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FOREIGN INVESTMENT, JOBS, AND

NATIONAL SECURITY: THE CFIUS PROCESS

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE, AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MARCH 1, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–75

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND

TECHNOLOGY

DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

MARK R. KENNEDY, Minnesota 

KATHERINE HARRIS, Florida 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

LUIS V. GUTIERREZ, Illinois 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

JOSEPH CROWLEY, New York 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

March 1, 2006 ................................................................................................... 1

Appendix: 

March 1, 2006 ................................................................................................... 79

WITNESSES 

WEDNESDAY, JANUARY 00, 2006

Edelman, Eric S., Under Secretary of Defense for Policy, U.S. Department 

of Defense ............................................................................................................. 12

Ervin, Clark, Director, Homeland Security Initiative, The Aspen Institute ...... 63

Glassman, James K., Resident Fellow, American Enterprise Institute .............. 56

Jackson, Michael P., Deputy Secretary, U.S. Department of Homeland Security ......................................................................................................................... 10

Kimmitt, Robert M., Deputy Secretary, U.S. Department of the Treasury ........ 7

Malan, Todd M., President and CEO, Organization for International Investment ...................................................................................................................... 57

Marchick, David M., Partner, Covington and Burling ......................................... 59

Reinsch, William A., President, National Foreign Trade Council ....................... 61

Welch, C. David, Assistant Secretary, Bureau of Near Eastern Affairs, U.S. 

Department of State ............................................................................................ 15

APPENDIX 

Prepared statements: 

Biggert, Hon. Judy ........................................................................................... 80

Castle, Hon. Michael N. ................................................................................... 82

Edelman, Eric S. ............................................................................................... 84

Ervin, Clark ...................................................................................................... 91

Glassman, James K. ......................................................................................... 94

Jackson, Michael P. .......................................................................................... 102

Kimmitt, Robert M. .......................................................................................... 112

Malan, Todd M. ................................................................................................ 118

Marchick, David M. .......................................................................................... 128

Reinsch, William A. .......................................................................................... 139

Welch, C. David ................................................................................................ 143

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Kimmitt, Robert M.: 

Responses to Questions Submitted by Various Members ............................. 144

(1)

FOREIGN INVESTMENT, JOBS, AND 

NATIONAL SECURITY: THE CFIUS PROCESS 

Wednesday, March 1, 2006

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL

MONETARY POLICY, TRADE, AND TECHNOLOGY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:03 p.m., in room 

2128, Rayburn House Office Building, Hon. Deborah Pryce [chairwoman of the subcommittee] presiding. 

Present: Representatives Pryce of Ohio, Biggert, Leach, Castle, 

Paul, Manzullo, Gerlach, Price of Georgia, Maloney, Sanders, Waters, Lee, Sherman, Gutierrez, Wasserman-Schultz, Moore of Wisconsin, Kelly, Garrett, Bachus, Ryun, Campbell, Barrett, McCarthy, Matheson, Cleaver, Davis of Alabama, Moxley, Meeks, and 

Scott of Georgia. 

Ex officio present: Representatives Oxley and Frank. 

Chairwoman PRYCE. This subcommittee will now come to order. 

Pursuant to the notice given previously, the Chair announces it 

shall limit recognition for opening statements to the Chair and the 

ranking minority members of the subcommittee and the Full Committee. Without objection, the opening statements of all members 

will be included in the record. I appreciate everyone’s consideration 

of this. We have a lot of members who want to participate today, 

and we would never get to the witnesses if we allowed full opening 

statements. 

At this time, the Chair recognizes herself for an opening statement. 

First of all, I am very pleased to welcome all of you here today 

to this hearing on the Committee of Foreign Investments in the 

United States, CFIUS. I would like to thank our witnesses for 

being here on such short notice. I know that we all appreciate the 

opportunity to discuss the CFIUS process, and hopefully answer 

some questions regarding recent transactions. 

The CFIUS process is not something that every American is 

aware of, or perhaps even every Member of Congress, until this 

past week. It is my desire to focus this hearing on how the Committee on Foreign Investment in the United States operates. I want 

the American people to have more information about the oversight 

and protections that are in place to determine if foreign investment 

is in the best interest of the United States’ national security. 

I would like to hear from our witnesses today how each CFIUS 

member evaluates a proposed transaction, and especially how the 

2

process for the Dubai Ports World acquisition of the Peninsula and 

Oriental Steam Navigation Company’s U.S. assets took place. 

I, for one, was alarmed by the comments of Secretary Chertoff 

made over the weekend that America must ‘‘balance the paramount 

urgency of security against the fact that we still want to have a robust global trading system.’’ To me, and to many Americans, that 

statement implied that there are aspects of our Nation’s security 

that must be sacrificed at the altar of free trade. That is something 

that I fundamentally reject. 

Since 9/11, Congress has invested millions and millions of dollars 

to strengthen our Nation’s seaports, and has called for comprehensive security improvements costing billions over the next decade. 

Selling the management rights of these ports to foreign interests 

undermines the confidence Americans have in their leaders. 

I am hoping you might reassure this subcommittee and the 

American public that there is no trade-off between participating 

fully in international trade, and ensuring the safety and security 

of our Nation. 

Each of the departments and agencies that comprise CFIUS 

plays a critical role in securing our Nation from threats, both foreign and domestic. I think we can all agree that feeling secure is 

as much a perception as it is something that can be empirically assessed. 

Therefore, I am hoping to learn today what, if any, consideration 

was given by CFIUS to the public’s perception of the Dubai transaction, and how it might have weighted against the myriad of other 

factors the committee analyzed in reaching its conclusion. 

This subcommittee has jurisdiction over the Exon-Florio provision of the Defense Production Act, which includes CFIUS, and we 

should take our responsibilities seriously. That is why we are here. 

It is important during this period of concern for our security that 

we do not hinder future investment in the United States. That 

said, in this particular case, the DP World transaction, perhaps a 

little more forethought from our Administration and this committee 

would have helped to reassure our citizens that they will continue 

to be safe. 

CFIUS gives the President powers to block certain types of foreign investment. But in our post-9/11 America, we need the assurance that our President has seen the CFIUS review, and that department heads are aware of what is going on in their agencies. 

The Byrd Rule was instituted 13 years ago, 13 years before 

Osama bin Laden, 13 years before each American knew what a yellow, orange, or red elevated threat meant, and 13 years before 

there was a Department of Homeland Security. In a post-9/11 

world, Congress operates under heightened awareness when it 

comes to all aspects of national security. Perhaps it is time we 

bring the Byrd Rule and the CFIUS process into a new decade with 

greater transparency and accountability, and I pledge to you all 

that this committee will do its best to see that that happens. 

DP World has recently reissued its CFIUS request, and we in 

Congress welcome a thorough review of this company and this 

transaction. If DP World can effectively manage these ports without putting any aspect of American security at risk, then this 45-

day review will bear that out. But should any aspect of the review 

3

leave continued questions or concerns, I believe that Congress 

should take swift measures to address the security of our people 

and our ports. 

My State of Ohio doesn’t have any ports, but this issue goes beyond ports or railroads or airlines. This issue touches every American who wants to know that each day, they are safe. I hope that 

this hearing can begin to reassure our citizens, and I very much 

look forward to hearing our witnesses’ testimony. And I will yield 

back the balance of my time and recognize my good friend, the 

gentlelady from New York, for her opening statement. 

Mrs. MALONEY. I thank the gentlelady for yielding and for calling 

this important hearing. 

A great number of questions have been raised about the security 

of our ports and the secretive approval process that led to this deal. 

Unless the President and the Congress act promptly, in the next 

day or so, the Government of Dubai will buy, over the strong objection of the American people, the company that operates 20 U.S. 

ports, including 7 of our largest ports, among them the ports of 

New York and New Jersey, which remain key terrorist targets. 

The Administration hastily approved this deal, even without the 

45-day investigation of national security concerns required by law. 

They approved this deal without consulting with or even informing 

the Congress, the American people, or the affected communities. 

The American people find this deeply troubling. Wherever I go in 

New York, I am stopped by people. They literally walk across the 

street and ask me, ‘‘How can our government be so stupid?’’ 

Clearly, the Administration’s approval process reflects a pre-9/11 

mentality. Our country cannot afford it, and the underlying law 

needs to be updated to reflect the post-9/11 world. We need to be 

focusing on how to improve national security at our ports and elsewhere, and not on how to do an end run around the national security reviews. 

The law requires a 45-day investigation whenever an acquisition 

by a foreign government—and I quote—‘‘could affect national security.’’ Neither the President nor any of the 12 agencies involved in 

the government approval process thought that this $6.9 billion 

transaction to a foreign government in any way ‘‘could affect national security?’’ At the very least, we need to change the Administration’s definition of national security. We need to inform them 

that our ports and the country’s infrastructure are terrorist targets 

and national security concerns. 

The 9/11 Commission Report concluded that terrorists have the 

opportunity—and I quote—‘‘to do harm as great or greater in maritime and surface transportation as the 9/11 attacks.’’ We need to 

ask probing questions today about a foreign government takeover 

of port management, and the process by which this decision was 

made. We need to see the objections of the Coast Guard or any 

other agency that raised questions. 

And I might add that we would be asking the same questions if 

this agreement involved other foreign countries, such as China, 

Russia, Venezuela, or Pakistan. This is not discrimination, as has 

been alleged by the President. It is about protecting our national 

security. 

4

I am not reassured by the new offer of a 45-day review. The 

President has made very clear that he will approve this deal no 

matter what any review shows. I am asking that this committee 

have access to all documents relating to the new investigation and 

to the prior review, every single bit of paper. I am particularly interested in any objections. In a $6.9 billion 

deal to a foreign government, you would think there would be some 

objections somewhere, or some review, not a decision to just bypass 

the national security required 45-day review. So it is important 

that we see all of these documents. 

We need to reform the CFIUS process. We need to make it 

stronger and more open to Congressional review. We need to ensure that it reflects the risks of the post-9/11 world. And most of 

all, we need to make sure that the American people are protected 

in their ports and in their trains and anywhere in America. 

I yield back. 

Chairwoman PRYCE. Thank you, Mrs. Maloney. The Chair now 

recognizes the Chairman of the Full Committee, the Honorable Michael Oxley, from the great State of Ohio. 

The CHAIRMAN. Thank you, Chairwoman Pryce, and thank you 

for your leadership to address the Dubai Ports World issue, as well 

as examining it in the larger context of the CFIUS process and port 

security in general. I think that over the next few hours, we’re 

going to learn a lot for our committee about the process and how 

it works. And while many people had an initial strong reaction to 

the Dubai Ports World acquisition and the company’s increased 

role in port management, we must view this in context. So if this 

additional 45-day review gives us the opportunity to reexamine the 

issue and look at the progress that has been made in this area, 

then that is all for the good. 

Certainly, we all welcome the added scrutiny, which will give everyone involved a chance to review the security issues and the status of the cargo shipping system. For instance, I have seen the 

press reports detailing the Coast Guard’s reported concerns about 

the screening of cargo ship personnel and security of the cargo 

holds protection system. While they may or may not be directly related to the port management company, certainly we would be wise 

to give these specific issues further thought and evaluation. My 

own prediction is that this process eventually will reveal the merits 

of the President’s position, and will show a system that is both efficient and seamless. 

The world’s cargo shipping system is global and interdependent. 

We trust our allies and our trading partners, because we all share 

a mutual interest and a secure system. Great strides have been 

made in increasing the security and efficiency of the system, which 

were begun long before the age of terrorism. 

Much has been changed since I was on the docks of New York 

investigating organized crime as a young special agent of the FBI. 

After all, nearly one third of U.S. ports are managed by foreignbased companies. The role of the management company is to track 

where the cargo comes from and where it goes. The U.S. Coast 

Guard is in charge of port security. U.S. Customs Service is responsible for checking those cargoes. U.S. longshoremen handle the 

cargo and operate the cranes. To assume some connection between 

5

the port management company and the content of the cargo misses 

a great deal about how the system operates. 

As far as the CFIUS process is concerned, we should all be reminded that it is not, nor should it be, political in nature. That is 

a slippery slope, and it would be a mistake to take that step. 

In our discussions with the Treasury officials who administer 

CFIUS, they have expressed their willingness to communicate more 

effectively and more often with this committee and with Capitol 

Hill. We have discussed informal quarterly briefings, and we at the 

Financial Services Committee would welcome that. 

Now is a good time to think about the tremendous value of foreign investment for the U.S. economy and the message we want to 

convey to the world. According to the Organization for International Investment (OFII), U.S. subsidiaries of foreign-based companies employ 5.3 million Americans and support an annual payroll of $318 billion, with an average worker’s salary of more than 

$60,000 a year. 

Also, according to the OFII, U.S. subsidiaries of foreign-based 

companies invest heavily in the manufacturing sector. In my own 

State of Ohio, 208,600 workers are employed by foreign-based companies. We should be welcoming and encouraging foreign direct investment, not shutting it out. 

I recommend to the members columnist Thomas Friedman’s New 

York Times column on this issue that he wrote recently. And I 

quote, ‘‘The world is drifting dangerously toward a widespread religious and sectarian cleavage, the likes of which we have not seen 

for a long, long time. The only country with the power to stem this 

toxic trend is America.’’ 

Let’s not be ruled by our worst fears. Let’s not close off America, 

as the terrorists would hope we would. While protecting ourselves 

against any security threat, let’s remember our American values of 

free trade and fairness and capitalism and the inherent worth of 

our relationships with other nations. Those are the American ideals 

we need to export to the rest of the world. 

Madam Chairwoman, I want to particularly welcome our first 

panel, all distinguished gentlemen, three former ambassadors, a 

former lead individual with the Transportation Department, all 

with great knowledge not only of the CFIUS process, but the port 

issues in general. And I can’t think of a more qualified and strong 

group to head this first panel. And with that, I welcome them and 

yield back the balance of my time. 

Chairwoman PRYCE. Thank you very much, Mr. Chairman. I’d 

now like to yield for opening statement to the ranking member of 

the Full Committee, Mr. Barney Frank. 

Mr. FRANK. Thank you, Madam Chairwoman. I am not often 

moved to poetry in this forum. But a line from a British poem—

I regret that neither the author nor the title remains in my mind—

is describing a seduction: ‘‘Whispering she would ne’er consent, consented.’’ And that appears to me to describe the process in which 

we are now engaged. 

There was a great deal of anger across the political spectrum 

when this was announced. Indeed, judging from the reactions my 

Republican colleagues have had on a wide range of other issues, it 

was not surprising that they reacted so negatively to this process. 

6

But the seduction process appears under way. And I must say 

that while this committee has usually functioned in a very bipartisan fashion, I am distressed that the request of our ranking member for a witness list that was not so overwhelmingly one-sided was 

rejected. 

We will have nine witnesses today, eight of whom will be ardent 

proponents of the deal. Now, we expect that from the Administration. What troubles me is out of the five non-Administration witnesses, there are two who take intellectual positions, one on either 

side, and then three other witnesses, all of whom are professionally 

involved in advocating for foreign trade. 

Now, that is a perfectly reasonable thing to do, advocating for 

foreign trade. But if you’re trying to have a reasonable hearing, 

then to have all three of those witnesses be people who have a professional interest in this, one an attorney. Again, perfectly honorable, but he practices before CFIUS. The likelihood that he would 

be at all critical seems to be rather low. 

Then we have the Foreign Trade Council and the Organization 

for International Investment. Frankly, I don’t even think FOX 

News would claim that this was fair and balanced. 

So I really regret the one-sidedness of the witness list, and I 

know that our ranking member asked for some more balance. 

Secondly, I want to address the issue that well, this is going to 

cause us problems, some of this criticism, with our allies in Dubai 

and in the United Arab Emirates. Although I must say that the argument that we should not be treating the Emirates any differently 

than England seems to me to be totally fallacious. The President 

said that. 

Now, I am a strong supporter of the Visa Waiver Program. I 

fought hard to get Portugal involved. Britain, you can come to 

America from England without a visa. I don’t want Dubai in that 

program. Does that make me a bad guy? I don’t think I am prejudiced. I can think of a lot of other areas there. I am offended by 

their participation so eagerly in the boycott of Israel. 

And I think we have a right to differentiate, and maybe not in 

this particular case. But to treat all countries the same when they 

have very different policies? Frankly, I am particularly upset that 

right now, the United Arab Emirates is sending 12 men to jail because they happen to be gay. And that doesn’t happen in England. 

Now, that may or may not in the end be relevant, but it is one of 

the things you take into account. 

But the central point I want to make here is that this seems to 

me, sadly, to be the latest example of incompetence on the part of 

this Administration. I agree it is regrettable that we are in this 

public debate involving the United Arab Emirates, which in some 

ways has been constructive and helpful, although they’re subject to 

pressures. That is the President’s fault. That is the fault of the people who let this go through. 

In October, when Dubai approached the United States and said, 

‘‘We want to buy the company that will run the ports,’’ did none 

of you say, ‘‘You know, this might not be the best time to do that’’? 

This political furor was entirely predictable. It is regrettable, but 

it was predictable. 

7

And it is the incompetence of this Administration that has put 

us in this position. You should have told them back then, ‘‘You 

know what? There are a lot of things you can buy. We’d love to 

have the investment. Why don’t you stay away from the ports for 

a while? We’ve had a lot of controversy over port security. We’re 

worried about things being smuggled in. There is all this tension.’’ 

So yes, I think it is unfortunate we are in this situation. I think 

anyone with any sense last fall should have foreseen this. And 

again, it is not purely partisan. Didn’t you have a sense that the 

Republican majority leader and the Republican speaker might be 

upset about this? Well, one reason perhaps you didn’t is that there 

was no conversation, no consultation. I think that maybe this Administration will learn that doing these things without any kind of 

consultation is a mistake. 

So we have very serious questions. And the final thing I would 

say is this with regard to this procedure. The notion that the President of the United States and the people under him are now going 

to conduct an independent review of a decision which he says was 

absolutely correct fools nobody except those who are eager to be 

fooled, those who are whispering they will not consent are planning 

to consent. 

And here’s the question I would have. If, in fact, the 45-day review is now necessary, why didn’t you do it in the first place? And 

if you didn’t really think it was necessary in the first place and you 

still believe it, why should we put any credence in the fact that 

you’re doing it now? 

So Madam Chairwoman, I am happy that we are having this 

hearing, but I would be happier if it was a better hearing. 

Chairwoman PRYCE. The gentleman yields back, I assume. I’d 

now like to introduce our witnesses for today’s hearing, and we’ll 

hear from them as soon as the introductions are complete. 

We have with us today the Honorable Robert Kimmitt, who is 

the Deputy Secretary with the Department of the Treasury. Welcome. The Honorable Michael Jackson, Deputy Secretary with the 

Department of Homeland Security. Thank you for being here. 

Joining them is the Honorable Eric Edelman, Under Secretary 

with the Department of Defense. Thank you. 

And the Honorable David Welch, Assistant Secretary of Near 

Eastern Affairs with the Department of State. 

Thank you, gentlemen, all for being here. Thank you for your 

consideration of this issue, your preparation for it. 

We look forward to hearing your testimony today, and we will 

begin with the Honorable Robert Kimmitt. Thank you. 

STATEMENT OF ROBERT M. KIMMITT, DEPUTY SECRETARY, 

U.S. DEPARTMENT OF THE TREASURY 

Mr. KIMMITT. Thank you, Madam Chairwoman, Chairwoman 

Pryce, Ranking Member Maloney, Chairman Oxley, Ranking Member Frank, and members of the subcommittee and Full Committee. 

Thank you for the opportunity to appear before you this afternoon to address the Committee on Foreign Investment in the 

United States and its role in the review of DP World’s acquisition 

of P&O. 

8

CFIUS is an interagency body comprised of the Departments of 

the Treasury, State, Defense, Justice, Commerce, and Homeland 

Security, and six White House offices: the National Security Council, the National Economic Council, the U.S. Trade Representative, 

the Office of Management and Budget, the Council of Economic Advisors, and the Office of Science and Technology Policy. 

The committee was established by executive order in 1975 to 

evaluate the impact of foreign investment in the United States. In 

1988 and 1992, Congress passed legislation, now embodied in the 

Exon-Florio amendment, which empowered the President to suspend or prohibit any foreign acquisition of a U.S. corporation if the 

acquisition is determined to threaten U.S. national security. 

CFIUS has evolved over time to keep pace with changes to the 

concept of national security. For example, in 1998, the Intelligence 

Community Acquisition Risk Center, known by the acronym CARC, 

was created. This office is now under the Director of National Intelligence, and provides CFIUS with the threat assessment of the foreign acquirer. 

Further, following September 11, 2001, the newly-created Department of Homeland Security (DHS) was added to the committee, 

and DHS has played a primary role in reviewing many transactions, including the case at hand. Further, agencies that are not 

formal members of CFIUS are often called upon to lend their expertise. 

CFIUS operates through a process in which Treasury is a chair, 

receives notices of transactions, circulates these and other materials to members of the committee, and coordinates the interagency 

process. Upon receipt of a filing, CFIUS conducts a 30-day review 

during which each CFIUS member examines the national security 

implications of the transaction, including the CARC threat assessment. 

