Rep Thompson Letter On UAE Ports Deal

Letter from Bennie G. Thompson Ranking Member (Democrats) Committee on Homeland Security

February 17, 2006

Chairman Peter King
Committee on Homeland Security
U.S. House of Representatives
Washington, DC 20515

Dear Peter:

During the past several days, I have read with great interest your comments regarding the $6.8 million sale of London-based Peninsular and Oriental Steam Navigation Co. (P&O), the fourth largest port operator in the world, to the United Arab Emirates-owned Dubai Ports World (DPW). This sale will result in DPW running some commercial operations at shipping terminals in New York, New Jersey, Baltimore, New Orleans, Miami, and Philadelphia.

Based on many conversations that I have had with the private sector and academics, I believe that foreign ownership issues raise homeland security concerns that the Committee on Homeland Security should examine thoroughly. It would be beneficial for the Committee to hold a series of full committee hearings on foreign ownership issues. Having the full committee convene on this is necessary given the gravity of the issue and its application to core homeland security efforts.

Specifically, I would recommend hearings on the following:

- A review of the Committee on Foreign Investments in the United States (CFIUS) process as it relates to homeland security;

- An examination of foreign ownership issues related to transportation security; and

- An examination of foreign ownership of critical infrastructure such as telecommunications, Internet, and technology companies.

A review of CFIUS is merited as the findings of the CFIUS Committee have a direct effect on homeland security. Under the Exon-Florio provision, the President may suspend or prohibit any foreign acquisition, merger, or takeover of a U.S. corporation that is determined to threaten the national security of the United States. When the President receives written notice of an acquisition, merger, or takeover, the CFIUS Committee, on which the Department of Homeland Security sits, is responsible for providing a thorough review.[1]

The DPW and P&O sale of the six ports was submitted to the CFIUS Committee, which unanimously decided that the sale did not present any problems. Assumingly, the Department of Homeland Security played a critical role in this decision as the agency has authority and jurisdiction over port security. It is very likely that this CFIUS decision will not be the last involving matters critical to homeland security and this Committee's interest. As such, a hearing on this matter is in order.

A second hearing on foreign ownership issues relating to transportation security would also be beneficial to the Committee. In particular, there has been a great deal of discussion recently on foreign ownership issues relating to the aviation industry. Several airlines have approached me regarding the Department of Transportation's Notice of Proposed Rulemaking (NPRM) to change the definition of actual control of U.S. air carriers. This Notice, released in November, tries to address the European Union's assertion to the U.S. that it will not pursue an "open skies" agreement with the United States unless the United States changes the definition of control so that if a foreign investor provides capital to a U.S. airline, it could gain effective control over the carrier. This rule has potential implications for availability of the Civil Reserve Air Fleet (CRAF) and effectiveness of our transportation security efforts. Given the obvious homeland security elements of this NPRM, it would be beneficial for the Committee to hold a hearing on those elements, examining specifically whether any measures are in place to ensure that integrity of aviation security is adequately protected. Likewise, during such a hearing, the Committee could evaluate the risk posed by the increased reliance on foreign repair stations for the services of aircraft that is only in-service in domestic routes. This Committee should evaluate whether additional risks exist when foreign mechanics, who do not undergo background checks or are on watchlists, work on American planes.

The last hearing that would be useful for the Committee to hold is on the foreign ownership of telecommunications, Internet, and technology companies. This is a matter that I know Stewart Baker at the Department has been intimately involved with in the past and may be able to provide an assessment of the risks and challenges posed by foreign ownership in our communications infrastructure. For example, what protections, if any, are necessary to defend national security, the privacy of our citizens, and public safety? How is the federal government considering how different technologies, business structures, and other factors affect any national security concerns relating to foreign ownership? Given the global nature of telecommunications and the Internet, a better understanding of these issues will help the Committee assist the federal government to protect our critical infrastructure here at home.

I look forward to hearing from you on this proposal. I will be home in Mississippi this coming week if you would like to discuss further. If your staff has any questions, please feel free to have them contact the Democratic Staff Director, Jessica Herrera-Flanigan, at (202) 226-2616.

Sincerely,

Bennie G. Thompson
Ranking Member
Committee on Homeland Security

[1] See Section 721 of Pub. L. 100-418, 102 Stat. 1107, made permanent law by section 8 of Pub. L. 102-99, 105 Stat. 487 (50 U.S.C. App. 2170) and amended by section 837 of the National Defense Authorization Act for Fiscal Year 1993, Pub. L. 102-484, 106 Stat. 2315, 2463.

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