screen the contents of a cargo container 
arriving to a seaport by truck used? If so, what technologies are used?

    Question 17. Does CBP screen containers arriving at seaports by 
rail? If so, what percentage of containers delivered to seaports by 
rail are scanned? What technologies are used? Is DHS/CBP actively 
working to increase the level of screening of containers delivered by 
rail?

    Question 18. What is the current standard for checking locks on 
containers leaving foreign ports?

    Question 19. What percentage of cargo containers leaving a foreign 
port destined for a U.S. seaport is secured using a locking mechanism? 
What is the current standard for checking locks on containers leaving 
foreign ports destined for a U.S. seaport? Who checks the locks? What 
role does DHS play? What are the protocols to ensure that tampering 
does not occur during transit?

    Question 20. What technologies are used to ensure the integrity of 
container locks through transit? What is the protocol when there is a 
discovery of a lock that has been tampered with during transit? Who 
physically inspects the contents of containers if has been discovered 
that the container has been tampered with during transit? Do the 
terminal operators play any role in this process?

    Question 21. What is the current standard for checking locks on 
containers at U.S. seaports? Who checks the locks? What role does DHS 
play in checking container locks? Do terminal operators play a role in 
checking container locks?

    Question 22. How does the Department of Homeland Security ensure 
that standards for checking container seals and locks are being met?

    Question 23. How many foreign companies conduct terminal operations 
in the U.S.? Please list the companies and the port and terminal in 
which they operate. If the foreign company has an American subsidiary 
which conducts the terminal operations, please provide the name of the 
subsidiary and the port and terminal in which it operates.

    Question 24. How many of the foreign companies that operate 
terminals at U.S. ports, have U.S. subsidiaries that operate at foreign 
ports or contract with U.S. companies to conduct port operations, are 
owned wholly, or partially by a foreign government? Please list the 
companies and the foreign governments that own, have investments, or 
other substantive interest in a company involved in port operations in 
the U.S.

    Question 25. Does DHS conduct screening of container ship crews? 
Are background checks conducted on foreign container ship crews? What 
is the protocol for screening crews and their belongings and luggage?
                                 ______
                                 
      Written Questions Submitted by Hon. Frank R. Lautenberg to 
                          Michael P. Jackson *
---------------------------------------------------------------------------
    * Responses to these questions were not available at the time this 
hearing went to press.
---------------------------------------------------------------------------
    Question 1. Why didn't anyone in your Department contact any of the 
port authority directors, port terminal operator executives, or port 
security personnel at the ports operated by P&O regarding this deal?

    Question 2. Do you think local port authorities should have a say 
in any situation where the security of their port is at stake?

    Question 3. When it comes to CFIUS review, how does your Department 
define ``national security''?

    Question 4. Does it use the same definition as the rest of the 
Committee members?

    Question 5. Did you, anyone in your Department, or anyone under 
your direction, visit any of the 22 ports in which P&O currently 
operates for purposes of the CFIUS review? If so, which ones, and when?

    Question 6. Exactly what assurances were you given by the ownership 
of DP World that they would continue to use the same employees?

    Question 7. Who at the Department of Homeland Security rejected the 
Coast Guard's concerns about the DP World deal?

    Question 8. DP World promised DHS to take certain security 
measures, like participate in voluntary security programs, but what if 
they don't follow through? You've already approved their transaction. 
Just how enforceable are these commitments they made to your 
Department?

    Question 9. Why so many missed congressional deadlines for 
important port security actions? How can we believe that this 
Administration gives port security any kind of priority whatsoever?
                                 ______
                                 
           Written Question Submitted by Hon. Mark Pryor to 
                          Michael P. Jackson *
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    * Responses to these questions were not available at the time this 
hearing went to press.
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    Question. Mr. Secretary, I wanted to follow up with you on your 
response to my earlier question on deadlines. You said that the 
Department has many important priorities, and I don't disagree. Would 
one of those priorities include removing scissors from the prohibited 
items list for airline passengers? In your opinion, what is more 
important, protecting our ports or prohibiting scissors from getting on 
an airplane?

                                  
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