All CFIUS decisions are made by consensus. Any agency that 

identifies a potential threat to national security has an obligation 

to raise those concerns within the review process. If any member 

of CFIUS objects or raises a national security concern that cannot 

be satisfactorily addressed during the initial 30-day review period, 

then the case goes through an extended 45-day investigation period. The investigation period provides CFIUS and the transaction 

parties additional time to address security concerns that were identified but not resolved during the review period. 

Under the Exon-Florio amendment, upon completion of the 45-

day investigation, the Secretary of the Treasury, as chairman of 

CFIUS, forwards a recommendation and report to the President, 

who then has 15 days to take action. Upon making a determination, the President sends a report to Congress detailing his decision. The most recent such report occurred in September 2003, 

when the President reported to the Congress on his decision not to 

block the transaction between Singapore Technologies Telemedia 

and Global Crossing. 

Let me turn now to the DP World transaction. At the outset, let 

me note that in contrast to some accounts, this transaction was not 

rushed through the review process in early February, nor was it 

casual and cursory. 

9

On October 17, 2005, lawyers for DP World and P&O informally 

approached the Treasury Department’s staff to discuss the preliminary stages of the transaction. This type of informal contact enables CFIUS staff to identify potential issues before the review 

process formally begins. In this case, Treasury staff identified port 

security as the primary issue, and immediately directed the companies to the Department of Homeland Security. On October 31st, 

DHS and the Department of Justice staff met with the companies 

to review the transaction and security issues. 

On November 2nd, Treasury staff requested an intelligence assessment from the Director of National Intelligence. Treasury received this assessment on December 5th, and it was circulated to 

staff members of CFIUS. On November 29th, DP World issued a 

press release concerning the transaction. On December 6th, staff 

from the CFIUS agencies met with company officials to review the 

transaction and review additional information. 

On December 16th, after almost 2 months of informal interaction 

and 45 days after CFIUS requested the intelligence assessment, 

the companies officially filed their formal notice with Treasury, 

thus beginning the 30-day process. Treasury circulated the filing to 

all CFIUS departments and agencies, and in this case also, the Departments of Energy and Transportation because of their statutory 

responsibilities and experience with DP World. 

During the 30-day review period, the CFIUS departments and 

agencies continued their internal departmental reviews, and were 

in contact with one another and the companies. As part of this 

process, DHS negotiated an assurances letter that addressed port 

security concerns that had been raised earlier in the process. The 

letter was circulated to the committee on January 6th for its review, and CFIUS concluded its review on January 17th. Far from 

rushing the review, members of CFIUS staff spent nearly 90 days 

carefully reviewing this transaction. 

Last Sunday, February 26th, DP World announced that it would 

make a new filing with CFIUS and requested a 45-day investigation. Upon receipt of DP World’s new filing, CFIUS will promptly 

initiate the review process, including DP World’s request for an investigation. The 45-day investigation will consider existing materials, as well as new information anticipated from the company. 

Importantly, the investigation process will also consider very carefully concerns raised by Members of Congress, State and local officials, and other interested parties. We welcome your input during 

this process, including issues that will be raised at today’s hearing. 

Madam Chairwoman and members of the subcommittee, those of 

us sitting at this table this afternoon share with you one fundamental principle, that our highest responsibility as government officials is protecting the national security of the United States. The 

work done by our colleagues in the initial review was guided by 

this standard, as will be our further efforts during the 45-day review. I am sure it will also guide your review of the President’s report to you at the end of the investigation. 

I thank you for your time this afternoon. I am happy to answer 

your questions after my colleagues make their statements. 

[The prepared statement of Mr. Kimmitt can be found on page 

112 of the appendix.] 

10

Chairwoman PRYCE. Thank you, Mr. Secretary. And now we will 

hear testimony from the Honorable Michael Jackson, Deputy Secretary with the Department of Homeland Security. 

Mr. Secretary. 

STATEMENT OF MICHAEL P. JACKSON, DEPUTY SECRETARY, 

U.S. DEPARTMENT OF HOMELAND SECURITY 

Mr. JACKSON. Thank you, Chairwoman Pryce, Ranking Member 

Maloney, Chairman Oxley, Ranking Member Frank, and members 

of the subcommittee and the Full Committee. I am grateful to be 

here today. We hope to have a good conversation about the issues 

involved in this testimony, and look forward to your questions. I’ll 

be as brief as possible by way of an introduction. 

I share the concerns and the assessments of Deputy Secretary 

Kimmitt about our commitment here to the process of working with 

the goal of defending the homeland. That is the touchstone against 

which the whole CFIUS process is graded, and it is the touchstone 

for us on all of our work in the CFIUS process. And I can guarantee you it will be our touchstone as we go forward in the 45-day 

review process. 

I’ll say just a word about whether or not the process was adequate in its time and attention to the task at hand. And I totally 

agree with Deputy Secretary Kimmitt that we had an adequate 

amount of time, a fully structured and resourced review of this 

matter. It was in part due to the fact of the long lead prior to the 

formal filing that we were able to look at this transaction with care 

and in detail. 

Our Department, as Bob said, began on October 31st the formal 

work of meeting with the parties in this transaction, and it culminated in January with the determination that we had no objection to this transaction. Along the way, we reviewed all of the evidence available to us from the intelligence community and from our 

own resources within the Department, which we put against this 

task, and all of the Department’s components concur in the conviction that the Department of Homeland Security should have no objection to this transaction moving forward. 

I would like to just say that this was made somewhat easier in 

our case at DHS because of the already strong relationships that 

we have with Dubai Ports World in our work with them in Dubai 

with various programs that are administered by Customs and Border Protection and by the Coast Guard. So we had a record of understanding the nature of this firm and its operation and its commitments to the security regime, which we are bringing to domestic 

maritime activities. 

I’d like to say just a little bit about the context for thinking about 

this transaction. The first views about this focused on, I think, 

misperceptions, and more information and more discussion is valuable here. 

This is not about buying ports. The ports are owned by the State 

and local authorities. There is already a very, very strong investment by foreign-owned corporations in terminal operations of two 

types. One, by the ocean carrier industry that services our ports. 

That industry is today almost entirely foreign-owned. Second, by 

operating companies who operate terminals. And there are many 

11

foreign terminal operators working today in the United States. 

This is a global supply chain business, and this transaction is not 

a dramatic new step in the profile of security management that we 

see in ports. 

Just a word about the framework, then, in particular on port security. It begins overseas. We have after 9/11 made transformational changes, and I would say substantial investments. 

From fiscal year 2004 through the proposed fiscal year 2007 budget, which we have recently submitted, the Department of Homeland Security alone will have invested $10 billion in maritime security activities. This includes a variety of programs, but I’d like to 

highlight just a few. 

One is our Container Security Initiatives that are managed by 

the Customs and Border Protection. These begin with pushing our 

borders out to foreign ports, to our work to inspect in-bound containers overseas before they leave. Approximately 80 percent of the 

in-bound containers are in the so-called CSI initiative today, and 

our work overseas with ports, including Dubai’s terminal operator 

here, DP World, is extensive. 

Similarly, when those containers come into the country, we have 

advance notice of the contents of those containers. They are run 

through a program of very intense analysis. We screen every single 

container in-bound through the United States. We then inspect 100 

percent of all containers when they arrive that have any concern 

based upon our screening, our complex screening of the history of 

who’s moving the container, what is in the container, who’s receiving the container, who has touched the container, all the information that we have. 

So on the container side, it starts overseas. The terminal operator unloads the container and does not have knowledge and visibility into the contents of the container. The terminal operator has 

a very important role in the security regime for these containers, 

but they do not have access to the rules and the determinations 

made about the selection of which containers we believe to be meriting further scrutiny. 

In addition to the role of Customs and Border Protection, the 

Coast Guard has a preeminent role or protecting the maritime domain. This begins as well overseas in port inspections. It begins at 

the inspection and the review of in-bound ships and the crews on 

those ships with advance notice, so that we have time to review the 

nature of the vessel and the people on the vessel. This is combined 

and coordinated with our Customs and Border Protection review of 

the contents of the vessel. The captain of the port and the Coast 

Guard has authority for a comprehensive security regime at the entire port operation. 

I am happy to answer further questions about that regime and 

the details of it. But we partner in this with our port authority 

partners, the public entities that own these ports. It is a water side 

and land side security regime. There are teeth in the regime for 

people who are scofflaws or who are not able to bring to bear the 

type of demands that we have for security. And we enforce those 

rules. The Congress has given us in recent years, in 2002, additional security challenges and authorities, and we are executing 

those responsibilities as well. 

12

So what I would like to leave, just by way of introduction, is the 

understanding that this is a company that got a thorough review. 

This is a company that we had prior knowledge of and had worked 

with before. This is a security regime in the maritime world which 

is a complex layered system of systems, a web of security. And the 

terminal operating company is one part of that, and it is a small 

part of a larger piece of the security puzzle. 

I am very comfortable that the review that took place was appropriate and fair. By the same token, I look forward to additional information that might be made available to the department as we 

participate in the 45-day review that is proposed. Thank you. 

[The prepared statement of Mr. Jackson can be found on page 

102 of the appendix.] 

Chairwoman PRYCE. Thank you, Mr. Secretary. For the information of the members and the witnesses, we expect to have a Floor 

vote at about 3:00. It is the intention of the Chair to continue this 

hearing through that vote, or we’ll be here all night. And so anybody who wants to leave and come back, feel free to do that, but 

we will continue the questioning of the witnesses through that 3:00 

vote. 

With that said, joining us now is the Honorable Eric Edelman, 

Under Secretary for the Department of Defense. Thank you very 

much, Mr. Edelman. 

STATEMENT OF ERIC S. EDELMAN, UNDER SECRETARY OF 

DEFENSE FOR POLICY, U.S. DEPARTMENT OF DEFENSE 

Mr. EDELMAN. Thank you, Madam Chairwoman, Congresswoman 

Maloney, Chairman Oxley, Congressman Frank, and members of 

the subcommittee and the Full Committee. Thank you for the opportunity to appear before you today to discuss the Department of 

Defense’s role in the Committee on Foreign Investments in the 

United States and our review of the Dubai Ports World and Peninsula and Oriental Steam Navigation Company transaction. 

As a formal member of the CFIUS process, the Department of 

Defense weighs a number of factors when it considers any individual proposed foreign acquisition of a U.S. company. First and 

foremost, a primary objective— 

Chairwoman PRYCE. Mr. Edelman, could you just move the mic 

a little bit closer? We’re having a hard time hearing you. 

Mr. EDELMAN. How about that? 

Chairwoman PRYCE. That is much better. Thank you. 

Mr. EDELMAN. As a formal member of the CFIUS process, the 

Department of Defense weighs a number of factors when it considers any individual proposed foreign acquisition of a U.S. company. First and foremost, our primary objective in this process is 

to ensure that any proposed transaction does not pose risks to U.S. 

national security interests. 

To do this, the Department of Defense reviews several aspects of 

the transaction, including the importance of the firm to the U.S. 

defense industrial base. That is, is it a sole source supplier, and if 

so, what security and financial costs would be incurred in finding 

and/or qualifying a new supplier if required? Is the company involved in the proliferation of sensitive technology or weapons of 

mass destruction? Is the company to be acquired part of the critical 

13

infrastructure that the Department of Defense depends upon to accomplish its mission? Can any potential national security concerns 

posed by the transaction be eliminated by application of risk mitigation measures either under the department’s own regulations or 

through negotiation with the parties? 

Regarding this specific CFIUS transaction, the Departments of 

Treasury, Commerce, and Homeland Security met with legal representatives of Dubai Ports World and P&O for CFIUS pre-filing 

notification consultations on October 31, 2005. On December 6, 

2005, the companies held a pre-filing briefing for all CFIUS agencies. The Defense Technology Security Administration attended the 

meeting for DOD. 

On December 16th, the Department of the Treasury received an 

official CFIUS filing. And on that same day, Treasury circulated 

the filing to all CFIUS member agencies for review, and DTSA 

staffed the filing to 16 other Department of Defense elements or 

agencies for review and comment. 

The review conducted by the Department of Defense on this 

transaction was neither cursory nor casual; rather, it was in-depth 

and comprehensive. The transaction was staffed and reviewed 

within the DOD by 17 of our agencies or major organizations. In 

this case, DOD agencies reviewed the filing for impact on critical 

technologies, the presence of any classified operations existing 

within the company being purchased, military transportation and 

logistics, as well as other concerns the transaction might raise. 

During the review process on December 21, 2005, through January 6, 2006, DOD did not uncover any national security concerns 

that warranted objecting to the transaction or requiring a 45-day 

investigation. The positions of the different agencies and elements 

were approved by staff who ranged from subject matter experts up 

to the Deputy Under Secretary of Defense as appropriate to the 

various offices undertaking the review. All who were consulted arrived at the same position: Do not investigate further. 

The DOD organizations that reviewed this and all other CFIUS 

transactions bring to bear a diverse set of subject matter expertise, 

responsibilities, and perspectives. The organizations include, for example, the Office of the Under Secretary for Intelligence; the Office 

of the Under Secretary for Acquisition, Logistics & Technology; the 

military departments—Army, Navy and Air Force; U.S. Transportation Command; the National Security Agency; and the Defense 

Intelligence Agency. 

The Army, for example, reviewed the case in the following manner. Army Material Command, Headquarters, and Assistant Secretary of the Army for Acquisitions, Logistics, and Technology staff 

gave a preliminary review immediately upon receipt of the case. 

AMC staffed the filing to their subordinate readiness commands responsible for acquisition and logistics, including the Military Surface Deployment and Distribution Command. For this case, the 

Army’s review criteria included the question of assured shipping, 

and the Army’s final position was ‘‘No objection.’’ 

The Defense Technology Security Administration, which reviews, 

coordinates, and analyzes the recommendations from all the DOD 

components, as well as assessing export control and sensitive technology issues, ultimately signed off on the transaction for the DeVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
14

partment. Therefore, we had a comprehensive and in-depth review 

of the transaction. No issues were raised by any agencies or departments within the Department of Defense. We remain comfortable 

with the decision that was made. 

I do want to provide a perspective from the Department of Defense regarding our relationship with the United Arab Emirates 

and their support as a friend and ally in the global war on terrorism. In the war on terrorism, the United States needs friends 

and allies around the world, and especially in the Middle East, to 

help in this struggle. A community of nations is necessary to win 

this long war. 

In our recently published Quadrennial Defense Review, we’ve 

highlighted that in conducting this fight to preserve the security of 

the American people and our way of life, it is important that we 

strengthen the bonds of friendship and security with friends and 

allies around the world. We must have the authority and resources 

to build partnership capacity, achieve unity of effort, and adopt indirect approaches to act with and through others to defeat common 

enemies. 

The United Arab Emirates is an outstanding example of the kind 

of partner we need in order to win this long war. Dubai was the 

first Middle Eastern entity to join the Container Security Initiative 

that Michael Jackson just described, a multi-national program to 

protect global trade from terrorism. It was also the first Middle 

Eastern entity to join the Department of Energy’s Megaports Initiative, a program aimed at stopping illicit shipments of nuclear 

and other radioactive material. 

The UAE has also worked with us to stop terrorist financing and 

money laundering by freezing accounts, enacting aggressive antimoney laundering and counter-terrorist financing laws and regulations, and exchanging information on people and entities suspected 

of being involved in these activities. 

As you may know, the UAE provides the United States and our 

coalition forces with important access to their territory and facilities. General Peter Pace has summed up our defense relationship 

by saying that, ‘‘In everything that we’ve asked and worked with 

them on, they’ve proven to be very, very solid partners.’’ 

The UAE provides excellent access to its seaports and airfields, 

like Dhafra Air Base, as well as overflight through UAE air space 

and other logistical assistance. We have more Navy port visits in 

the UAE than any other port outside the United States. Last year, 

U.S. Naval warships and Military Sealift Command ships spent 

over 1,400 days in the ports of Dubai, Jebel Ali, Abu Dhabi, and 

Fujairah. And by the way, the port of Jebel Ali, which is the only 

carrier-based port in the Gulf, is managed by Dubai Ports World. 

Coalition partnerships also used the UAE ports in this past year. 

The U.S. Air Force has operated out of Dhafra since the Gulf War 

in 1990. And today, Dhafra is an important location for air refueling and air reconnaissance aircraft, and for supporting operations 

in Iraq and Afghanistan. 

And we should note that our most important commodity, our 

military men and women, were frequent visitors to the UAE. In 

fact, over 77,000 military men and women were on liberty or leave 

in the UAE in 2005. 

15

So we rely on the Emirates for our security in their country, and 

I appreciate and would like to express my thanks to the government of the UAE for that. 

Our close military-to-military relationship with the UAE also includes the use of the UAE Air Warfare Center established in January 2004, where our pilots train with pilots from countries across 

the Middle East. 

Finally, the United Arab Emirates have been very supportive of 

our efforts in Iraq and Afghanistan. They’ve provided military and 

operational support to Operation Enduring Freedom in Afghanistan, and financial and humanitarian aid to Afghanistan and its 

people. The UAE has provided monetary and material support to 

the new Iraqi Government, including a pledge of $250 million in 

economic and reconstruction assistance. 

Madam Chairwoman, this concludes my formal statement. I’d be 

happy to answer any further questions you or your colleagues may 

have on this subject. 

[The prepared statement of Mr. Edelman can be found on page 

84 of the appendix.] 

Chairwoman PRYCE. Thank you very much. 

And now we’ll hear finally from the Honorable David Welch, Assistant Secretary of Near Eastern Affairs with the Department of 

State. 

Thank you very much for being with us this afternoon, Mr. 

Welch. 

STATEMENT OF C. DAVID WELCH, ASSISTANT SECRETARY, BUREAU OF NEAR EASTERN AFFAIRS, U.S. DEPARTMENT OF 

STATE 

Mr. WELCH. Thank you, Madam Chairwoman. I’ll try not to repeat what my colleagues have already said in order that you and 

your colleagues may make the vote and expedite the hearing. 

Forgive me for my voice. The UAE is a longstanding friend and 

ally of the United States, and a key partner in the global war on 

terror. Secretary Rice reiterated this during a recent visit just last 

week to the United Arab Emirates. 

As Ambassador Edelman said, the UAE provides the U.S. and 

Coalition forces with critical support for our efforts in Iraq and Afghanistan, including unprecedented access to ports and territory, 

overflight clearances, and other critical logistical assistance. 

Furthermore, as a moderate Arab state, the UAE has long supported the Israeli-Palestinian peace process, and shares our goals 

of a stable economic, political, and security environment in the Gulf 

region, and in the Middle East more broadly. 

The UAE also cooperates with us on a host of non-proliferation 

and law enforcement issues. It has enacted aggressive counter-terrorist financing and anti-money-laundering laws, it has frozen accounts, and it has exchanged information with us on people and entities suspected of being involved in terrorist financing and proliferation activities. 

The UAE also provides substantial assistance to its friends 

around the world, including military support and financial support 

to the Iraqi Government; humanitarian relief for the people of Afghanistan; housing and hospitals for the Palestinian people; and 

16

$100 million for the victims of the recent Pakistani earthquake. 

The UAE was also one of the first nations to offer financial aid to 

the United States after Hurricane Katrina struck the Gulf Coast, 

and it provided one of the largest foreign donations of $100 million. 

As Deputy Secretary Jackson has mentioned, the UAE is an established partner in protecting America’s ports. The purpose of the 

interagency CFIUS process, in which the Department of State is an 

active participant and reviews, is to establish whether a transaction could affect national security. And the fact that the United 

Arab Emirates is a friend and ally of the United States did not and 

will not diminish the rigor of that process. We’re confident in the 

State Department that the additional time now available will provide an opportunity to review the concerns expressed over this 

transaction, and to confirm that it does not jeopardize in any way 

the national security of our country. 

Thank you very much. 

[The prepared statement of Mr. Welch can be found on page 143 

of the appendix.] 

Chairwoman PRYCE. Well, thank you very much, gentlemen, for 

your testimony this afternoon. Let me just start off by asking all 

of you—and maybe one would prefer to answer first. Maybe our 

Homeland Security representative would like to go first. But I want 

to start out with the question that every American wants the answer to. Are we more or less safe if this deal goes through? Mr. 

Jackson, do you want to— 

Mr. JACKSON. If this transaction goes through, we are no less 

safe tomorrow than we were today. 

Chairwoman PRYCE. And you make the case that you can separate operations from security, but it just doesn’t equate to me how 

that is possible. Won’t there be some sharing of information and 

data in terms of logistics and escape routes and emergency measures, and just the basic things that working together require the 

sharing of? 

Mr. JACKSON. Well, let’s unpack this a little bit. First of all, in 

the global supply chain, there is widespread understanding of the 

nature of our security requirements, which this firm already enjoys 

by virtue of its participation in the Container Security Initiative 

today. There is the broader understanding that any member of the 

global supply chain marine industry has of our broad contours, 

which are written into law and published in regulations and explained very routinely and clearly, that describe security measures. 

There are certain things in the terminal operation which are simply not accessible to the terminal operator. For example, the terminal operator’s main role is to unload containers, unload cargo, 

and to place them on trucks or trains for shipment into the United 

States, and similarly, to load cargo and freight leaving the country. 

