Port Canaveral confident Gulftainer deal will pass U.S. security review
A Florida port that plans to lease operating control of a new container terminal to a company based in the United Arab Emirates required its partner obtain a U.S. government security clearance as a condition of its contract, and has requested officials conduct a full investigation, rather than a 30-day informal review, to ensure complete transparency, the port's director said.
Furthermore, the Canaveral Port Authority and Gulftainer, the UAE port operator, submitted the application to the Committee on Foreign Investment in the United States, an inter-agency group which reviews foreign acquisitions to make sure they do not threaten U.S. security, even though it technically isn't required under the law, and did so at least 10 days prior to Rep. Duncan D. Hunter's recent request for the Obama administration to vet the deal, Chief Executive Officer John Walsh told American Shipper.
"We feel very comfortable that they do a full, in-depth review," he said in an interview in his office.
The request to go directly to a second-stage review likely reflects lessons learned eight years ago when another global terminal operator from the UAE, Dubai-owned DP World, was forced to divest U.S. assets obtained as part of a larger acquisition after lawmakers cast the transaction as outsourcing critical infrastructure to a Middle Eastern country with possible terrorist ties. National and local politicians seized on the fact that mid-level Bush administration officials approved the deal without notifying Congress and undertaking a more thorough review, with final approval coming from agency and cabinet heads.
Port Canaveral, located midway between Jacksonville and Miami, announced June 23 that it had signed a 35-year agreement with Gulftainer's U.S. subsidiary to operate and further develop a new container terminal. The port authority and the state of Florida are investing $42 million to reconfigure a piece of port property into a container terminal with two new berths. The facility represents the first foray into the container business for the port, which mostly handles bulk, breakbulk, refrigerated, military and construction-related cargoes, in addition to hosting cruise ships.
Gulftainer will invest $100 million in infrastructure, equipment and talent to run the 20-acre terminal (expandable to 40 acres), which expected to open for business in March.
Gulftainer is headquartered in the emirate of Sharjah. Founded in 1976, it operates the Sharjah and Khorfakkan container terminals in the UAE, as well as terminals in Brazil (Recife), Russia, Saudi Arabia, Pakistan and Iraq. The company moved 7 million standard shipping containers last year, and has said its goal is to triple volumes and operate 35 terminals across five continents by 2020.
In 1988, Congress passed the Exon-Florio amendment delegating to CFIUS the task of investigating foreign acquisitions of U.S. companies.
The CFIUS process is officially launched when the Treasury Department receives a written notice of a transaction, but in most cases, companies consult with executive agencies ahead of time to head off potential problems and make sure they have a good chance of getting approved. Other agencies represented on CFIUS include the National Security Agency and the departments of Defense, Homeland Security, State, Justice and Commerce.
Applications typically go through a 30-day staff review. If questions are raised, the background check can be bumped up to a 45-day investigation. The president has the authority to prohibit any acquisition that could harm the nation's security.
In reality, the Gulftainer deal, as in the case of DP World, involves no purchase of port assets. The transaction is only a concession granting the terminal management company exclusive operating rights for a long-term period. Still, port authorities in the post-9/11 environment are likely to get deals with foreign operators checked in advance because of the sensitive nature of port infrastructure and border security.
Hunter, chairman of the House Transportation and Infrastructure subcommittee on Coast Guard and maritime transportation, asked Treasury Secretary Jack Lew to review the Port Canaveral-Gulftainer deal. His father, Duncan L. Hunter, served 14 terms in the House and helped instigate the opposition to the DP World takeover of container terminals at six major ports, amid accusations that Dubai turned a blind eye toward smuggling of nuclear and chemical components. He also tried to pass legislation that would limit ownership of critical infrastructure to American firms, and called for all cargo containers and trucks entering the United States to be scanned for terrorist weapons.
Walsh said Gulftainer is a world-class port operator that would load and unload vessels with a workforce that is 95-percent American and be subject to all U.S. Customs and Coast Guard security requirements for vessels and cargo. GT-USA's general manager is British, and the chief operating officer is an American who has operated terminals in New York, Houston and Saudi Arabia.
"Our request is that, regardless, they go to the second stage" review, Walsh said. "We want to make sure that every 't' is crossed and every 'i' dotted — put all our the cards on the table" with full disclosure of the company's executive teams, finances and operating practices.
In a statement Friday, Port Canaveral said it has been notified to expect a response to the CFIUS filing by early September. The Gulftainer contract has also been submitted to the Federal Maritime Commission for review, according to Walsh.
"We remain confident that the container terminal will receive all needed clearances and approvals to begin operating in March 2015," the Canaveral statement said.