In doing so, the content of those containers is simply not known 

to the men and women doing the daily work. This is the role of a 

different set of government actors. There are security requirements 

that we can audit and do audit on a routine basis that they’re required to know. And so certainly there are facility security arrangements that are specific to a given terminal. And we have a capacity 

to come in and audit the people who are implementing them, and 

we have the capacity in this transaction, frankly, to draw more inVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
17

formation about Dubai Ports World’s employees in the United 

States more readily than we can at present with other terminal operators. And that is a feature of the assurances letter which they 

have provided us. 

So we believe that we can impose the right type of background 

scrutiny of employees and security arrangements at the terminal. 

And there are certain things that they will see by virtue of operating the terminal, but other security features are beyond their 

control, random in nature, and unknown to the terminal operators. 

Chairwoman PRYCE. Well, let me take a different tack, then, on 

to a different subject. This 45-day investigation that will begin 

soon, once the filing is made, who will conduct the investigation 

and how is that different than the work that’s already taken place? 

And to what end will it be shared with the public? Deputy 

Kimmitt, is that your bailiwick? 

Mr. KIMMITT. Yes, Madam Chairwoman. Once the company 

files—and it will be a new filing, a resubmission—the filing will, 

as I indicated earlier, be immediately circulated to all the agencies 

who comprise CFIUS. The policy level—that is, assistant secretary 

level—of the government that to some degree had been involved in 

the decision thus far will look at that new filing, determine what 

additional questions they might have, what additional information 

they may need, and then they will send it up to the deputies’ level. 

That will be the commencement of the 45-day period. 

During that period, we at the deputies’ level will be looking both 

at the information that had been originally filed and the new information, and listening, of course, very carefully, as I said, to concerns that had been raised by the Congress and other interested 

parties. 

During that period, we will then make a recommendation to the 

Cabinet Secretaries. And then no later than the 45th day, the Secretary of Treasury, as chair of the CFIUS committee, will send forward both a recommendation and a report to the President, who 

has 15 days to consider that submission. Once he makes his determination, a report will be sent to the Congress, as has been done 

in previous cases. 

Chairwoman PRYCE. My time has expired. The gentlelady from 

New York. 

Mrs. MALONEY. Thank you. Defense, you testified that you did 

not think that critical infrastructure was national security. And as 

we know, the law requires a 45-day review for any act that could 

affect national security. 

So my question—and I’d just like a yes or no answer, and just 

go down the line from Treasury to Homeland—would you accept a 

change in the CFIUS law that would have a broader definition of 

national security for the CFIUS process that would include critical 

infrastructure? 

Most national security experts, and certainly the 9/11 Commission, wrote that our ports were part of our critical infrastructure 

and important to our national security. So Treasury, yes or no? 

Broader definition, yes or no? 

Mr. KIMMITT. Well, first, I think the current definition does encompass critical infrastructure. If I may? 

18

Mrs. MALONEY. I want a—would you accept a broader definition 

that includes critical infrastructure? Yes or no? I’ve heard some reports and read reports that you’re opposed to that. 

Mr. KIMMITT. No. I think there needs to be a broader definition. 

Mrs. MALONEY. You think there needs to be one. Homeland. 

Mr. JACKSON. We would have no objection. 

Mrs. MALONEY. Defense? 

Mr. EDELMAN. Congresswoman Maloney, I’d just like to make 

clear that what I testified to was that whether or not a company 

is acquiring critical infrastructure is a consideration that the Department of Defense considers, critical infrastructure from the 

point of view of the Department of Defense— 

Mrs. MALONEY. And would you accept a broader definition of national security to include— 

Mr. EDELMAN. Critical infrastructure is part of national security, 

from my point of view. 

Mrs. MALONEY. Would you accept a broader definition? Yes or 

no? 

Mr. EDELMAN. I would accept that definition. 

Mrs. MALONEY. You would? And State? 

Mr. WELCH. No objection. 

Mrs. MALONEY. No objection. Well, I am working on legislation 

to strengthen the CFIUS process, and certainly the American people believe, and I think they’re correct, that our national infrastructure is part of national security and should have a higher level of 

oversight. I am— 

Mr. JACKSON. Can I just assure you that in this process, we do 

that. 

Mrs. MALONEY. May I—you’ve all agreed on that, so let’s keep 

going. I’d like to go to the approval process that I found troubling 

when the President of the United States said he wasn’t aware of 

this approval, and the head of Homeland Security said he wasn’t 

aware of it. Defense said they weren’t aware. Although there are 

12 agencies that make this decision, the decision was made by midlevel or low-level people for a $6.8 billion agreement that included 

20 key ports, and was a major change in that Dubai Ports World, 

is a foreign-controlled company, which is different from P&O, a 

British company that is privately owned. 

Treasury told me earlier that there are roughly 40 to 60 of these 

decisions in CFIUS every year, but most of the acquirors are privately owned. How many involve foreign government-owned companies? How many government-owned, such as Dubai Ports World? 

Mr. KIMMITT. Could you give me a time period? 

Mrs. MALONEY. Within a year. 

Mr. KIMMITT. Within a year? Well, let’s take 2005, for example, 

Mrs. Maloney. There were 65 notifications, of which 12 were government-owned or controlled. 

Mrs. MALONEY. Twelve. I would venture to say that 12 decisions 

of this importance should be made at the cabinet level, not by lowlevel employees that people don’t even know who they are. I’ve 

looked at the lists. I’ve never heard of them. 

But I just want to say there was a—and I would like to request 

copies of all of these leases and all the documents pertaining to 

those leases. And in this agreement process that we’re going forVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
19

ward with, I would like to know, when the committee decided not 

to undertake a 45-day investigation, did it provide DPW with a 

document saying that? When you decided not to take the 45-day 

option? 

Mr. KIMMITT. At the point the 30-day period concluded, the company was notified of the results of that 30-day review. 

Mrs. MALONEY. Could we get a copy of that notification, the committee? 

Mr. KIMMITT. We’ll certainly provide it. 

Mrs. MALONEY. And was this letter withdrawn as part of a new 

agreement to a 45-day review? 

Mr. KIMMITT. I am not sure of the form of communication, Mrs. 

Maloney. I’ll find out what that is. And once the new filing takes 

place, we’ll be dealing with a second separate case. 

Mrs. MALONEY. And can we get a copy of the standstill agreement? 

Mr. KIMMITT. My understanding is that the company has provided that to Members of Congress. I’ve actually seen Members of 

Congress refer to it on television. 

Mrs. MALONEY. Oh, I would love to see it. 

Mr. KIMMITT. We’ll certainly— 

Mrs. MALONEY. And they’re new application? Is that out, their 

new application, a copy of that? 

Mr. KIMMITT. They have not yet filed that. 

Mrs. MALONEY. They haven’t filed it. Okay, thank you. 

Chairwoman PRYCE. The gentlelady’s time has expired. 

Mr. KIMMITT. Madam Chairwoman, may I please? With respect, 

Mrs. Maloney. The people who conducted this review are highly 

dedicated career professionals. These are the people we entrust to 

safeguard our security every day. I think there was clearly a problem here with the Congressional notification aspect of the process. 

I admit that. We at higher levels take responsibility for that. 

But I have to strongly support the professional work done by career professionals who day in and day out, through Administrations Republican and Democrat, are called upon to make sacrifices 

for their country to make tough decisions like this. And I know you 

weren’t suggesting that this process be politicized. 

Clearly, we want the security review to be undertaken by the 

people best equipped to do that. I think we have to figure out how 

to take their good work and communicate with you to make sure 

that you can discharge your important oversight responsibilities. 

Mrs. MALONEY. May I respond briefly, Madam Chairwoman? 

When we’re talking about a $6.9 billion contract, and it is only a 

few contracts, I think that the head of the agency should be aware 

of it. 

And all of us bring our personal experience here. And one of 

my—part of my personal experience was one of the biggest scandals in New York City history was a $25 million contract—millions, 

not billions—whereby the head of the agencies didn’t approve it, 

but low-level, mid-level people. And the reform that came out of it 

is that the head of the agency, on something that involves that 

much money, that much real estate, 20 ports, two of the highest 

terrorist targets in the United States, according to the CIA and 

FBI, the New York and New Jersey ports, that this warrants the 

20

review of the head of an agency that people know, people trust, and 

people— 

Chairwoman PRYCE. In the interest of— 

Mrs. MALONEY. It does not build my trust to hear that heads of 

agencies and the President are not aware of this agreement. 

Chairwoman PRYCE. Members must get to their votes, Mrs. 

Maloney. We must proceed. All right. The gentleman from Delaware, Mr. Castle. 

Mr. CASTLE. Thank you, Madam Chairwoman. Mr. Kimmitt, I assume from your answer, and I’d like to ask the others as well, that 

the four of you were not involved in the initial 30-day CFIUS review of this particular application; is that correct? Were any of you 

in the room during that review period? 

Mr. KIMMITT. No, that is correct. Generally, what would come to 

the deputies’ level is any unresolved security concern that would 

have to be taken into an investigation. 

Mr. CASTLE. Did those types of security concerns come to the attention of any of you before this decision was actually made? 

Mr. KIMMITT. Not before me personally. 

Mr. CASTLE. Anybody? You’re all shaking your heads no? 

Mr. JACKSON. No, sir. 

Mr. EDELMAN. No, sir. 

Mr. CASTLE. Based on—when, then, did each of you find out 

about this? After the dust-up occurred and it started making the 

news? Or do you typically have a review at some point before that? 

Very quickly, how did each of you find out about the decision itself, 

and what occurred that made you find out about it? Or is it normal 

course, or something that happened? 

Mr. KIMMITT. I had it called to my attention by a member of my 

staff in February, several weeks after the decision had been made. 

Mr. JACKSON. I had it called to my attention by Deputy Secretary 

Kimmitt giving me a call to alert me that this is something that 

he had had a question raised with him about. 

Mr. EDELMAN. I also learned about it from Deputy Secretary 

Kimmitt in a phone call. 

Mr. WELCH. Sir, I learned as we were preparing for the Secretary 

of State’s trip to Abu Dhabi and the UAE, and that would have 

been about 3 weeks ago. 

Mr. CASTLE. So a lot of this is pretty recent is what you’re really 

saying. I mean— 

Mr. WELCH. In my case, sir, perhaps I should explain a little bit. 

Mr. CASTLE. If you can do it quickly. 

Mr. WELCH. The person responsible in the State Department is 

in a different office. He may well have learned earlier. 

Mr. CASTLE. Got you. You’re in a different level. Got you. Or a 

different circumstance. 

My next question, then, is based on what you have learned since 

then, and if you put yourself back in the position of reviewing, in 

that 30-day period, would you have agreed with the decision that 

was made then, or do you think this is something that should have 

gone into the 45-day period and be reviewed by the President? 

And I’ve just looked at a CRS report, which indicates that doesn’t 

happen very frequently. And I’ve listened to your testimony today, 

which indicates to me you’re going to say no, you wouldn’t change 

21

your minds. But there has been a heck of a lot of water that’s gone 

under the bridge since this decision was made public. Some of it 

may be not totally credible. Some of it may be credible. And I don’t 

know if it’s brought any doubts. Do you wake up early thinking 

about this, that maybe somebody had made a wrong decision or 

whatever? 

I am not trying to impugn anyone’s reputation or decision-making. But do you think that in retrospect, perhaps this was not a 

correct decision to close it out on the 30 days and not extend it to 

the next cycle, for national security reasons? 

Mr. KIMMITT. I think the security review was conducted thoroughly and professionally, Mr. Castle. If I had learned about it before the decision was made, I would have come—after I apprised 

myself of the facts—I would have come very quickly into contact, 

as I did, with my colleagues at the deputies’ level, assuming that 

they were as comfortable as I that the proper procedures had been 

followed and that the correct security experts had looked at it. 

I think that one of the things that we would have thought, not 

only of informing our bosses, but how best to notify the Congress. 

When I found out about this, I got the facts, I told my boss, and 

I said, ‘‘Let’s notify the Congress.’’ 

Mr. CASTLE. So you’re sort of suggesting that you would have 

had sort of a political concern if you had known about it? 

Mr. KIMMITT. Well— 

Mr. CASTLE. Again, I am not trying to put words in your mouth 

here and suggest anyone was wrong in their decision. You’re suggesting to me— 

Mr. KIMMITT. I would say it would have given us a better chance 

to present the facts that were before the security review. Our first 

obligation would have been to look at it, of course, to see if, in fact, 

the national security interests of the United States were protected. 

That is our first obligation, and certainly it was yours. 

But if we agreed, as we do in this case, that the people at that 

level acted professionally, consistent, I might say, with practices 

going back almost 20 years, then I think the question would have 

been how best to bring that to the attention not only of people more 

senior in the Administration, but to come into close contact with 

the Congress— 

Mr. CASTLE. Let me get—I only have a little bit of time. Could 

the others try to take a shot at answering that question? 

Mr. JACKSON. But what I know right now, sir, I do not see evidence on the table that would make me feel concerned about 

changing the Department’s vote on this issue. I will say that we 

have internally already re-racked the way that we manage inside 

DHS the discussions of this so as to make sure that they all come 

up to the front office for— 

Mr. CASTLE. What about just the plain political—I know I am 

running out of time—the plain political point of view in terms of 

the sensitivity of a Middle Eastern country, maybe an ally, but 

maybe not known to the public at large, maybe even to Members 

of Congress, in not having a more thorough public discussion of 

this in that kind of a decision-making? Was there some sensitivity 

with that, even if you agree with the decision? 

22

Mr. JACKSON. I think that it is apparent we could have done better on communicating with Congress about this transaction. There 

were lots of reasons why we anticipated a process would brief in 

the normal course of events, and this one turned out not to be a 

normal event. There was also, I think, quite a bit of evidence about 

this transaction in the press prior to the conclusion of the transaction review, and that did not raise warning signs within the— 

Mr. CASTLE. Mr. Jackson, could I get a quick answer from the 

other two, and then maybe perhaps Mr. Kimmitt? But the Chair 

may cut me off at any moment here. 

Chairwoman PRYCE. I am going to cut you off in a second. Go 

ahead. Secretary Kimmitt and— 

Mr. KIMMITT. Well, if I could, just one point before my colleagues 

answer Mr. Castle. Because you asked the question then about the 

public, if you look at the law, the law says that we are to hold confidential information provided to the committee during the pendency of a review. There is an exception for the Congress, but not 

for public disclosure. 

And remember the important reason for doing this, not just that 

classified information may be involved in the intelligence review, 

but you want these companies to feel comfortable filing with 

CFIUS and providing their most sensitive proprietary data. And 

frankly, a lot of these transactions don’t go forward. We tell them 

it is not going to work, and they don’t want to suffer the 

reputational risk of having CFIUS reject the deal. 

Mr. CASTLE. Not too many, though. 

Mr. KIMMITT. No. A good— 

Mr. CASTLE. About six or seven out of, what, 1,500 or so? 

Mr. KIMMITT. Well, I’d be glad to discuss longer. What you have 

seen are the ones where the company decides to take it all the way 

through the process. What we need to do is give you a lot more fidelity on the number that are withdrawn. 

The CHAIRMAN. [presiding] The gentleman’s time has expired. 

The gentleman from Vermont. 

Mr. SANDERS. You don’t look like a Madam Chairwoman. Thank 

you, Mr. Chairman. 

Let me be very clear, and I want to thank our guests for being 

with us today. I have very strong concerns about this proposed 

agreement. And frankly, it is incomprehensible to me that a President who has talked so much about national security would allow 

this agreement to go through. 

At a time when we are spending billions of dollars trying to protect the American people from terrorism, I cannot understand how 

the Committee on Foreign Investments in the United States would 

okay a deal that would put the operations of major American ports 

into the hands of a company that is wholly owned by the United 

Arab Emirates Government. This is not a foreign company. This is 

a government-owned company. 

Several facts that I think we need to know about the United 

Arab Emirates, who, if this deal goes through, will own and control 

this company. And I say this, making clear that I am not a xenophobe, I am not anti-Arab, I am not an Arab basher. But I think 

it is important that we get some facts out. 

23

According to the 9/11 Commission, unlike Iraq, to whom we went 

to war, the United Arab Emirates Government had direct ties to 

Osama bin Laden, and was one of three countries in the world to 

recognize the Taliban Government of Afghanistan. At least two 9/

11 hijackers came from the United Arab Emirates. According to the 

FBI, money was transferred to the 9/11 hijackers through the UAE 

banking system. After 9/11, the Treasury Department reported that 

the UAE was not cooperating in efforts to track down Osama bin 

Laden’s bank accounts. The UAE has been a key transfer point for 

illegal shipments of nuclear components to Iran, North Korea, and 

Libya. 

Further, there are, as I understand it, no Democratic institutions 

in the United Arab Emirates. There is no transparency. People cannot speak up, or else they go to jail. And yesterday, we learned that 

the parent company of Dubai Ports World is honoring an Arab boycott of Israel. 

Here are my questions. And given the time limitations, I would 

appreciate you guys being brief. 

Question 1: The 9/11 Commission reported that a United States 

missile strike intended for Osama bin Laden had to be called off 

in 1999 because members of the United Arab Emirates royal family 

and government officials were at bin Laden’s hunting camp in Afghanistan. In other words, we could have killed Osama bin Laden 

over 2 years before 9/11 if we were not concerned about harming 

the royal family of the UAE. 

Can any of you tell the American people the names of the government officials or royal family who enjoyed hunting trips together with Osama bin Laden? Further, can you tell us that these 

very same officials will not be involved in the UAE Governmentrun Dubai Ports World, which will have ownership of six major 

American ports? 

That is my question. I would appreciate an answer. 

Mr. KIMMITT. I do not know the facts, Mr. Sanders, on the first 

part of your question. I will tell you that when we look at a company, we take a look at its management, its board, and so forth. 

Mr. SANDERS. Which in this case is the Government of the UAE. 

Mr. KIMMITT. There are government representatives— 

Mr. SANDERS. This is owned by the UAE Government; is that 

correct? 

Mr. KIMMITT. As the intelligence community takes a look at this, 

they take a look at the company. As you say correctly, in this case, 

it is both an operational company and the government. 

Mr. SANDERS. Here’s my question. According to the 9/11 Commission, UAE top officials and royal family members associated with 

Osama bin Laden. Can you tell us absolutely that these very same 

people will not be running six major American ports in the United 

States? Can you tell me that? 

Mr. KIMMITT. I will pledge to get that information back to you, 

Mr. Sanders. 

Mr. SANDERS. All right. Could any of you tell me? This is a government-run company, and government officials had a friendly relationship with Osama bin Laden. Can anybody else tell me that 

we will know for a fact that some of these very same officials will 

not be running this company? I am not hearing it. And to my mind, 

24

it is beyond comprehension that if you cannot answer that simple 

question, I cannot understand why we would go through with this 

transaction. 

Mr. KIMMITT. Mr. Sanders, I said I would get you the answer. 

Mr. SANDERS. Please get it. 

Mr. KIMMITT. I just don’t have the information. And what I will 

say— 

Mr. SANDERS. I will be very surprised. And tell me what I am 

missing here. Government-run company, government officials associating with Osama bin Laden. And how do you know that tomorrow, new people will not be put in place? Can you tell me that? 

Mr. KIMMITT. Well, first, there have been some pledges made by 

the company. 

Mr. SANDERS. By the government. 

Mr. KIMMITT. Right, by the government. 

Mr. SANDERS. Yeah. 

Mr. KIMMITT. I would say on the fundamental point you’ve made, 

when the intelligence community makes its risk assessment, they 

are looking at all information available to them; certainly, what the 

9/11 Commission has reported and what has come since. 

What I need to do is to go back and get you that answer, and 

I pledge to do it. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. SANDERS. Thank you very much. 

The CHAIRMAN. I’d take the priority of the Chair to ask a few 

questions. 

Ambassador Kimmitt, have you received a new filing from the 

Ports World? 

Mr. KIMMITT. We have not, Mr. Chairman. Their chief operating 

officer testified yesterday. My understanding is they are also in 

consultation with people on the Hill today. We anticipate receiving 

it very shortly, but we have not received the formal filing. We have 

received some of these documents referred to, one of which I said 

we would endeavor to get either from them or directly to Mrs. 

Maloney. 

But the actual CFIUS filing is still under preparation, and I 

think one of the things that has delayed it is listening to the concerns raised by the Congress. 

The CHAIRMAN. Would the trigger for the 45 days begin at the 

filing? 

Mr. KIMMITT. No. Mr. Chairman, when the filing comes in, it will 

be stamped in as a new case at the CFIUS staff level. It will then 

move to the policy, or assistant secretary, level. And only when it 

comes to the deputies’ level does the 45-day clock begin. 

I would imagine that would be relatively quickly. But at each 

level, the staff needs to do its circulation of this new material. The 

policy level needs to look at whether there is any additional information they need to move it forward. So the actual 45-day clock begins when it has been passed from the policy level to the deputies’ 

level. 

The CHAIRMAN. Thank you. The CFIUS process is under the jurisdiction of this committee, has been since the act was passed. 

And we’ve had numerous discussions, both informal and hearings 

25

and so forth on the CFIUS process. It is clear that the general public really doesn’t know what CFIUS is. 

As a matter of fact, one of the writers, Homan Jenkins, for the 

Wall Street Journal, was—he said that CFIUS sounds like one of 

the hazards of a foreign holiday that your doctor warns you about. 

But anyway, what—and in my opening remarks, I made it clear 

that I felt that to politicize the process, the CFIUS process, would 

be a huge mistake. I meant that in the true sense. I didn’t necessarily mean in terms of more openness and transparency. 

If you were to, in hindsight, now, advise this committee how we 

should proceed, if at all, with another look at the CFIUS process, 

what would you recommend? 

Mr. KIMMITT. Well, again, Mr. Chairman, I think the interagency 

aspect of the CFIUS process worked well. I might say this is one 

of hundreds of interagency committees in the government, and this 

is actually one that’s been looked at probably more frequently by 

the GAO. We have public regulations out in the public domain. 

When it is referred to as secretive, it is just that when the committee meets, because we’re dealing with proprietary information 

that we’re barred by the law from discussing publicly, and sensitive, sometimes very sensitive, classified information, like any 

interagency process, the actual meeting itself is held behind closed 

doors. 

I think where we need to focus our attention, Mr. Chairman, is 

on determining the way that we can help you better exercise your 

important oversight functions. That means, as Deputy Secretary 

Jackson said, we need to make sure that, for example, in our departments, in addition to these highly professional security personnel who do the actual review, that we get both higher-level people involved, but also our legislative liaison, public affairs, and 

other people to determine how, as we come into contact with you, 

we can have an opportunity for the dialogue that ultimately will 

give you more visibility, and then ultimately determine how best 

to present it to the public. 

The CHAIRMAN. And would that be informally in the committee? 

Or how would that work? How would that interaction work? And 

particularly as it related to sensitive information, proprietary information, that kind of thing. Obviously, it is a very difficult—try to 

lead us through that, how that would work. 

Mr. KIMMITT. Well, Mr. Chairman, I think as you said in your 

comments, one of the concerns expressed in the GAO report—and 

I might say the GAO is as knowledgeable on this subject as anybody. They’ve done a very good job of looking at this. We may not 

agree with everything that they say, but I think they performed a 

real service. 

We talked both last fall and more recently, and one of the things 

that was pointed out was that we were not providing regular briefings to the committees of jurisdiction on cases that had closed. And 

so we were improving our process for briefing Congress. 

For example, we had, even before this case broke publicly, scheduled briefings on cases that had closed toward the end of 2005, 

early 2006, this being one of those cases. 

I think now where we really need to focus our attention is how 

you and we interact on pending cases in a way that ensures, as you 

26

said, that people continue to look at the United States as a place 

they might want to invest. Because investment is a vote of confidence that is in our marketplace and our workers and their productivity. As you know, between 5 and 6 million Americans are employed by company’s headquarters overseas. FOI accounts for 20 

percent of our exports and $30 billion a year in R&D. 

But we have to protect the national security. And one of the 

ways you protect it is to get the companies to come in with exceptionally sensitive information during that review process. We also 

need exceptionally sensitive information from the intelligence community during the review process, particularly on governmentowned and -controlled companies. In order for the security professionals to conduct their review, we must encourage people to still 

be as candid as we need. And at the same time, work with the Congress to help you perform your important functions. I think this is 

where we need to have the discussion. I’d rather leave the form 

until later, until we decide what goal it is we’re pursuing. 

The CHAIRMAN. Thank you. And obviously, this committee has 

the same goals in mind, and we’ll continue to work with all of you 

in the process. 

Let me just ask one question. I am over my time. But is there 

anyone—is there any agency not in the CFIUS process that ought 

to be, or have we pretty well covered the waterfront here? 

Mr. KIMMITT. Well, first, we have the 12 members outlined, and 

then we always look at each individual transaction at which other 

agency should be invited. Going to Mrs. Maloney’s very good question, really, to a considerable degree, national security is defined 

based on the circumstances in which the transaction is presented, 

and each department and agency brings their important national 

security responsibilities to the table, which I would note does include critical infrastructure. 

There have been some suggestions recently that—for example, 

the DNI, rather than just providing a report, would sit at the table 

during the deliberations, as he does during other interagency meetings. I think that would be a good idea. 

I think that we should continue that discussion to make sure 

that we get every possible national security perspective that is 

needed during the course of that review. 

The CHAIRMAN. Thank you. My time has expired. The gentlelady 

from Wisconsin, Ms. Moore? 

Ms. MOORE. Well, thank you, Mr. Chairman. And I want to 

thank the distinguished panel for coming and providing this testimony to us today. 

If I repeat things that others have asked, please forgive me, but 

this is very important to my constituents. I am feeling a little bit 

concerned. And perhaps given the dearth of time that I have, I’ll 

focus my—I’ll direct my questions toward Deputy Secretary Michael Jackson of Homeland Security. 

As I look through your testimony, you know, it kind of sounds 

good. But I am wondering about some of the assurances, the security plans. Aren’t these basically paper security plans, and not really based on any physical inspections, like my saying, ‘‘I’ll tell you 

the manifest of stuff that’s in my purse, and you’ve just got to believe me’’? 

27

I also would like to know, you know, when you say things to us, 

like, ‘‘We have increased the port security, cargo security, by more 

than 700 percent,’’ I mean, no one could be more impressed by 

those kind of data. But doesn’t that, in fact, depart from the wisdom of, say, the Coast Guard, where literally billions of dollars 

lacking in our ability to inspect these cargo adequately? 

And finally, there’s been some concern, a lot of concern, by my 

constituents about the ownership arrangement where a foreign 

country actually owns the security company. 

Now, I am really, really pleased to hear reports that the United 

Arab Emirates are making really tremendous efforts to route out 

terrorism in their country, and that, in fact, after 9/11, for example, 

they put in place laws, anti-money-laundering money laws, that 

they have, in fact, tried to close some of the security gaps that resulted in, you know, 9 out of 11 of the hijackers coming through 

there, through the UAE. I am happy to hear that they’re making 

efforts to prevent nuclear material from coming through there. 

But the question that I have, really, is given their 5 years—and 

this is the government that owns this company that would manage 

these terminals. Given their sincere effort over the course of the 5 

years, combining that with our incapacity, really, to inspect these 

containers, when you say, for example, 100 percent—100 percent—

of all of the cargo that is suspicious is inspected, and that really 

represents only 2, maybe 4 percent of all the packages, that those 

confluence of forces are things that are making my constituents 

very nervous. 

Mr. JACKSON. Let me see if I can try to unpack a couple of components of your questions, and then address them. 

First, one element of what you were asking about has to do with 

our physical inspections. And a couple of facts. Since 2004, we have 

done compliance examinations and have detected over 700 violations in various different facilities. Forty-four resulted in termination of cargo operations and access until corrections were made, 

and the others were corrected based upon assurances provided and 

reinspection of the facilities in question. This is just one small element, and I’d love to give you a lot more data. But it shows you 

that we do have a significant force on board. 

In Dubai, where this firm that is proposing to purchase P&O operates, we have continuously had inspections examinations conducted by our people over there, and they have never had any intent or exercised any action to limit our access to a container that 

we wanted to open, inspect, or to look at a security plan. 

So in relation to the particular firm, there has been good access 

for inspections in their facilities overseas. We fully expect that cooperation here. But we have gone further in the assurances by both 

regulation statute and by the assurances getting guarantees that 

we can have access. 

Our record in the United States of access is very strong, and we 

have no real concern whatsoever that we will be able to do this. 

If we find a concern and have to shut down a terminal, that is the 

lifeblood of the terminal operator’s business. That is a big stick, 

and we are not reluctant to wield it if it is necessary. 

Another cluster of questions has to do with inspections and our 

process of inspecting containers. This is a layered system of secuVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
28

rity. It begins when the supply chain starts with stuffing a container and moving it from another country into our Nation. And we 

are, through the so-called C–TPAT program, engaged with over 

8,000 global shippers and their suppliers, which multiplies by 

manyfold the number of firms involved. And systematic requirements to impose security reviews of employees and physical facility 

measures to increase security. So far down the supply chain, this 

process of trying to bring greater discipline and visibility begins. 

Twenty-four hours before a container is loaded, the United States 

is given information about that container, and we can inspect it in 

our Container Security Initiative ports and have that container reviewed. If we have any concerns about the vessel, we also have advance notice of vessel arrival, we can look at the people, the crew, 

and the containers, so that if we need to do boardings, which we 

routinely do at the Coast Guard, we can do that as well. 

There is a system of systems, a layer of layers. It begins overseas. It comes to the terminal operator. The process is robust. Is 

it perfect? No, ma’am. Are we going to be better— 

Ms. MOORE. And before my time expires, the money. 

The CHAIRMAN. The gentlelady’s time has expired. 

Ms. MOORE. The money. 

The CHAIRMAN. The gentleman from Illinois. 

Mr. JACKSON. If I can just, Mr. Chairman, one thing on the money, just a punchline. This year, we are devoting $2.5 billion at 

the Department of Homeland Security alone to maritime security. 

This does not include the commitments and the Megaport Program 

for radiation portal monitoring overseas or work that we do with 

the Defense Department and other agencies of the Federal Government. There is a very considerable, and I fear under-appreciated, 

investment that the U.S. Government is making in maritime security. 

The CHAIRMAN. The gentlelady from Illinois. Or the gentleman 

from Illinois. 

Mr. MANZULLO. Thank you, Mr. Chairman. We have a lot of foreign-directed investment in my Congressional district and want to 

do everything we can to preserve it, because of over a quarter a 

million jobs in Illinois, most of those are manufacturing jobs that 

depend upon FDI. 

I do have some questions as to—and I think this is the problem 

that you ran into, and why you’re under—the Administration is 

under fire on this issue. As I read the statute, if you have a foreign 

entity—and everybody agrees this is a foreign entity? This is a 

wholly-owned state enterprise; is that correct? 

Mr. KIMMITT. That is correct. 

Mr. MANZULLO. That is correct. And, in fact, the New York Times 

was upset about it, because it said because they’re a wholly-owned 

state enterprise, free enterprise companies did not have the ability 

to come in and meet the price. That was of no consideration to you. 

Mr. KIMMITT. I am sorry, sir. Could you repeat that as a question? I didn’t understand. 

Mr. MANZULLO. The New York Times said that because Dubai is 

a wholly-owned state enterprise, free enterprise companies were 

not in a position to come in and bid on the contract. Has that ever 

entered into your consideration? 

29

Mr. KIMMITT. Sir, I am not aware that there was any restriction 

whatever on who bid for this property. 

Mr. MANZULLO. That is not the question. Let me go— 

Mr. KIMMITT. Then I am sorry. I guess I don’t understand it, sir. 

Mr. MANZULLO. Let me go on to another question, then. 

Mr. JACKSON. Can I just try to answer, perhaps? The CFIUS 

process deals with transactions presented to us, and we do not go 

behind the transaction that is presented to stimulate competition 

in the— 

Mr. MANZULLO. That answers my question. Thank you very 

much. And thank you for trying, Mr. Kimmitt. 

Mr. KIMMITT. I was going to say the only other bidder on— 

Mr. MANZULLO. If I could go on, and then we could talk, perhaps, 

later on. But as I read the statute, amended in 1992, it said, ‘‘The 

President or the President’s designee shall make an investigation 

in any instance in which an entity controlled by or acting on behalf 

of a foreign government,’’ which is this case, ‘‘seeks to engage in 

any merger, acquisition,’’ etc., ‘‘which could result in control of a 

person engaged in interstate commerce in the United States that 

could’’—could—‘‘affect the national security,’’ and that is what triggered the 45-day period. That is what the statute says. 

But the way you’re interpreting it, according to your testimony, 

Mr. Kimmitt, on pages 2 and 3, it says that the CFIUS members, 

during the initial 30-day period of time, can resolve any national 

security concerns. And Mr. Jackson, you’re saying on page 2 that 

the Department of Homeland Security has legal authority to eliminate any threat within the 30-day period of time. 

And the issue here is it isn’t until the 45-day period has kicked 

in that people of higher level within the departments even have an 

opportunity to look at the file; isn’t that correct? 

Mr. KIMMITT. That had been the practice, sir. 

Mr. MANZULLO. And that is what happened here; isn’t that correct? 

Mr. KIMMITT. That is correct. 

Mr. MANZULLO. So the people at the lower level within the agencies took it upon themselves to say whether or not there was a national security threat when the statute is clear if it is foreignowned, and there could be a national security threat, then you 

must go on to the 45-day period of time. How could you possibly 

misread that statute and show to the American people the fact that 

Americans as a whole picked up the security threat? In fact, the 

Coast Guard did initially too. 

That is why we’re having problems. Because people with sufficient authority and sufficient levels of authority within the 12 or 

so departments didn’t even know about the file; is that correct? 

Mr. KIMMITT. That is correct. I’ll give you the legal answer, although I am a policy official. But the legal advice that policy officials going back to 1992 have received, so through both Republican 

and Democratic Administrations, is that—and the practice that is 

followed is that—if there are any security concerns that have not 

been resolved during the 30-day period— 

Mr. MANZULLO. The statute does not say that. 

Mr. KIMMITT. Well— 

30

Mr. MANZULLO. You are reading that into the statute. The whole 

purpose of the Byrd amendment was simply to say if there could 

be a security threat. Could be. Not that you resolve it in 30 days. 

If there could be a national security threat, then it goes to a higher 

level for more review. That is why Members of Congress want you 

to take the statute—I don’t think we can make this any clearer. 

Mr. KIMMITT. Well, I think, sir, one of the questions that has 

come up is why there is no period after ‘‘shall conduct a review.’’ 

And again, what I would like to do is to get the lawyers to explain 

their position. 

Mr. MANZULLO. Lawyers could never explain— 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. KIMMITT. But if I— 

The CHAIRMAN. The gentleman’s time has expired. The 

gentlelady from California, Ms. Waters. 

Ms. WATERS. Mr. Chairman and members. To our panelists who 

are here today representing all of the agencies, it seems to me that 

there is some thought that we disrespect the work of professionals, 

and that you have got to come here and protect the reputations of 

the professionals who do this work, which means that you don’t get 

it. 

You don’t get that the President of the United States has made 

fighting terrorism the cornerstone of his presidency. I don’t think 

that you understand that because of that, we have created a Homeland Security agency. We have Patriot Act I and II. We have invaded and occupied Iraq and Afghanistan. We have spent over 

$250 billion on this war. We have jailed suspects at Guantanamo 

without trial, without charge. We have a National Security Agency 

with technology that is scanning the conversations of Americans 

and picking up on key words, and thus following up with surveillance and wire tapping. 

You don’t understand that our Nation has been damaged with 

the accusations of abuse of prisoners. I don’t think you understand 

that right now, there’s a civil war going on in Iraq between the 

Sunnis and the Shiites, and 2,295 American soldiers have been 

killed. 

We have been so at this war on terrorism, we have caused two 

historic enemies, Iraq and Iran, to come together. We have talked 

about the President, the axis of evil, and even Kim Jong-il is 

threatening us with his nuclear capability. We are less safe, the entire Middle East has been destabilized, and I think Israel is more 

at risk. 

And so when you and/or the President or anybody else wonders 

why we are raising questions about the decisions that are being 

made to allow our ports to be managed by a non-democratic society, 

then I just don’t think you get it. And, the least of which I expected 

from the President of the United States was to play the race card 

and accuse those who question the decision of discrimination. 

So this is not about whether or not your professionals are good, 

hard-working people trying to do their job. It is not even about 

whether or not the Emirates, or the United Arab Emirates, is capable of managing these ports. 

This is about a Nation that is on edge, a Nation which is on edge 

living under the threat of orange, yellow, and red alerts developed 

31

by this President because he said we were in danger. Osama bin 

Laden is still running around somewhere up on the border with 

Pakistan, maybe in Afghanistan. The poppy fields are flowing in 

Afghanistan, more drugs than ever are hitting the European markets, and you wonder why we question you; why a governmentowned entity of an undemocratic country—non-democratic, rather—country has been given a contract, or will be given a contract? 

Well, I just want to give you a little bit of that background so 

you can understand why the Members of Congress would question 

you, the secretaries of all the agencies, and the President himself. 

We don’t care whether or not you are good professionals who just 

work at your job. What we care about is a Nation on edge that we 

all have to represent and we have to answer to. And we care about 

the fact that we have to say to people in our districts that we understand or we don’t understand. 

And so it is not even whether or not you can make us believe 

that this is a good thing that you are doing. What we believe, because the President has been so good at what he has been doing, 

he’s hyped it, he’s worked it, he’s turned his Administration into 

this machine to fight terrorism—we care that not only are we alerted and we’re standing waiting for the orange, yellow, and red alerts 

every day, day in and day out, we care that we don’t end up with 

anybody in control of our ports or any of our sensitive areas in this 

country that we would raise any questions about. 

Why would we raise questions about them? Let me show you 

what the New York Times said. ‘‘But Dubai’s record is hardly unblemished. Two of the hijackers in the September 11th attacks 

came from the United Arab Emirates and laundered some of their 

money through its banking system. It was also the main transshipment point for Abdil-Kadir Khan, a Pakistani nuclear engineer 

who ran the world’s largest nuclear proliferation ring from warehouses near the port, met Iranian officials there, and shipped centrifuge equipment, which can be used to enrich uranium, from 

there to Libya.’’ 

Did you investigate that? Did you investigate any of this? And 

if so, what did you find? 

Mr. KIMMITT. Ms. Waters, first, I do very much appreciate the 

complimentary words to the career professionals who have worked 

on this. I think all the facts that you brought up were looked at 

in the initial review period. Those certainly were available to the 

intelligence community. And I think both those facts and the other 

concerns you’ve expressed will also be looked at closely during this 

45-day investigation. 

Ms. WATERS. After the—thank you. I yield back. 

Chairwoman PRYCE. The gentlelady from New York is recognized. 

Mrs. KELLY. Thank you very much. We have ports in New York. 

We’re deeply concerned about this situation, and I think the Administration needs to give us better answers about the implications 

to our national security with this. 

Yesterday, President Bush advised Members of Congress to look 

at the facts. So in reviewing the port deal, I’d like you to characterize for us how you dealt with the many facts which show us that 

32

Dubai’s territory and financial system has been a hornet’s nest of 

activity for our enemies. 

For example, how did CFIUS deal with the fact that Dubai is 

currently being used by Iran to finance its acquisition of weapons 

of mass destruction? I held a hearing 2 weeks ago in which OFAC 

advised me that they were part of an interagency team that was 

recently sent to Dubai to discuss proliferation issues. Did the 

CFIUS consult with this interagency team? I asked the Director of 

OFAC. He said he didn’t know. What is the answer? Yes or no? 

Mr. KIMMITT. The agencies who were involved in that team were 

all part of the CFIUS review, Mrs. Kelly. 

Mrs. KELLY. Well, the Director of OFAC said he didn’t know if 

they were involved. So you’re saying they were. 

Mr. KIMMITT. Well, inside the Treasury Department, as you 

know, because you’ve been a major supporter of Treasury’s transformation into a Department that works very hard on terrorist financing, of which OFAC is a part—in fact, the gentleman you referred to is just now moving from OFAC to the Financial Crimes 

Enforcement Network—they were much a part of our internal review process, and they have been taking the lead also on working 

with the UAE on money laundering and other efforts. 

Mrs. KELLY. A man is currently under Federal indictment for allegedly selling missile-related equipment to the Iranians using the 

Dubai branch of Bank Saderat, the Export Bank of Iran. Was this 

discussed during your review? Does the Bank Saderat have a business relationship with the Dubai Islamic Bank, which helped structure that ports deal? 

Mr. KIMMITT. I’d have to get back to you on the facts. Again, I 

think that all the facts and intelligence throughout the intelligence 

community were available before the community assessment was 

given to the CFIUS— 

Mrs. KELLY. Could you give me an answer on—this is a fact. I 

have the indictment right here. I’d like an answer about whether 

or not that was—to that question. 

Mr. KIMMITT. Yes, Mrs. Kelly. 

Mrs. KELLY. At any point during your deliberations, was it discussed that international arms trafficker and U.S. designated terror financer Victor Bout appears to continue operating freely in the 

UAE, despite repeated U.S. requests that he not? 

Mr. KIMMITT. Again, I’d have to come back to you with that answer. What I will tell you is the departments and agencies, in addition to the intelligence community, who are responsible for both 

our counter-terrorism and counter-proliferation efforts were at the 

table when these issues were discussed. 

Mrs. KELLY. Can you explain how much the government knows 

about who’s going to own the debt of this company, and what kind 

of influence they are going to be able to exert on the company 

through the debt ownership, or the name of the purchasers of the 

debt, both the traditional and the Islamic sukuk bonds run through 

the OFAC list? Was any effort made by the U.S. Government to acquire the names of the bond purchasers from Barclays or Dubai Islamic Bank? 

33

Mr. KIMMITT. I know some work was done on that, Mrs. Kelly. 

It may have been completed. I’d like to get you an answer to that, 

too. 

Mrs. KELLY. Okay. I’ve asked you three questions, and I really 

would—well, several others prior to that. I really would like those 

questions answered. 

Is it the case that if the company ever goes public, one third of 

the equity will go to the bondholders of Dubai Ports, thereby making them shadow partners? Is that true? 

Mr. KIMMITT. I’d have to look at the specific ownership structure. 

I know it was looked at during the course of the review, but I’d 

have to come back to you with that answer. 

Mrs. KELLY. It is my understanding that that is a mandate by 

law. The Dubai Islamic Bank ostensibly helped arrange the Islamic 

financing portion of this deal. The bank’s Sharia Board has the responsibility to assure compliance with religious law and the implementation of all bank transactions, and correct any breaches that 

may occur. If this deal goes through, will the Dubai Islamic Bank’s 

Sharia Board be obligated by Dubai law to enforce religious law 

with all the Dubai Ports World operations financed in the transaction? Do you have an answer for that? 

Mr. KIMMITT. I will get you an answer for that. 

Mrs. KELLY. I thank you, sir. I think we need to have answers 

like that before this committee and before Congress in general in 

order for us to have an informed view of the kind of background 

that the Dubai ports are going to be—their control over their ports 

will be for us who are concerned about our national security. Certainly I am concerned about our New York ports, and I‘‘m hopeful 

that you will get back to me. 

Madam Chairwoman, I would hope that you would request officially that these questions be answered by the gentleman. 

Chairwoman PRYCE. The gentleman has indicated that he will 

supply the committee with that information. And if it is not forthcoming, we’ll get back to him. Thank you. 

Mrs. KELLY. Thank you very much. 

Mr. KIMMITT. We take very seriously the concerns you’ve raised. 

I think these are good questions. We owe you answers. I am sure 

that there are answers that I just don’t have in front of me. We’ll 

get you an answer to each of those questions. 

Mrs. KELLY. Thank you very much. I yield back the balance of 

my time. 

Chairwoman PRYCE. Thank you, Mrs. Kelly. The gentlewoman 

from California, Ms. Lee, is recognized. 

Ms. LEE. Thank you, Madam Chairwoman. Let me just say 

how—like the entire country, how disturbed I am about this, for 

many, many reasons. First of all, this war on terror. Domestic security, I would have hoped, was central to the war on terror in terms 

of Homeland Security and protecting this country, rather than waging illegal wars and unnecessary wars around the world. But obviously, now what is coming to surface is that really Homeland Security and domestic security really may or may not be that important 

in the scheme of things. 

34

And I ask you, when these deliberations were taking place, did 

you go back to the 9/11 Commission report and measure this deal 

as against what the 9/11 Commission suggested? 

In fact, I remember several months ago, I believe the 9/11 Commission recommendations, as they were being implemented, were 

given probably D’s and F’s in terms of scoring. And that, to me, is 

very scary. So here we go again. I suspect that now every category 

would be an F. 

But let me just ask you, in the 9/11 Commission report, it concluded that ‘‘Terrorists’’—and this is directly from the report—‘‘Terrorists have the opportunity to do harm as great or greater in maritime and surface transportation than the 9/11 attacks.’’ 

Now, in your review of this deal, how did you look at that recommendation as it relates to this overall deal? And then secondly, 

let me just ask you, in terms of foreign companies operating terminals in the United States, how many are there? Where are they located? And what is the rationale for not making sure that ports 

comply with the same standards that our airline industry must 

comply with in our airports in terms of state-controlled and foreigncontrolled companies? I’d ask, I guess, Mr. Kimmitt or Mr. Jackson 

if you could response do that, please. 

Mr. KIMMITT. I will start out by saying that both the information 

and intelligence that went into the preparation of the 9/11 report, 

certainly their recommendations and progress since then would 

have been taken into account both by the intelligence community 

in providing their assessment, and then each of the departments 

and agencies in making their own individual judgments on this 

case. 

I would say—I am sorry Mrs. Kelly has left—that one area in the 

9/11 report that got a pretty good grade was on terrorist financing, 

having made progress on terrorist financing. Again, if you look at 

the report card. And I’ll say that one of the countries that we’ve 

made considerable progress with in that region is the UAE. I’ll 

turn to my colleague with regard to port security. 

Mr. JACKSON. Regarding the 9/11 Commission report, let me just 

say that at Homeland Security, we take their work as a 

foundational document to help us understand what happened and 

what went wrong, and that is a series of observations and a series 

of findings that has been internalized within the department. 

We did a very substantial and comprehensive review of this 

transaction, and all of the lessons learned about our experience in 

the field and the work of many fine other analysts, including the 

9/11 Commission, are part of the screen that we apply to making 

these security determinations. Security is the driver of this process. 

Let me just say a word about your specific question on ownership 

by foreign-owned corporations of port assets. If you look at the container ocean carrier industry, that is mostly all foreign-owned. Very 

little of that is U.S.-owned today. There has been a consolidation 

in the industry of very substantial means over the last 15 years, 

and there has been a consolidation principally in the hands of foreign owners. Those foreign-owned ocean carriers themselves operate terminals and terminal holding companies all across America 

in our ports. There are multiple different estimates on this, and we 

35

are actually trying to get some very detailed facts terminal by terminal by terminal which we will make available to the committee. 

But I would say that my rough estimate is well over half of those 

facilities in the container traffic world are foreign-owned. In certain 

segments of the port business—for example, fuel terminal operations—some of that has a higher concentration of U.S.-owned 

businesses. And I’d be happy again to provide the committee with 

much more detailed information. 

On the question of is port security the same thing as aviation security, the answer is no. In one way, aviation security is much 

more simple, because it is a closed-loop system where everybody 

throttles through gates that we can inspect and manage in a different way than we do in ports. They’re obviously vastly spread 

across the globe, and this is a system that has a different structure 

for its security. It is a more challenging structure. But I think that 

it is one where we have made phenomenal progress since 9/11. And 

I would be happy, again, to provide as much detail as you would 

like about the structure of these security arrangements. 

Ms. LEE. Madam Chairwoman, may I just— 

Chairwoman PRYCE. Your time has expired. If you have one— 

Ms. LEE. Just very quickly. I’d just like to get an idea whether 

or not you believe that we need to increase our funding for port security efforts. 

Mr. JACKSON. I think we are spending a very large sum of money 

on port security. Can we spend it smarter? Absolutely. We have 

more work to do here. But I think that this is all about a balance. 

And Madam Chairwoman, this was a question you raised earlier 

about Secretary Chertoff’s use of the balance. 

When the Secretary was talking about a balance, he was trying 

to convey that we must be a realist in this world. All of our investments of our limited resources have to follow risk. And there is a 

balance that comes with finding ways to prioritize around the 

greatest risks. 

The maritime world poses some significant risk, and we are putting significant money in it. I don’t want any of you to misunderstand that in trying to find the balance, we are in any way disdainful, and certainly not Secretary Chertoff, disdainful of this mission 

of protecting the homeland and guaranteeing that we find that 

right balance. And it is a balancing act. 

But I think we have substantial resources added, and we will 

continue to use them wisely. We will do it iteratively. The tools 

that we used right after 9/11 in the first days are growing in maturity and complexity. That is a good thing. They’ll get better. Continuous innovation is the requirement in this world. 

Chairwoman PRYCE. Thank you. The gentleman from New Jersey, Mr. Garrett, is recognized. 

Mr. GARRETT. Thank you, Madam Chairwoman. And also, thank 

you, members of the panel. I appreciate you all coming here to enlighten not only this committee, but also the American public as 

well to some of the background information that I think a lot of 

people in this country are looking to hear and have fleshed out. 

I come from New Jersey. And just like Mrs. Kelly from New 

York, these issues hit home for us, because we’re just in the shadows of 9/11. We lost more people in our district than anyone else. 

36

So anything to do with security hits home. And although I don’t 

have the ports particularly in my district, but Port Newark, Port 

Elizabeth are right down the road, figuratively speaking, where we 

are in northern New Jersey. So it hits home for us. 

I won’t be redundant on some of the question. Some have been 

answered, and others, I am looking forward to your answers. I 

think I have three specific questions, though. 

One is procedural. It is the notice requirement. Maybe you said 

it. If you did, just refresh me. At what point along the line, if at 

all, Congress is officially notified of this? Because I do know during 

this whole thing in the press, someone from the Administration 

said, ‘‘Well, gee, it came out in Bloomberg on the wire, and Congress should have been aware of it back in October or November.’’ 

And I know some people took offense that we had to look at it that 

way. So could you elaborate specifically at what point along the 

way we were notified? 

Mr. KIMMITT. The answer for the DP World case is that once 

they refile and we complete the investigation, the President will 

make a full report to you. 

In general, as I mentioned with Chairman Oxley, the practice 

had been to brief the Congress on a regular basis with regard to 

closed cases. We have to find a way consistent with the legal requirements to maintain confidentiality on the proprietary information that is given, I think, to share information with the Congress 

on these pending cases. 

Mr. GARRETT. The proprietary information—just briefly on that—

is merely on their filing of their, perhaps, private information. But 

the mere fact that a company is saying, ‘‘We want to do X, Y, Z,’’ 

purchase this company, or purchase this American company, is 

that private proprietary information that you really have to be concerned about, or is it something within the file itself? 

Mr. KIMMITT. I guess the answer is if they have, as in this case, 

made a public statement— 

Mr. GARRETT. But if they haven’t. I mean, other cases— 

Mr. KIMMITT. If they haven’t? I think if they just made an approach to us and said, ‘‘We’re thinking of doing this. What is the 

process?’’ Because that is information that they gave us, even the 

fact that they might be doing the deal is considered confidential 

business information that we have not affirmatively briefed the 

Congress on it. I think the question would be if you were also 

aware of that and ask us a question, could we respond? I think 

that what we would try to do is to suggest the company should 

come closely into contact with you. 

But to this point, when the information has not been publicly 

available, we haven’t had a good process for discussing with the 

Congress these pending cases. And I think that is one place that 

we’ve got to turn. I think our first priority is to conduct this 45-

day investigation thoroughly, rigorously, and professionally. 

Mr. GARRETT. Right. 

Mr. KIMMITT. But I think beyond that, we have to find a way. 

Mr. GARRETT. Thank you. And I am working on legislation to 

that end to see how we can get that information so we’re not left 

in this after-the-fact situation here. 

37

Secondly, in the legislation that we’re looking at, we’re wondering whether or not it is able to change the burden of proof, if 

you will, in these cases, either in these cases or going forward as 

well. Here, it seems as though the burden of proof is on the Administration of the United States Government, to step in, review the 

matter, and say whether or not we’re going to stop the proceeding, 

as opposed to when you’re dealing with national security matters 

such as the ports or other ones, broader, as some of the members 

said earlier, whether or not the burden of proof should be basically 

on the other side. 

And just as in a court case when it is a criminal matter, who has 

the burden of proof going forward basically raises the bar. And I 

wonder if anyone has comments as to where we put that. 

Mr. KIMMITT. Well, I think burden of proof is a legal term. If I 

could just put it to the side. 

The way the process works is the company has to give very detailed information. If that information raises any security concern, 

then the burden is on the company to either assuage that concern 

through mitigation, or the deal is not going to go forward. And in 

this case, because security concerns had been raised and were not 

resolved to the satisfaction of the Department of Homeland Security, a letter of assurances was put together to help address that. 

So I think that, again, their responsibility is to give us the information. The responsibility of the CFIUS staff is to identify that 

concern. Then I think the burden does flow to them. And by the 

way, not just on port security, but on defense acquisitions and telecommunications cases, staff must address and mitigate that concern, or the deal doesn’t go forward. 

Mr. GARRETT. I didn’t get to my third question. I’ll submit that, 

then, if I may. Thank you. 

Chairwoman PRYCE. All right. Mr. Sherman from California is 

recognized. 

Mr. SHERMAN. Thank you, Madam Chairwoman. I will use some 

of my 5 minutes to make an opening statement, as is the tradition 

before this subcommittee. 

The Administration was clearly incompetent, as Mr. Frank pointed out, for not simply quietly telling the UAE not to try to control 

American ports. The UAE has clearly lost far more in terms of its 

world standing and its standing with the American public than 

they are going to make by investing in our ports. They clearly could 

have spun off this business—creating a subsidiary— and never had 

this controversy. And the damage to our relations with the Arab 

world clearly must be laid at the doorstep of an Administration 

that could have defused this situation before it went off. 

As Mr. Manzullo pointed out, this Administration chose to ignore 

our law. The easiest way to ignore American statutes is to twist 

them out of all conceivable shape. And when the Administration 

decides that a law that says if it could affect, just might possibly 

affect, our national security, you have to conduct a real review, and 

you reach the conclusion, ‘‘Oh, this couldn’t possibly affect our national security,’’ then you’ve twisted law out of all recognizable 

shape. 

I would point out this is not unusual for the Administration. The 

Iran-Libya Sanctions Act is ignored again and again and again, to 

38

the point where the Administration takes the position in the case 

of a Japanese oil company that declares to its own shareholders it 

is making investments in Iran, that we, the United States, don’t 

know whether they’re making investments in Iran. 

This is an Administration that simply ignores the law again and 

again, because they think they know what is right, and they don’t 

want Congress involved in our foreign policy. We’re now engaged 

in a whitewash process. We’re told, ‘‘Don’t worry about this. 

They’re not going to own our ports. They’re just going to control 

them.’’ 

Eight of nine—as Mr. Frank pointed out, eight of nine of the witness to come before this subcommittee are boosters of this transaction. But don’t worry. Eight out of nine Americans know this is 

bad for our national security. 

I’ll be introducing legislation to prohibit this transaction unless 

and until the UAE changes its policies. And let me make a prediction. My bill and similar bills will not get a vote in the 109th 

Congress. But let me make another prediction. In the 110th Congress, bills to reverse this whitewash transaction will get a vote on 

the floor, because the American people are going to demand that 

their representatives worry about American security. 

Now, I’ll point out that this is not an ethnic issue. It is a matter 

of the policies of the owners of the company. APM is not a government-owned company, so we shouldn’t hold its owners responsible 

for everything the Danish government does. APL is a governmentowned company, and we ought to look at what the Singaporean 

government does. But the Singaporean government is a stalwart 

ally against terrorism compared to the UAE. 

DPW is part of the UAE government. And as several have pointed out, including Mrs. Kelly, it is hardly an ally in the war on terrorism. Don’t just look at the mistakes they’ve made and the incompetence they’ve had in allowing nuclear materials to go through 

their ports, but look at their official policies. 

This is a government which was praised by Hamas officially in 

July of 2005 for the massive amount of money that is going from 

the UAE and its leading citizens, in full conformity with UAE government policy, to terrorists on the West Bank in Gaza. I don’t 

know how you classify a country as an ally in the war on terrorism, 

and that same country and government is classified by Hamas as 

an aid to Hamas’s terrorist activities. 

The father of the current president of the UAE gave millions of 

dollars to terrorist organizations, in full accord with UAE law. The 

current president sits on the board of a charity, a major charity, 

that provides millions of dollars to terrorists in the West Bank and 

Gaza. The UAE official government policy is to support a boycott 

of Israel. The princes of the UAE, several of them, have close personal relationships with bin Laden. 

And I’ll ask the panel, particularly the gentleman on my left, 

how did you reach the conclusion that owners of this company, the 

UAE Government, could be relied upon to be allies in the war on 

terrorism when they are facilitating the funding of the bomb-makers? 

39

Mr. KIMMITT. Mr. Sherman, I’ll give the answer from the point 

of view of the CFIUS committee, and then ask my colleague, Ambassador Welch, to talk about the specifics. 

The issues that you’ve raised would fall in the U.S. Government 

to those departments and agencies charged with the responsibility 

for counter-terrorism: the State Department, the Treasury Department— 

Mr. SHERMAN. Well, let’s hear from State, then. 

Mr. KIMMITT. And what I would say is— 

Mr. SHERMAN. I have a limited amount of time. Let’s hear from 

State. 

Mr. WELCH. Sir, I’ve listed the things that you’ve mentioned. I 

am not aware of these contributions. I was just in Dubai. 

Mr. SHERMAN. How could you not be aware of these contributions? They’re in the public domain. I am not leaking classified information here. 

Mr. WELCH. I didn’t say that. I am not aware of them. 

Mr. SHERMAN. You’re not aware of the July Hamas press release 

praising the UAE? 

Mr. WELCH. The United Arab Emirates Government does not 

have a relationship financially to Hamas. 

Mr. SHERMAN. Do they allow their leading citizens to give millions of dollars to Hamas—American citizens can’t give money to 

Hamas. UAE citizens are encouraged to do so. 

Mr. WELCH. Sir, I think that the United Arab Emirates is playing a convincing and important role in controlling financing to terrorist organizations, including Hamas. We just had the Secretary 

of State— 

Mr. SHERMAN. So when did they stop funding the terrorists? 

Mr. WELCH. I am not sure they began, sir. 

Mr. SHERMAN. So millions of dollars did not go from the father 

of the president of the UAE to Hamas? Hamas didn’t praise the 

UAE for its unstilting support? Couriers are not going from the 

UAE bringing cash to Hamas? None of that is happening. 

Mr. WELCH. Sir, that is a broad mix of things. With respect to 

the activities of the government, per se, again, I am not aware of 

those— 

Mr. SHERMAN. When a government allows its leading citizens to 

send millions of dollars to terrorist organizations. When it allows 

a telethon for terrorists to be broadcast over the airwaves. A government is responsible for governing. It can’t say, ‘‘Well, we didn’t 

send a check. We just encouraged our leading citizens to do so,’’ 

and be called an ally on the war on terrorism, unless you’re adopting a hear-no-evil, see-no-evil policy toward defining who are our 

allies and who we have to be worried about. 

Mr. BACHUS. [presiding] You can answer the question. But you’re 

about 2 1/2 minutes over, but— 

Mr. SHERMAN. I understand. 

Mr. WELCH. Again, we’ve taken note of the list of those concerns. 

Let me just say that the UAE has cooperated in trying to freeze 

accounts of a number of terrorist groups. We have a number of 

mechanisms whereby we pursue individual cases if we know of 

them. 

40

I am not aware of the ones you mentioned, again. They have a—

we’ve just set up a Joint Terror Finance Coordinating Committee 

to look at increasing our efforts to combat this problem. The UAE 

is a major financial center, and of course, they have their responsibilities in that regard. We’ll provide you information for the 

record in answer to your specific concerns. 

Mr. SHERMAN. The UAE seems to take a position that they’re 

anti-terrorist, except if the terrorist organization focuses on killing 

Israelis. Then they’re pro-terrorist. And these people you call allies 

in the war against terrorism? I yield back. 

Mr. BACHUS. Thank you. Thank you, Mr. Chairman. Let me address this question to the panel, a follow-up of what Mr. Sherman 

said. You know, you’re not aware of some of these other things that 

Mrs. Kelly or Mr. Sherman has said. You are aware of the boycott 

of Israel; are you not? And I’ll ask Mr. Welch. 

Mr. WELCH. Yes, sir. 

Mr. BACHUS. Does the Dubai Government or UAE honor the boycott of Israel? 

Mr. WELCH. Sir, first of all, the United States opposes the boycott of Israel. 

Mr. BACHUS. I said does the UAE honor the boycott? 

Mr. WELCH. It does. 

Mr. BACHUS. Is that a security concern for you? 

Mr. WELCH. I don’t know if that was evaluated in the course of 

this process or not. 

Mr. BACHUS. Well, let me ask you—no, I’ll follow up on that. 

That is a good—the four of you are the Under Secretary—or in 

your case, you’re the Assistant Secretary for the Department. I 

think your appearance here conveys that you are aware of what 

went on in the vetting process. Am I wrong about that assumption? 

Were all of you all aware of what went on? You’ve come here to 

tell us what went on in the what is described as a robust debate 

and a full vetting process. Were you all involved in that process? 

Or is there someone else at your department that would be better 

able to testify? 

Mr. KIMMITT. Well, there were individuals, Mr. Bachus, at the 

assistant secretary level and below who did the actual vetting in 

this particular circumstance. We were asked by the subcommittee 

and the committee to come up to discuss the process in general and 

to give our perspective. 

Mr. BACHUS. Who could give us—who at the department—would 

you supply names of the people who actually were engaged in the 

process? 

Mr. KIMMITT. Yes. That was one of the questions that Mrs. 

Maloney had asked. We know that answer. We’ll be glad to do it. 

Mr. BACHUS. Thank you. Do you know who was at the table, the 

individuals? Are you aware of— 

Mr. KIMMITT. We do. I’d have to come back to you with those 

names. 

Mr. BACHUS. Are you aware of what they discussed? Whether or 

not they discussed, say, the boycott of Israel? 

Mr. KIMMITT. I am not aware of the specifics, but we can get you 

that information, which actually has been requested. 

41

Mr. BACHUS. They’re all under your supervision, though, or 

under your—you’re their— 

Mr. KIMMITT. Well, either ours, or I would mention in this case, 

Mr. Bachus, the Commerce Department takes a— 

Mr. BACHUS. Sir, the Commerce Department is not here. But in 

your four cases, they’re all under your supervision. Each one of 

you, these individuals are under your supervision. 

Mr. KIMMITT. Who did participate. That is correct. 

Mr. BACHUS. You only found out 21 days ago that this process 

had been going on for 130 days? 

Mr. KIMMITT. Well, the process ran about 90 days; 60 informal, 

then the 30 formal days. 

Mr. BACHUS. You had mentioned October 17th as the commencement. 

Mr. KIMMITT. Right. 

Mr. BACHUS. That is 133 days ago. 

Mr. KIMMITT. I am sorry, sir. I was counting to the date on which 

the deal was— 

Mr. BACHUS. Am I wrong when I say that the four of you all, although these were people under your supervision, and you were 

charged with supervision and oversight of them, that you were unaware of these negotiations until 21 days ago? Is that correct? 

Mr. KIMMITT. That is correct, sir, in my case. 

Mr. BACHUS. And the other three of you, at least two of you 

learned of these negotiations when Under Secretary Kimmitt called 

you? 

Mr. JACKSON. That is correct in my case, sir. It is not the routine. If there are reasons to elevate during the 30-day period, based 

upon concerns that the staff raises, it is quite routine that it gets 

up to the Deputy Secretary level or above. 

Mr. BACHUS. So this was such a routine run-of-the-mill matter 

that you weren’t brought into the negotiations? 

Mr. JACKSON. It was a matter that yielded very, very substantial 

common agreement within the 12 agencies, plus the two additional 

invited— 

Mr. BACHUS. Do you think that it would have been proper for 

you to be advised and be part of the negotiations as the under secretaries involved? 

Mr. JACKSON. For my sake, I wish in hindsight that I had been. 

Mr. BACHUS. Do you think that there could be a full vetting process or a full debate without the participation of the under secretary? Or if you weren’t involved, was the secretary of your agency 

involved? 

Mr. JACKSON. In my case, not, sir. 

Mr. BACHUS. How about in your case? 

Mr. KIMMITT. No, sir. Well, not in this particular case. 

Mr. BACHUS. Sure. Well, that is what we’re talking about. How 

about in your case? 

Mr. KIMMITT. As the Deputy Secretary said, Mr. Bachus, the way 

the system has worked— 

Mr. BACHUS. I understand that. I am saying—I know how it 

worked in this case. You weren’t consulted, nor I suppose none of 

the secretaries were consulted. When did the White House learn? 

Did they know before you knew? 

42

Mr. KIMMITT. Well, as I said in my opening statement, Mr. Bachus, the White House has representation on the committee at the 

staff and policy level. In terms of when higher level people were advised, I’d have to speak with them. 

Mr. BACHUS. So you and your secretaries were not aware of these 

negotiations. So it is probably fair to assume the President may not 

have found out about them until 2 or 3 weeks ago, about the time 

you were notified; is that correct? 

Mr. KIMMITT. I think that is correct. I’d defer to the comments 

made by the White House Press Secretary, sir. 

Mr. BACHUS. Sure. The Commerce Department, were there—

other than national security issues, are there economic disadvantages that could be created by this; are they considered as national 

security, or is that not considered? 

Mr. KIMMITT. I would think that would be one of the issues that 

Commerce and perhaps others would bring to the table, sir. 

Mr. BACHUS. Now that you’ve been advised what these hearings 

were like, the port operator can determine sailing times, berthing 

assignments, docking order, all of which can make a million dollars 

difference in the case of each, you know, ship. Are we turning over 

that authority to the Dubai ports? Does anyone know? Or was 

there maybe a mitigating agreement that took that away from—

that duty away from them? 

Mr. JACKSON. Sir, I am sorry. I was consulting with Admiral 

Bone. But is your question does the terminal operator schedule the 

arrival and departure times? 

Mr. BACHUS. Yeah. No. You know, let’s say two ships arrive at 

the same time. Who determines the docking order or the berthing 

assignments, which can be advantage to— 

Mr. JACKSON. The pilots in the Coast Guard schedule those sequencing of the— 

Mr. BACHUS. Not the port operator. 

Mr. JACKSON. Admiral Bone says that they are consulted. But at 

the end of the day, the authority about docking the vessel is ultimately derived from the pilot’s authority. 

Mr. BACHUS. Do you know if lobbyists were retained by Dubai, 

and then were in these negotiations? Or do they have registered 

lobbyists? 

Mr. KIMMITT. I think the Government of the UAE does. I am not 

aware that they were involved in that process. We could certainly 

get that— 

Mr. BACHUS. Will you find out if they were, and when they were 

involved, and if they were involved before you were involved? 

Mr. KIMMITT. All right, sir. 

Mr. BACHUS. Thank you. And let me ask you this. Were there 

any agreements to mitigate national security concerns? The law 

provides that you can enter into agreements to mitigate any of 

those. And the Coast Guard said that some of their objections were 

met. Were these reduced to writings and mitigating agreements, as 

called for by the statute? 

Mr. JACKSON. Yes, sir. There was an assurance letter that was 

negotiated by DHS, and all of our concerns were accommodated 

within the contours of that letter. We’ve provided that publicly and 

on behalf of— 

43

Mr. BACHUS. Is that an agreement? Is that considered a mitigating agreement which would have legal— 

Mr. JACKSON. It does have legal binding authority. 

Mr. BACHUS. Could we have copies of those mitigating agreements? 

Mr. JACKSON. Yes, sir. Absolutely. But I thought we had provided 

them already. 

Mr. BACHUS. My last question, it is my understanding that there 

has been a nomination to the U.S. Maritime Administration—I 

don’t know that it is the director or whatever—and that the gentleman was an official with the Dubai ports; is that correct? 

Mr. JACKSON. Yes, sir. That is correct. 

Mr. BACHUS. So the ports will be operated by the Dubai ports 

and the—if this administrator of the U.S. Maritime Administration 

is, in fact, appointed by the Senate, he will run the U.S. Maritime 

Administration; is that correct? 

Mr. JACKSON. The nomination is to head the U.S. Maritime Administration. 

Mr. BACHUS. Now that you all know that these ports will all be 

operated—or, you know, if there’s no change by Dubai ports, does 

it bother you or concern you at all that the head of the U.S. Maritime Administration might be a former executive with Dubai ports? 

Mr. JACKSON. Let me make a distinction here, sir. It is widely 

being misrepresented here that this transaction has something to 

do with controlling ports. 

Mr. BACHUS. No, no, no. Just the operator. Just the operator of 

the port. 

Mr. JACKSON. The terminal operators. 

Mr. BACHUS. Terminal operator. 

Mr. JACKSON. Yes. 

Mr. BACHUS. But does the fact that they are—the terminal oper- ator at all the ports, does that—and that is obviously a $6.6 billion 

deal, so it is not like they’re having janitorial services. I mean, it 

is an important— 

Mr. JACKSON. Sir, if you take a position like any of the gentlemen that I am sitting at this table with, you have to file a total 

disclosure. And this gentleman would be recused in his position 

from anything having to do with his former employer from at 

least— 

Mr. BACHUS. No, I understand that. I understand that. I am not 

accusing the gentleman of anything. I am not— 

Mr. JACKSON. Well, I can speak to this as a former deputy secretary of— 

Mr. BACHUS. I am saying now that the port operation of the terminals has been turned over to Dubai Ports, is it wise to proceed, 

in your opinion, with the nomination of a former executive, or do 

you think that it would at least be something that should be looked 

at and reviewed? 

Mr. JACKSON. It is certainly the prerogative of the Senate to take 

that into consideration as they see fit. But let me say, speaking as 

a former deputy secretary at the Department of Transportation, 

wherein the Maritime Administration resides, it is imperative that 

we bring people into the Administration to serve in these senior 

jobs who have had real experience in the real world, people with 

44

the highest degree of credibility and—I have every reason to believe that this gentleman— 

Mr. BACHUS. Let me close with this question. You know, the 

whole premise—and I know you all have stated this several times. 

And I agree with you. I just use your word. Unnecessary restrictions by the United States on foreign investment may encourage 

other governments to restrict foreign investment by U.S. firms. 

In other words, if we restrict them from being terminal operators, they may restrict us, or put restrictions on us. And that is one 

reason we have an open-door policy as far as foreign investment. 

And one of the reasons is we want to invest in those countries and 

their operations. 

So my question is does the UAE permit investment in the maritime sector to the extent the United States does? 

Mr. KIMMITT. I think that they do allow investment. I’d have to 

get you the detail as to what level of investment. But you’re right, 

Mr. Bachus, that one benefit of an open investment policy is that 

it allows us, then, to use that to advocate on behalf of U.S. companies overseas. 

Having said that, the real question still is—has the national security been protected? That is certainly what was in the minds of 

the people who did this review, and it certainly is what will guide 

our 45-day investigation. 

Mr. BACHUS. And the only reason I say that, it is my understanding they won’t allow full investment. They would not allow a 

U.S. company to come in as a 100 percent owner of a terminal facility. The UAE just simply does not allow that. We’re allowing them 

to do that, so I wondered if there was some maybe mitigating 

agreement that said, ‘‘Okay. We’re doing this with you all. You will 

allow U.S. companies 100 percent ownership of operations in the 

UAE,’’ which would be important for our company. 

Mr. KIMMITT. My understanding, but I want to get this fact for 

you, is that they allow investment up to the 75 percent level. 

Mr. BACHUS. But we’re allowing it up to 100 percent. 

Mr. KIMMITT. 100 percent. But it is significant, Mr. Bachus, as 

you well know, any time you get above 50 percent— 

Mr. BACHUS. Sure. I am just wondering if they won’t allow us to 

get above 75 percent, should we allow them to get above 75 percent? 

Mr. KIMMITT. Well, I’d like to get the facts and get back to you 

on that. 

Mr. BACHUS. Sure. No, I think you’re absolutely right. I’ve been 

told that they do allow 75 percent, but not 100 percent ownership 

by U.S. companies in their concerns. 

At this time, I recognize Mr. Frank. 

Mr. FRANK. I apologize for having been drawn away. And I gather this didn’t get to the highest levels. But I have to ask you, because I think it is unfortunate that we’re in this situation where 

we have to make this public decision about the UAE. 

Let me ask all of you, were you surprised when the fact that the 

control of this part of the port business was going to be turned over 

to the UAE caused considerable political turmoil? Can I ask each 

of you? Were you surprised by that, Mr. Kimmitt? 

45

Mr. KIMMITT. I was not surprised. That is why, as I said earlier, 

as soon as I learned the facts on this and informed my boss, I said 

that we— 

Mr. FRANK. When did you get the facts? I am sorry. When did 

you hear about it? 

Mr. KIMMITT. In February, after the approval— 

Mr. FRANK. Mr. Jackson, were you surprised? 

Mr. JACKSON. I had not contemplated the notification to Congress prior to this becoming public, and so I was, I would say, surprised by the degree of vehemence and intensity of— 

Mr. FRANK. But you were surprised. Mr. Kimmitt wasn’t. How 

about you, Mr. Edelman? 

Mr. EDELMAN. When the Deputy Secretary of Treasury called me 

to discuss this issue, Congressman Frank, I realized that there 

would be a certain amount of controversy associated with it. But 

I have to confess that, like Deputy Secretary Jackson, I was surprised by— 

Mr. FRANK. How about you, Mr. Welch? 

Mr. WELCH. Yeah, I’d have to say, sir, I was surprised. 

Mr. FRANK. You were. Okay. I would recommend—I don’t know 

if there is such a program—but antenna development for members 

of the Administration. Because I am surprised that some of you 

were surprised. I don’t know where you’ve been for the past few 

years. And I don’t agree with all the sentiments here. 

But frankly, I have to say this. For this Administration to complain that there was and has been an excessive outburst of too 

much skepticism, etc., etc., it is a little bit of not understanding 

what their own role has been. And I guess the fact that three of 

the four of you did not realize that making this public would cause 

this kind of concern does not speak well for the understanding of 

the political system. And part of good governance is understanding 

the political system. 

And I have another question. 

Mr. JACKSON. Sir, can I just say that I said I was surprised by 

the depth and intensity. I was not surprised that there would be 

controversy and a lack of agreement about this. 

Mr. FRANK. Well, okay. But I think you should have been—that 

does not—I am sorry, guys. You can change that on the record. 

Frankly, I am surprised that you were surprised by the depth and 

the intensity. 

The 45 days. Exactly what is going to happen during these 45 

days? Let me put it this way. What subjects are going to be studied 

during the 45-day period that have not already been studied? Mr. 

Kimmitt? 

Mr. KIMMITT. Well, as I mentioned, Mr. Frank, we’ll look at— 

Mr. FRANK. No, specific question. What are you going to look at 

in the next 45 days that weren’t already studied? 

Mr. KIMMITT. New information that will be brought to our attention by the company. We’re awaiting the filing. 

Mr. FRANK. New information from the company. So the company 

has information that they didn’t give you in the first place? I 

mean— 

Mr. KIMMITT. No. The company, as part of its filing, has indicated that it is considering structural changes and other issues of 

46

that sort. That will be considered, measured against the security 

concerns that have been raised. 

Mr. FRANK. Well, are these structural changes—why are they 

doing structural changes if they’re not necessary? I mean, you did 

the study, and you said there’s no problem. So are these structural 

changes that deal with security? In other words, are they more concerned than you guys were because they’ve now got—that you 

didn’t have? 

Mr. KIMMITT. No. We will look at the information that was available. We’ll look at new information that is available and the concerns you have raised. We’re going to take your— 

Mr. FRANK. Okay, I understand. So you’re going to re-look at 

what was available. 

Mr. KIMMITT.—and take your views into account, sir. 

Mr. FRANK. What is that? 

Mr. KIMMITT. And take your views into account, the issues that 

you’ve raised. But— 

Mr. FRANK. My views were that you people need a political common sense transfusion. I don’t know if you can fix that up in 45 

days. 

But the issue is—well, let’s be very clear. I don’t know anybody 

who really believes that this 45-day review period is going to be 

anything more than a repeat of what we had, because you obviously didn’t think it was necessary, and you completed this. And 

I would be interested to know what new information is going to be 

looked at. And you say, well, the company is going to give new information. I don’t know whether that means that they didn’t give 

us enough in the first place. But I really don’t understand what the 

45 days is going to be used for. 

Mr. KIMMITT. Well, again, Mr. Frank, we’re going to take a look 

at any information available in making the determination that national security interests are protected. 

Mr. FRANK. Are you going to go over your own work again and 

see if you made any mistakes, or are you going to look at the future? 

Mr. KIMMITT. We’re going to look at the information that was 

available and information that will be made available. 

Mr. FRANK. Okay. Let me ask, one of the things I saw the President said was that we shouldn’t be treating Dubai and the Emirates any different than we treat England. I am making that statement. Now, it has been pointed out that P&O was not owned by 

the government, and that is one difference. 

But let me ask each of you. Let me start with Homeland Security. You have immigration and these other—do you in your Department treat the United Kingdom and the United Arab Emirates 

the same in every regard? And, you know, immigration, visas, etc.? 

Mr. JACKSON. No, sir. 

Mr. FRANK. Thank you. Mr. Kimmitt, did Treasury, when you do 

your international work, do we have the same exact set of procedures with the United Arab Emirates that we have with the United 

Kingdom? 

Mr. KIMMITT. Well, I don’t think we have the same exact set of 

procedures with them. 

Mr. FRANK. Okay. So we treat them differently in some ways. 

47

Mr. KIMMITT. Well, any two countries, sir. 

Mr. FRANK. Well, no. I am—well, I agree with that. I mean, it 

is the President that is the problem. I mean, I do think that he 

said we shouldn’t treat Dubai and England differently. I think we 

do in many respects. 

Let me ask Mr. Welch. Does the State Department treat—I 

mean, in terms of sharing of information and working together 

with the UN, is the United Kingdom and the United Arab Emirates, do we treat them pretty much the same? 

Mr. WELCH. No, not at all, not— 

Mr. FRANK. Okay, thank you. Well, I think— 

Mr. JACKSON. Mr. Frank, I would like to say that I believe the 

President was making a basic equity argument. And obviously, 

we’re looking at the differences between nations when we do the 

security review. But to give them the same type of level playing 

field for investment that we give Great Britain and other nations— 

Mr. FRANK. Well, that is not what he said, Mr. Jackson. Let me 

say this, since you—obligated to respond. First of all, I mean, if you 

want to give advice to the White House on how the President 

should phrase his statements, you ought to do that. That is not 

what he said. And in fact— 

Mr. JACKSON. I am not doing that. I am trying to help you understand the President’s position, sir. I am just trying to help explain 

the Administration’s position. 

Mr. FRANK. No. I was talking about the President’s statement. 

You were trying to suggest that the President said something other 

than what he meant. And I would say this. Yes, I know in this context. Frankly, one of the issues has to do with port security. One 

of the things I am going to ask for, would you please submit, whoever would be the appropriate one, a description of what it is that 

the people who are now going to be—if Dubai gets this—what do 

they do? What are their specific functions? 

Because if I listen to you guys, it sounds to me like the people 

who do what these people do essentially stand on the pier and 

wave bon voyage to people. I mean, there’s been this diminution of 

what they do that, boy, they’re just down there. They don’t really 

have much to do with what is going on. I think you have underdescribed the potential. 

And here’s the problem that many of us have. You have this government-owned company playing a major role in how the ports are 

run. It is a government in a tough part of the world. It is a nonelected government subject to a lot of pressures. It is a government 

that has to worry about fundamentalists, about angry anti-Americanism. It is not in the safest neighborhood in the world. It is not 

England. And the Government of Dubai has not got the freedom 

that the Government of the United Kingdom has in many ways. 

And the fear is that they could be pressured in some ways to allow 

some people into positions of responsibility that we’d rather 

wouldn’t be there. 

So when the President said we shouldn’t treat Great Britain any 

differently than we treat the United Arab Emirates, I think it was 

wrong, that, in fact, we do in a number of areas. And one of them 

is in the capacity to even talk about the good will. Although I share 

48

the gentleman from California’s and others’ unhappiness with that 

position on Middle Eastern affairs and the Israeli boycott, etc. 

But we are saying that there was a difference in the capacity of 

the Government of the United Kingdom and the government of the 

United Arab Emirates in their willingness and ability to withstand 

some of the pressures that would come for things to happen wrong. 

And for the President to say that the mistake is that we are treating Great Britain and the United Arab Emirates differently—except for that one is easier for me to pronounce—I think this is just 

an example of how he is not arguing this thing very effectively, and 

not making anybody feel more comfortable. 

And again, I don’t know what you could do in the 45 days. But 

if this is the approach, I don’t think you’re going to be any further 

along 45 days from now than you are today. 

Thank you, Mr. Chairman. 

Chairwoman PRYCE. The gentleman from South Carolina. 

Mr. FRANK. Madam Chairwoman. I am sorry. May I—you’re 

back, and I just want to—I complained about the witness list. I still 

don’t like the composition of the witness list. But I’ve double 

checked, and it may—I and the people with me, we may not have 

been as clear about our concerns as we were before. So I should not 

have made any implication that we were unfairly treated. I do not 

think the witness list was the right witness list. But I double 

checked, and I should not have suggested that there was any problem in our communication. I don’t like the result, but I don’t mean 

to make any criticism of the process. 

Chairwoman PRYCE. I appreciate the gentleman and your statement, because that was the first I was aware that there was any 

problem. And I certainly would have worked with the gentleman if 

I had known. 

Mr. FRANK. No, I appreciate it. I just don’t like eight-to-one. But 

it was not a procedural problem. 

Chairwoman PRYCE. Thank you. The gentleman from South 

Carolina. 

Mr. BARRETT. Thank you, Madam Chairwoman. I appreciate 

that. Gentlemen, thank you. I am glad you have your steel underwear on today. I know it’s been kind of tough. 

You know, we’ve had a lot of different questions from different 

people, but the same theme that I see keeps coming back time and 

time and time and time again. This is a different day that we’re 

operating in. People are extremely concerned. I have not seen my 

constituents as mad about this one issue as anything I’ve seen 

since I’ve been in the United States Congress. 

So my question is very simple. Is CFIUS broken? Is this whole 

process—and I am not questioning—I am not trying to put blame, 

because I know that you are professional. I know that the people 

who are involved in this process did everything they felt like was 

correct by the letter of the law, but I think the process is broken. 

Because there’s too many questions not being answered, too many 

people don’t know what is going on, including possibly yourselves, 

especially late in the process. 

So I would like an answer from each one of you. Just tell me, 

is this process broken? If it is, would you or your agencies be willing to tell us how to fix it? And if it needs to be fixed, does it need 

49

to be fixed prior to making a decision on this sale? And we’ll start 

here on the left. 

Mr. KIMMITT. Sir, I don’t believe it needs to be fixed before the 

final decision is reached in this case. As I mentioned, after the 45-

day review, after up to 15 days consideration by the President, a 

report will be sent to the Congress in detail. Going back to what 

Mr. Frank and others have said, we know that we’ll be measured 

against, among other things, the concerns that you’ve raised, the 

factual questions that you’ve asked, the opinions that you’ve expressed. I think for the DP World case, the process will run to that 

conclusion. 

I think the process needs to be improved. The GAO report last 

fall talked about the fact that the security agencies were not having an opportunity to get their issues fairly addressed in the process. We at the deputies’ level have worked very hard to make sure 

that every security professional, at whatever level, has the opportunity to get her or his views on the table to be fairly considered. 

There’s no rush to judgment, in spite of a comment to the contrary. 

Anybody who had had a lingering concern among the literally hundreds of people who looked at this at the professional staff level, 

it would have gone into the 45-day period. 

So I think the process—that is, the interagency part of this 

CFIUS process—worked. I think in terms of notification within departments, particularly moving it further up in the departments, 

we’ve talked about the improvements that we need to make there. 

I think where we really need to focus our attention is the relationship between the executive and the Congress in this process. Although I think we’ve done a better job of telling you about cases 

that have been closed, I think we need to focus more on what we 

can do within the law or beyond to better apprise you on pending 

cases. 

Mr. BARRETT. Would you be willing to give me some comments 

on how to improve that? 

Mr. KIMMITT. Oh, absolutely. 

Mr. BACHUS. Okay, good. 

Mr. JACKSON. Sir, I concur with Deputy Secretary Kimmitt that 

the process does merit consideration, specifically with the view to 

how we share information with the Congress. And our Department 

would be here to participate within the Administration and with 

Congress in any discussions of those issues. 

Mr. EDELMAN. Congressman, I can attest to the fact that very 

early in my tenure last August, Deputy Secretary Kimmitt called 

me and asked me to come over and talk with him at the Treasury 

about the GAO report and the issues that had been raised in it 

about the Department of Defense and other security agencies not 

being able to sufficiently raise their concerns about this. I think a 

number of steps have been taken to improve that process. 

I think all of us have learned some lessons. I won’t speak for the 

others. But I think clearly, issues that are controversial, like this 

one, need to be raised to higher levels and policy and political levels earlier on in the process. We’ve taken some preliminary steps 

in the Department of Defense to try and remedy some of that. 

Mr. WELCH. Sir, I agree with what they’ve said. And I am a little 

bit in a different position here, because within the State DepartVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
50

ment, our seat at the table is held by another bureau, a peer of 

mine. In that process, if there’s an issue involving a country or firm 

within our region, we are consulted. We were consulted fairly and 

responsibly in this process. Though, as I said in an earlier answer, 

I was personally not aware of it until we began preparing for the 

Secretary of State’s trip. 

Mr. BARRETT. I would welcome you submitting any of your suggestions to help better this process, gentlemen, in a timely fashion 

too. Thank you, Madam Chairwoman. 

Chairwoman PRYCE. Thank you. Ms. Wasserman-Schultz? 

Ms. WASSERMAN-SCHULTZ. Thank you, Madam Chairwoman. My 

first brief question is who from the White House participated in the 

CFIUS process, and who did they report to? 

Mr. KIMMITT. There are, ma’am, six White House offices involved: the National Security Council, National Economic Council, 

Council of Economic Advisors, Office of Management and Budget, 

Office of Science and Technology Policy, and the U.S. Trade Representative. I don’t know the reporting chains within the White 

House, but they have been members of the CFIUS process for some 

time. 

Ms. WASSERMAN-SCHULTZ. There were six White House entities 

involved in this process, and the President didn’t know anything 

about this before it was approved? 

Mr. KIMMITT. There have been six White House offices involved 

in consideration of CFIUS cases going back for a number of years. 

Ms. WASSERMAN-SCHULTZ. I realize that. But when this first 

came to light, in fact, you acknowledged—each of you acknowledged that you only recently were aware of it. It seemed as though 

the White House alluded to the President being aware of it, especially because the law requires if there’s a national security review 

for the President to sign off on it at the end of the process. 

Given the amount of alarm, and given that we’re talking about 

a government-owned company where there are national security 

implications, how could there be six White House entities involved 

in the CFIUS process, and it didn’t rise to the level of knowledge 

not just of the President, but even of your own awareness or the 

awareness of your superiors? That is just mind-boggling to most 

people. 

Mr. KIMMITT. As I said, there were in this case not just the normal 12 participants. We also had participants from two other departments and agencies involved in this process. I think that improvements are being made not just in the departments but elsewhere on making sure that even those not involved in the actual 

security analysis are advised of pending cases. 

Ms. WASSERMAN-SCHULTZ. I think this might be the case of too 

many cooks spoiled the soup. Really, I’ve never had more constituents in as short a period of time, like the gentleman from South 

Carolina said, contact my office. And I’ve literally had senior citizens, little old ladies, calling my office crying about their concern. 

And I represent the State of Florida, and my district abuts the 

Port of Miami. I went to the Port of Miami last week, and I can 

tell you that when you walk through the Port of Miami Terminal 

Operating Company and see the potential for the national security 

51

implications that are here, how the CFIUS process could not have 

triggered a 45-day review is beyond me. 

But one of my greatest concerns stems from the fact that we’re 

talking about a foreign government-owned company controlling the 

P&O company. There was really apparently a disconnect between 

the CFIUS process that made the decision and the fact that no national security implications were triggered. 

I don’t know how the CFIUS process, given the UAE’s involvement just 5 years ago, in spite of the fact that they may be our 

friend now and may have been cooperative since 9/11, and the fact 

that this is a government that recognized the Taliban, only one of 

three countries that recognized the Taliban, the fact that this is a 

country that supports the boycott of the state of Israel. I mean, the 

fact that you have financial involvement in the September 11th attacks and the transport of nuclear material through that country 

to the state of Iran, how could all of those facts, did they not come 

to light, or were they not raised during the CFIUS process? And 

if they were, then how could that not have triggered the 45-day national security review? 

Mr. KIMMITT. To the best of my knowledge, those facts and many 

others were taken into account during the process, both by the 

agencies charged with responsibility, but also by the intelligence 

community that would have looked both at historical and more current information and intelligence. 

Ms. WASSERMAN-SCHULTZ. It is just—the most startling thing is 

the disconnect here, where—like I said, I was on the ground at 

POMTOC in the Port of Miami. The national security implications 

hit you in the face when you walk through that place. And virtually everyone I spoke to down at the port, including the people 

involved with POMTOC now, have national security concerns. 

Let me ask you another quick question. Because in October of 

2005, the GAO report that came out said that of the 500 notifications of acquisition between 1997 and 2005, CFIUS initiated only 

eight investigations. That is an alarming finding by itself. But the 

GAO report went on to say that CFIUS has frequently encouraged 

companies to withdraw from the process in order to address their 

security implications, really, I guess, so as not to trigger the 45-day 

review. You also in this process had a pre-CFIUS process, also 

seemingly to avoid triggering the 45-day review process. 

So can you explain how it is that you’re not just following the 

law so that we can really figure out whether there are national security implications with a deal like this? 

Mr. KIMMITT. Well, I think the focus at every level is on determining whether there is a national security concern. If there is a 

national security concern that cannot be addressed, the deal will 

not go forward. If that concern cannot be addressed in the 30-day 

period, it will go to the 45-day period. 

If a company makes a voluntary decision to withdraw, they have 

to start the process again. It doesn’t mean that the security concern 

isn’t there. They might need more time to address it. They might 

go back and restructure the deal. They might put the U.S. operations under a separate ownership. 

And my feeling is that, again, our focus should be on whether the 

national security interests of the United States have been proVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
52

tected. If they haven’t been, then those people in departments and 

agencies are not going to sign off on the deal going forward. 

Ms. WASSERMAN-SCHULTZ. But the GAO report indicated that the 

CFIUS process has encouraged companies to withdraw when security implications have arisen, instead of allowing the 45-day review 

to be triggered. So why would you do that? I mean, why wouldn’t 

you just allow the process to go forward so that the people at the 

highest levels that are responsible for that review and for those 

final decisions are allowed to engage in those decisions? 

Mr. KIMMITT. Well, you go to the 45-day if an issue has been 

raised and has not been properly addressed. If a company says, ‘‘I 

need more time to address your concerns,’’ and withdraws, that is 

an independent decision on their part. 

Chairwoman PRYCE. The gentleman’s time has expired. 

Mr. JACKSON. Can I just add one footnote to this? 

Chairwoman PRYCE. Very briefly. We have a whole other panel 

that has been very patient, so please be brief. 

Mr. JACKSON. Many people withdraw because the 30-day process 

has indicated that there will not be an approval no matter what. 

The nature of the objections are so structurally comprehensively 

laid out that people do withdraw, do not resubmit, and do not pursue the consummation of the transaction. So there are multiple explanations, and this is one of them, for a transaction being withdrawn. 

Chairwoman PRYCE. The gentleman from Georgia, Mr. Scott, is 

recognized. 

Mr. SCOTT. I thank you, Madam Chairwoman. Let me just start 

very quickly by stating how important it is for us to register this 

one important point, and that is what the American people feel 

right at this moment. They don’t want this thing delayed. They 

want it stopped. They want it stopped. They want all of our cargo 

checked at the ports, not 5 percent. Sort of like Ethan Hunt in Mission Impossible when he said, ‘‘The knock list is out in the open.’’ 

Well, this list is out in the open, and the world knows we only 

check 5 percent. We better go to work and hurry up and get 100 

percent of our cargo checked. 

Now, I see some eyebrows being raised out there, and people 

kind of reacting. If Hong Kong can do it, why can’t the United 

States? Hong Kong checks 100 percent of its cargo, and they’re not 

even a terrorist threat. There’s nobody wanting to blow them off 

the face of the earth. We’re at war. This is a serious war. And this 

is a war against terror, against Islamic extremists, in the Arab 

part of the world. We’re not using this as any discriminatory manner. 

But here are the facts, gentlemen. The facts are these. This is 

a government-owned company owned by a government that is one 

of only three other governments—Saudi Arabia and Pakistan—that 

even to this day recognizes the Taliban as the official Government 

of Afghanistan. Yes, they do. While our young men and women in 

uniform are over there dying, that is what this company does. This 

country owns this company that has been active in illegal transfers 

of nuclear material to Iran to help build an atomic bomb, whose 

president says his one aim is to wipe Israel off the face of the 

earth. And this is who we’re turning our security of our ports over 

53

to? No wonder the American people are saying, ‘‘No. We’re not 

going to take this.’’ 

What this meeting ought to be about is not examining any of the 

intricacies here. This meeting ought to be about what steps and 

how quickly we can terminate this deal, and how quickly we can 

begin to rise up and get the can-do spirit in America to say, ‘‘We 

need to protect our own securities at our ports.’’ Why, the American 

people. And we need to start doing it at the point of origin, not wait 

until they get to the ports. By then, it is too late almost. We need 

to have Americans at each of these ports wherever their entry 

bringing materials into this country, checking not 5 percent, but 

100 percent of them. 

Gentlemen, this is the same country that owns this company that 

transfers financial backing to Al Qaeda. Comes right through this 

country. Gentlemen, this is the country that owns this company, of 

which two of the hijackers that flew those planes into New York’s 

Twin Towers. And you mean to tell me you didn’t even tell the 

President of the United States? He said he didn’t know nothing 

about it. But yet still, he says it is a good deal. He’s shot all his 

credibility. 

It is up to this Congress of the United States, and the people of 

this country are looking to this Congress to finally stand up and 

do what we were elected to do, provide the oversight that is needed. It is shameful and a disgrace that such a decision was even 

thought about being made, to turn the security of our ports or the 

operations of our ports, whatever you want to say it is, this country 

owning this company has no business doing it. 

And we need to sit back from the table a bit. And maybe this is 

a Godsend that will force us to examine why we’re in the shape we 

are in in terms of our weak homeland security. The American people deserve better than this. 

My first question that I want to ask is how can we stop this? 

Mr. KIMMITT. Sir, the way the process works, as I have explained 

it, is that after the 45-day review and the review by the President, 

a report will be sent to the Congress. And at that point, my assumption would be that in exercising the oversight responsibilities 

to which you referred, you would look very closely at the report and 

measure it against precisely the concerns you’ve raised— 

Mr. SCOTT. Let me ask you this question. Is it in your opinion 

that legislation is the only way of stopping this by the Congress? 

Because it is very important. Like I said at the outset, the American people want this stopped. And we need to tell them at this 

committee how it can be stopped. 

Chairwoman PRYCE. The gentleman’s time has expired. But the 

witnesses can answer this question, and then we’ll proceed to the 

next panel. 

Mr. KIMMITT. I would say the same answer, Madam Chairwoman, and that is I think we owe you, Mr. Scott, the report that 

will be sent by the President. We will expect you to look at that 

against the parameters that arise from the security concerns you’ve 

raised, legitimate security concerns. And then you will make the 

judgment and exercise your constitutional responsibilities on how 

to respond. 

54

Chairwoman PRYCE. The gentleman’s time has expired. Mr. 

Davis from Alabama is recognized. 

Mr. DAVIS. Thank you, Madam Chairwoman. Let me ask you 

gentlemen a few quick questions, and then wrap up with an observation. Mr. Jackson, as a matter of curiosity, in how many other 

instances has the Department of Homeland Security raised concerns about a transaction that’s been evaluated by CFIUS? 

Mr. JACKSON. I’d have to get back in and look. We aggressively 

push it all the— 

Mr. DAVIS. You don’t know that? Do you know if it’s been done 

at all? Do you know if DHS has ever raised the kind of concern 

that was raised here about any other transaction? 

Mr. JACKSON. Absolutely. I’ve been personally involved in some 

quite aggressive conversations in the— 

Mr. DAVIS. How many of those ended of being approved anyway? 

Mr. JACKSON. Several since I’ve been confirmed a year ago. 

Mr. DAVIS. Several means two? Three? How many? 

Mr. JACKSON. I’d have to go back and look. 

Mr. DAVIS. Did you identify those to the committee at some 

point? 

Mr. JACKSON. I’d be happy to if it is allowed by law. And I think 

that it is, so I’d be happy to tell you about that. 

Mr. DAVIS. Well, certainly, we would request to see if there are 

any other instances where DHS has raised concerns, and somehow 

the transaction has gone forward. 

Mr. JACKSON. To answer your question fully, sir— 

Mr. DAVIS. My time is limited, so I am going to move on to another question. 

Mr. JACKSON. I know. But I would like to not make a misrepresentation here. We aggressively look at all the cases. 

Mr. DAVIS. No, no, you’re not answering my question. Let me 

move on to something else. The second question I want to pose and 

make sure I understand this, there has been some testimony by 

you all and some question as to whether or not the UAE has done 

a better job of strengthening its money laundering laws. And, of 

course, we know at one point, the country was notable for its almost complete lack of laws related to money laundering. Has the 

Treasury Department or the Department of Justice done any analysis as to how many money laundering prosecutions have happened 

in the UAE since it changed its laws? 

Mr. KIMMITT. I would have to get that specific figure for you, but 

we are very directly engaged, Mr. Davis, with them. 

Mr. DAVIS. Okay. But once again, my time is limited. Just so I 

can—because my time is limited, do you know how many prosecutions have been waged in the UAE since they changed their laws? 

Because that would be one measurement of how seriously— 

Mr. KIMMITT. I will get that answer for you. 

Mr. DAVIS. Okay. Another question. Let me make a very general 

point, because my time is about to wrap up. And then obviously, 

you all have been here for a while. I recognize you’re not here as 

political advocates, but I do hope you take this point back to your 

respective departments. This is what is interesting. I think when 

my party got in trouble, when people on my side of the spectrum 

got in trouble, was, frankly, back in the 1970’s and 1980’s when a 

55

lot of our leaders kind of got the attitude whenever the American 

challenged them, some people in my party would say, ‘‘You know 

what? We know what is right. We have the facts. We’re really 

smart. We’re really dedicated. And don’t challenge us, because we 

know better than you.’’ 

And I’d be the first to admit to you a lot of liberal folks did that 

for a while, and that kind of turned off the American people. 

I wonder if this doesn’t become the turning point from the left 

and right kind of flip. And I’ll tell you what I mean when I say 

that. 

The way the Administration has defended this deal is essentially 

to say, ‘‘We have the facts. We know what is right. We have the 

country’s best interests at heart. Don’t challenge us. If you challenge us, you’re being bigoted, you’re being prejudiced, and you 

don’t have all the information.’’ 

In other words, the people that you work for are starting to 

sound a lot like the people who got my party in trouble. And I 

think that there’s going to be a price for that. 

The final point that I want to make, the President said a few 

days ago that if this deal does not go through, that it sends a signal to the Arab world that the United States is not open for business with them. 

I wonder if it doesn’t send a different signal, gentlemen, if the 

deal goes through. I wonder if it doesn’t send the signal to Arab 

nations that you can have any human rights practices that you 

want, that you can have almost no system of financial transparency, that you can be an opponent of one of the United States’ 

strongest allies, that you can, in effect, have a deathbed conversion, 

and all of these things can happen overnight. I think that is the 

signal that we’re sending, frankly. I think the signal that we’re 

sending is that a country with a remarkably weak record and so 

many things that we care about can still do a multi-million-dollar 

deal with the United States. 

I think that is the wrong signal to be sending, and I think that 

is why you’ve heard so much outrage from so many people on both 

sides of the aisle today. And I yield back the balance of my time. 

Chairwoman PRYCE. Thank you, gentlemen, very much for being 

with us this afternoon, for your candid answers, and for the information that you promised to provide in the future. You are now excused, and have a good night’s rest. 

And we’ll welcome our second panel, who has been very, very, 

very patient. You may want to wait to sit down, because I bet those 

are hot seats now. 

All right. We’ll proceed now with the second panel of witnesses. 

And once again, gentlemen, thank you for your patience. We’ll introduce them in order. 

Mr. James Glassman, a resident fellow with the American Enterprise Institute. Welcome, Mr. Glassman. Joining him is Mr. Todd 

Malan. Mr. Malan is president and CEO of the Organization for 

International Investment. And we have Mr. David Marchick, a 

partner at Covington and Burlington. Burling. Excuse me. And 

William Reinsch. Is that correct? 

Mr. REINSCH. Well done. 

56

Chairwoman PRYCE. All right. President of the National Foreign 

Trade Council. And Mr. Clark Ervin, director of the Homeland Security Initiative at the Aspen Institute. 

Gentlemen, we welcome your testimony. You may summarize it 

and give your formal statements for the record, if you’d like. You 

each are welcome to 5 minutes. And that may seem very trifling 

compared to how long you have listened and waited. But we appreciate that patience, and you may begin, Mr. Glassman. 

STATEMENT OF JAMES K. GLASSMAN, RESIDENT FELLOW, 

AMERICAN ENTERPRISE INSTITUTE 

Mr. GLASSMAN. Thank you, Madam Chairwoman and members of 

the committee. It is an honor to appear before you as a witness 

today. 

The intense reaction to the transfer of shipping terminal operations at six U.S. ports raises disturbing questions about national 

security priorities and about America’s commitment to her allies 

and to the process of globalization. 

The response to the DP World-P&O deal has been wholly out of 

proportion to the possible risk involved. It has almost certainly 

damaged our relations not just with the UAE, but with Arabs and 

Muslims and others disposed to support American policies and values. That damage could hurt our overall national security efforts 

and threatens to disrupt capital flows to the United States at a 

time when those flows are desperately needed. 

In my written testimony, I seek to correct the many inaccuracies 

about this transaction that have been raised publicly. In my short 

time, however, I want to concentrate on a discussion of economic 

consequences. 

The United Arab Emirates has embraced the security and economic prescriptions of the United States. They’ve done what we 

want them to do. Our ships call at their ports. Our war planes use 

their airports. They turn over suspected terrorists. A news article 

in the Financial Times cited Dubai as ‘‘a pragmatic pro-Western 

and free market exception in a region often bristling with hostility 

to America.’’ 

The overreaction to the terminal transactions, coupled with 

Congress’s recent thwarting of the purchase of Unical by a Chinese 

company, cannot help but deter other investments, especially by 

developing nations in this country. xenophobia, as the Economist 

magazine puts it, seems to be creeping into American politics. And 

xenophobia hurts an economy. 

The arithmetic of foreign investment is not complicated. The current account deficit has been rising for the past decade and now 

is about $800 billion, indicating a wide gap between what we buy 

in goods and services from foreigners and what we sell to them. 

This deficit has not harmed the U.S. economy for a simple reason. 

The United States remains one of the best places in the world to 

invest, so dollars that flow abroad from our purchase of imports are 

recycled back to us as capital investments. 

In recent years, important capital flows are coming from emerging markets, including Asia and the Middle East. These flows are 

crucial, and Dubai has been among ‘‘the most prominent recent 

buyers into the U.S. economy,’’ as the Financial Times says. And 

57

I could give you a list of some of the properties that Dubai has 

bought. 

Now, however, the United States risks developing a reputation 

as a country that no longer welcomes some people’s money. If that 

happens, other nations will attract capital that would have gone to 

the United States. The virtuous circle of global trade and investment risks being broken with disastrous consequences. 

As a news story in the Wall Street Journal stated, ‘‘A successful 

move to block the ports deal could send a chilling signal about foreign investment in the United States at a time when such investment had been critical in sustaining growth. 

This episode has been a sad one in many ways, but it could have 

positive results by helping to revive interest among policy-makers 

in getting serious about reducing the threat of seaborne weapons 

of mass destruction. That threat must mainly be attacked at the 

source in foreign ports before the WMD get here. Would withdrawing the P&O leases from DP World help national security? To 

the contrary. It could jeopardize Dubai’s role as a loyal American 

ally. 

Absolutely keep our ports safe. National security is job one. Trust 

our own law enforcement and military. They have not objected to 

this sale. 

The United States benefits mightily from a globalized world. Our 

ties through trade, in fact, have made us more safe as our trading 

partners become more prosperous, open, and democratic. 

But if we decide to deny firms from developing nations, Arab, 

Asian, and otherwise, from investing in the United States, those 

firms will go elsewhere. And we will pay the price in higher interest rates, higher mortgage rates, higher inflation, lower stock 

prices, and less participation in a world that is growing more and 

more creative and exciting. 

Those in the public eye, public officials, press, and academics 

have an obligation to discuss complicated issues like this one in a 

dispassionate way to avoid exploitation and distortion. Unfortunately, in this case, the temptation for some has been too great, 

and that is why this hearing is so important. Thank you. 

[The prepared statement of Mr. Glassman can be found on page 

94 of the appendix.] 

Chairwoman PRYCE. Thank you very much. 

Mr. Malan. 

STATEMENT OF TODD M. MALAN, PRESIDENT AND CEO, 

ORGANIZATION FOR INTERNATIONAL INVESTMENT 

Mr. MALAN. Thank you very much, Madam Chairwoman and 

Ranking Member Maloney. My name is Todd Malan. I am president and CEO of the Organization for International Investment. 

OFII is an association representing the interests of U.S. subsidiaries of companies based abroad, or what we call insourcing companies. OFII has 140 member companies which range from mid-sized 

businesses to some of the largest employers in the United States, 

such as Honda, HSBC, Sony, AEGON Insurance, Nestle, Unilever, 

and L’Oreal. 

As the representative of the largest collection of the companies 

that regularly seek review of acquisitions by the Committee on ForVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
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eign Investment in the United States, we very much appreciate the 

opportunity to participate in this important hearing. 

Some people view the business community skeptically when it 

comes to national security discussions. Unfortunately, this perspective ignores that the terrorists aim at our economic system, not just 

our political system. From the tragic events of September 11th to 

last week’s foiled attack in Saudi Arabia, economic and business interests are prime targets. 

Companies and the people that run them understand this fact of 

life. The business community works hard to cooperate with governments on all aspects of national security. My member companies 

take this national security mandate very seriously. 

While national security is any nation’s first priority, it must be 

maintained alongside other important national priorities. National 

security and economic strength are interdependent. 

When Congress enacted the Exon-Florio statute, it struck a balance between two interrelated priorities: national security protection and the economic benefits of an open investment policy. According to the most recent government figures, the benefits of 

insourcing into the U.S. economy are quite clear. U.S. subsidiaries 

employ 5.3 million Americans. U.S. subsidiaries support an annual 

payroll of nearly $318 billion. Average compensation per employee 

is about $60,000, 34 percent more than compensation at all U.S. 

firms. 

Contrary to many people’s assumptions, these companies don’t 

just invest here for our market. U.S. subsidiaries account for nearly 

21 percent of U.S. exports. 

I’d like to also add that to put the particulars of this case in perspective that we’re talking about today, 94 percent of total assets 

owned by foreign companies are from OECD member countries. 

Ninety-eight percent of U.S. FDI is from private sector firms. Only 

2 percent of total direct investment are from companies controlled 

by foreign governments. 

In today’s global economy, labels such as ‘‘foreign’’ or ‘‘domestic’’ 

are less and less relevant. Millions of Americans are shareholders 

in foreign companies. American shareholders now hold over $2.9 

trillion in foreign equities. Millions of Americans either directly, or 

through their mutual funds and pension funds, are owners of these 

firms. Within my membership, there are numerous examples where 

American shareholders hold a majority in a ‘‘foreign company.’’ 

OFII believes that the Exon-Florio statute strikes the proper balance, and that CFIUS reviews are extremely rigorous procedures 

that yield important national security protections. However, we 

agree that there needs to be better mechanisms in place for consultation between the Congress and CFIUS. This process needs to 

be focused, perhaps, to committees of jurisdiction, as it is in other 

oversight responsibilities, and it needs to ensure that confidential 

business proprietary information is protected. There are numerous 

examples of other such procedures in monetary policy, trade policy, 

and trust review. 

My written statement includes specific comments regarding attributes of CFIUS process and the current law, and our concerns 

about various proposals for changing the law. I’d be happy to answer any questions about those perspectives. 

59

However, I’d like to leave you with a general observation about 

the relationship between national security and economic activity. 

When it comes to national security concerns arising from commercial operations of critical infrastructure, why should the nationality 

of the owners of the capital stock be the principal or sole concern? 

Certainly, there are many instances of foreign ownership that do 

raise special concerns, as in the case of government ownership of 

the acquirer, a situation where CFIUS already pays special attention. 

However, if we agree that there are vulnerabilities in a particular area, like critical infrastructure, then the solution is to address the risk comprehensively, and not take the view that the risk 

lies only with the ownership. Mere ownership of such facilities does 

not mean the risk has been mitigated. 

On the other hand, just because a firm is headquartered abroad 

doesn’t mean it can’t be a partner in national security. A disproportionate focus on nationality may, in fact, distract from accomplishing the real national security objectives. 

Madam Chairwoman, thank you very much for calling this hearing. We look forward to working with you, your colleagues, and the 

Administration to enhance Americans’ national security, because a 

more secure nation is one that will attract investment, encourage 

capital accumulation, and realize long-term economic growth. 

Thank you. 

[The prepared statement of Mr. Malan can be found on page 118 

of the appenidx.] 

Chairwoman PRYCE. Thank you, Mr. Malan. And now we’ll hear 

from Mr. David Marchick. 

STATEMENT OF DAVID M. MARCHICK, PARTNER, COVINGTON 

AND BURLING 

Mr. MARCHICK. Thank you, Madam Chairwoman, Ranking Member Maloney, and Mr. Scott. Thank you for the opportunity to be 

here today. 

I’d like to cover four points with your permission. First, the fact 

that it is in the United States’ national security interest to encourage foreign investment in the United States. Today more than ever, 

foreign investment is crucial for the vibrancy and vitality of the 

U.S. economy. 

Second, the CFIUS process. I’ve frankly been struck by the assertions in the press and elsewhere that transactions breeze through 

CFIUS with alacrity. Nothing could be further from the truth. Just 

because a transaction is approved in the first 30 days doesn’t mean 

the review is cursory. Just because the vast majority of cases are 

approved by CFIUS doesn’t mean the process isn’t tough. Just because the process is confidential, or as the press has suggested, secret, doesn’t mean that it is suspect. And just because the President doesn’t personally get involved in a review doesn’t mean that 

the review lacks credibility. 

The fact is that parties regularly consult and negotiate detailed 

security agreements with CFIUS well before the formal filing, 

which starts the 30-day process. In the vast majority of cases, this 

pre-filing period gives CFIUS ample time to review, analyze, and 

mitigate transactions within the first 30 days. In fact, since SepVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
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tember 11th, CFIUS has applied greater scrutiny to foreign investments, imposed even tougher requirements as a condition for approval, and enhanced enforcement of security agreements negotiated through the Exon-Florio process. 

The third issue, transparency. The concerns voiced by Members 

of Congress over the Dubai port transaction make it clear that Congress has serious questions about the CFIUS process. My view is 

that if Congress had more visibility into the process, you would 

have greater comfort in it, and knowledge that the process is already rigorous. 

A few ideas for your consideration. First, the CFIUS agencies 

should spend more time on the Hill briefing you, your staff, and 

other committees on the activities, processes, and trends in filing. 

Second, the CFIUS agencies should issue regular reports to Congress regarding the number of cases filed, the sectors affected, the 

countries of origin of the investing parties, the number of withdrawals, and the number of proposed investments by foreign companies owned or controlled by foreign governments. 

Third, and perhaps more importantly, the CFIUS agencies and 

this committee could explore ways for this committee and the Senate Banking Committee to receive classified briefings on substantive decisions made by CFIUS. Such classified briefings could 

be modeled on the process currently used in the intelligence committees. Some briefings for the big four, others for members of the 

committee, others that include staff. 

However, given the national security and commercial sensitivity 

of the information that would be provided in these briefings, there 

need to be strict parameters. In addition, I would assume the 

criminal penalties, including SEC and insider trading sanctions, 

would apply for leaks of classified or confidential information. 

Each of these important steps to create more transparency and 

more comfort in the process could be accomplished under the current legislative framework. 

Let me also offer some ideas of what Congress should avoid 

doing. Congress should not create a public notice requirement for 

Exon-Florio reviews. A national security review process should, by 

its very nature, remain confidential. As part of virtually every 

CFIUS review, the Executive Branch conducts background checks 

on companies, on individuals, undertakes an intelligence assessment, and discusses highly classified national security issues. 

CFIUS filings also include highly sensitive proprietary company 

information, information that companies’ competitors would love to 

have. 

A mandatory public notice requirement does not exist for HartScott-Rodino processes. That is the anti-trust review process, as 

you know. The same rules should apply for Exon-Florio. 

Second, Congress should not empower itself in the statute to vote 

on decisions made by CFIUS. Congress isn’t organized to be a regulatory body. And in fact, if foreign investors thought that Congress 

would review each and every foreign investment, they simply 

would not make investments in the United States, period. 

Fourth, the global impact of Exon-Florio. Tightening Exon-Florio 

could invite similar restrictions abroad. As we speak, Canada, RusVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
61

sia, and France are each considering new restrictions on investment. I want to give you one poignant example of this. 

Recently, a major Indian telecommunications company called 

VSNL, a government-owned company, was forced to accept extremely burdensome security conditions in order to obtain CFIUS 

approval for a transaction. What did it do? Well, it went to the Indian Government and suggested that, ‘‘In the interest of a level 

competitive playing field, as well as regulatory symmetry, a similar 

security agreement process should exist in India for U.S. and other 

foreign carriers who desire a license in India.’’ What did the Indian 

Government do? They issued draft regulations doing exactly that, 

which would impose burdensome regulatory restrictions on American companies investing in India. 

The Dubai Ports transaction has ignited a passionate debate 

about CFIUS. But as we all learned in law school, bad facts lead 

to bad laws and bad precedent. 

I hope this committee will take a deliberate measured approach 

in response to this controversy and refrain from amending ExonFlorio. Instead, I would recommend that the committee work with 

CFIUS agencies to improve any shortcomings or imperfections in 

the implementation of the agreement. 

Thank you once again for the opportunity to appear before you. 

[The prepared statement of Mr. Marchick can be found on page 

128 of the appendix.] 

Chairwoman PRYCE. Thank you. 

Mr. Reinsch, president of National Foreign Trade Council. 

STATEMENT OF WILLIAM A. REINSCH, PRESIDENT, NATIONAL 

FOREIGN TRADE COUNCIL 

Mr. REINSCH. Thank you, Madam Chairwoman. It is a pleasure 

to be here. It is late and I don’t want to be redundant. I’ll trust 

you to put my entire statement in the record, and make some brief 

comments. 

I am indeed one of the lobbyists that Mr. Frank referred to. But 

I think the other reason I am here is that I had some peripheral 

involvement in the statute when it was written when I was working on the other side of the Hill. And when I served in the last Administration, I had some involvement in administering it. And I am 

also really old, so I can take the long view on this and look not only 

at the pending case, but some others. 

Let me make several points. First, I think that CFIUS made the 

correct decision in the instant case. I think the 45-day process that 

they’re going to undertake, which is wise, will confirm it. I hope 

they address a number of the concerns that were raised here, particularly those that Mrs. Kelly raised, because I think they were 

questions that deserved answers. I think there will be some, but 

that is what the 45 days is for. 

I also agree with the comments that a number of you made, particularly those most recently by Ms. Wasserman-Schultz about port 

security being a very serious issue. I think it is. I don’t believe that 

ownership of terminal operators is the most important element of 

port security. There are a lot of other elements that make much 

more difference. And if you care, we can discuss that at a later 

point. But I think it is something that the Congress needs to look 

62

at, not only from the standpoint of resources, which is probably 

front and center, but also from the standpoint of some other legislation. 

I am particularly concerned, though, about the message we are 

sending moderate or cooperative Arab states through the actions on 

the Dubai Ports World case. I thought a good bit about the comments that Mr. Davis made a few minutes ago about that message. 

And I think where I disagree with him and what worries me about 

this is that we are, in attacking the proposed transaction, not distinguishing between Arab states that have been cooperative with 

the United States post-9/11, on the war against terrorism, terrorist 

financing, allowing our Navy to dock there and things like that, 

and states that have not. 

And if we’re not prepared to make that distinction, if we’re not 

prepared to acknowledge the progress that these states are making 

in cooperating with us, then I think we’re sending a very difficult 

signal to everybody in the Middle East about what is the point of 

cooperating with the United States if we’re going to treat you all 

the same at the end of the day? 

The UAE’s record is not an unblemished one. There’s no question 

about that. A lot of the information cited is pre-9/11. We had gaps 

in our procedures pre-9/11 as well. We’ve come a long way. I think 

they’ve come some way too. I would like to see a policy that acknowledges that progress. 

Now, with respect to CFIUS reform, one of the issues that has 

not been extensively dealt with that my colleague Mr. Marchick 

just touched on is that the process is, in fact, more subtle and 

nuanced than it is being given credit for in this hearing. More often 

than not in these cases, the government and the acquiring party 

work out security arrangements that address the concerns that 

have been raised. There were some in this case that I think bear 

some study on the committee’s part. 

I recall in the IBM-Lenovo case last year, for example, there was 

considerable discussion about security procedures that would guarantee the acquiring company could not access technology that was 

not part of the acquisition but which was located in the same physical area. 

In another earlier case that I was involved in, a separate board 

of directors was created to ensure continued American control of 

some sensitive military contracts that the acquiring company was 

taking over. 

In other words, there are solutions to these problems that are 

presented. CFIUS has been adept over the years at dealing with 

them, and I hope the committee will look at that nuanced element. 

Finally, let me comment on the question of transparency. CFIUS 

has historically made public very little information about its deliberations or decisions, and its record of consultation with the Congress is likewise limited, and I think it is fair to say that the process operated appropriately in this case. At this time, there’s no 

question that CFIUS over a long period of time has demonstrated 

a tin ear for the politics of these cases. 

The issue of how to address that, though, is complicated. If you 

want to have a more consultative process with the Congress while 

a case is pending, that is something that you need to think through 

63

the implications of fairly carefully. On the one hand, failure to consult and provide information to Congress can lead to exactly what 

has happened in this case, and that is something I think we all 

would prefer to avoid in the future. On the other hand, providing 

information can often lead to leaks or to further Congressional demands for involvement in the decision-making process, which I 

think would be unwise. 

I would also not minimize the risk of leaks. The information reviewed in a case is often highly sensitive in that it reveals internal 

details of corporate operation and finance that could have significant value to competitors. In addition, the agreements that I just 

referred to that are reached between the government and the applicant addressing new security procedures to be put in place, can 

also be sensitive, and could compromise the very security they’re 

designed to provide were they to become public. 

So I’d urge you to think long and hard about this before going 

down the road of more consultation, more transparency, and particularly more involvement in the decision-making process, which 

I think would be a level of micromanagement for the Congress that 

the framers of this provision back in 1986 and 1987 were wise to 

avoid. 

I do have some other recommendations in my full statement, but 

I won’t go into them at this time. Thank you, Madam Chairwoman. 

[The prepared statement of Mr. Reinsch can be found on page 

139 of the appendix.] 

Chairwoman PRYCE. Thank you very much. We appreciate your 

insights and look forward to reading the rest of them. 

And now finally, we will hear from Mr. Ervin. You’re next. 

STATEMENT OF CLARK ERVIN, DIRECTOR, HOMELAND 

SECURITY INITIATIVE, THE ASPEN INSTITUTE 

Mr. ERVIN. Thank you very much, Chairwoman and Ranking 

Member. Thank you very much for this opportunity to testify this 

evening on an issue that I believe is of profound importance to the 

security of our homeland, whether a foreign government with, at 

best, a mixed record on terror should be allowed to operate terminals at six major American seaports, a vulnerable strategic asset 

through which, experts agree, a terrorist would be most likely to 

smuggle a weapon of mass destruction into our country. The stakes 

could not be higher. 

Needless to say, a terrorist attack with a weapon of mass destruction could exceed the impact of 9/11 by several factors, resulting potentially in the deaths of millions of Americans, and bringing 

our economy to its knees. 

In the last few weeks, we Americans have learned a number of 

troubling things. I would wager that most Americans did not know 

until now that port terminals in this country have been operated 

by foreign companies for quite some time. Likewise, of course, most 

Americans did not know of CFIUS, the secretive interagency group 

that has the unilateral power to approve the acquisition by foreign 

companies of key U.S. strategic commercial assets after a mere 30-

day review, without being obliged so much as to inform the President, much less the Congress. 

64

And I learned just today from testimony from the first panel, I 

was under the impression that the acquisition by foreign governments of key U.S. strategic assets was unique in this deal. If not 

that, then certainly unusual. But we heard today that if last year 

is representative, this happens rather regularly. We heard last 

year that there were 65 transactions subject to CFIUS review 

which were approved, 12 of which the acquirer was a foreign government. 

In this instance, the already unduly rushed and lax CFIUS procedures were not followed. Even though the control of key operations by foreign government was at issue here, there was no investigation, the committee made the decision to approve the deal 

on its own, and the President was not even informed of the decision. 

At a minimum, to talk about process to start, the CFIUS process 

has to be changed. The review period is too short, and the committee has too much unilateral power. Where the control of a component of the Nation’s critical infrastructure or of a key strategic 

asset is concerned, and the acquirer is a foreign government, the 

law should require the committee to conduct a complete and 

lengthy investigation, which is to say more than 45 days, to determine whether permitting the deal to go forward could compromise 

national security. The committee may make a recommendation to 

the President, but then he should make his own decision based on 

his own independent review after, in my judgment, longer than 15 

days. Then—and this is the most important point—rather than 

simply notifying Congress of his decision as a fait accompli, the 

President, in my judgment, should have to seek and obtain Congressional approval for the deal to be finally approved. 

If treaties and trade agreements are important enough to require 

Congressional sign-off, as well as Presidential approval, certainly 

Congressional concurrence should be required before a foreign nation gains control of something as important as operating terminals 

at key seaports post-9/11. 

As I said, the foregoing goes to process. In terms of substance, 

this deal should not be approved under any circumstances, even if 

it had the support of both the President and the Congress. In the 

post-9/11 age, we should have learned by now that there is no margin for error when it comes to the security of the homeland. Under 

these circumstances, now that we know that operations at many 

other key ports are controlled by foreign companies, perhaps consideration should be given to prohibiting such control in the future, 

even if the company at issue is one based in a rock solid ally like 

Great Britain. But certainly, we should not hand over control of 

port operations to a nation that has strong links to terrorism. 

In the last few weeks—and I am closing—as this deal, the controversy over this deal has unfolded, I’ve listened carefully to the 

arguments of those who support this deal. Basically, they boil down 

to four. And over the course of the last 4 hours, we’ve heard all of 

them. 

One argument is that it is nativist, xenophobic, Islamophobic, 

and even racist to oppose this deal. In fact, opposition to this deal 

has nothing to do with UAE’s being an Arab and a Muslim country. 

If the acquirer here were the Government of Japan, whose people 

65

are Asian and Buddhist, or the Government of Norway, whose people are Caucasian and Christian, and either of those countries had 

the same record on terror as the UAE, I for one would be as opposed to that deal as I am to this one. It is UAE’s record that is 

at issue here, not the ethnicity or the religious affiliation of its people. 

Another argument is that if this deal goes forward, the new owners won’t have anything to do with security. This is flat out untrue. 

Yes, it is true that the Customs Bureau will inspect cargo, but only 

6 percent of cargo containers are opened. Yes, the Coast Guard will 

be in charge of port security still, but that simply means that it 

sets standards that are left up to the port terminal operators to 

comply with on a day-to-day basis. 

Key things, like hiring security personnel, patrolling the perimeter, and overseeing the unloading of cargo, will be handled by a 

port operator that is owned by the Government of UAE. 

Third, UAE has been, at least recently, an ally in the war on terror. And that may well be true. But port terminals are not carrots 

that should be handed out as rewards for other nations’ cooperation. If indeed our approval of such a deal is a quid pro quo for 

UAE’s continued support in the war on terror, it seems to me that 

the price is too high, and we should not pay it. 

The final argument, to my mind, is the most dangerous, and we 

heard it just a second ago. It would be ludicrous, it seems to me, 

if it were not so disturbing. According to some, our ports are already vulnerable because too little money has been spent to secure 

them, too few cargo inspections are conducted, we have too little 

radiation detection equipment, and the equipment we have is not 

that good. This is all true. But instead of agreeing to something 

that might make our ports more vulnerable, shouldn’t we address 

the vulnerabilities we already have? 

In closing, Chairwoman, you asked a very important question. I 

think it was the very first question. That was would this deal, if 

it goes forward, make our ports safer or less safe? No one on the 

other side of this question has been willing to say that this deal 

will make us more safe. Deputy Secretary Jackson’s answer was, 

‘‘Well, we won’t be any less safe. We won’t be any worse off than 

we are now.’’ 

Because of UAE’s record on terror, because UAE is in control of 

this company, and because of the key security tasks that port terminal operators provide, it seems to me that a very good case can 

be made that we will be less safe. But the standard in the post9/11 world should be approval of deals like this only if it makes it 

safe. And this deal does not pass that common sense test. Thank 

you. 

[The prepared statement of Mr. Ervin can be found on page 91 

of the appendix.] 

Chairwoman PRYCE. Thank you all very much, gentlemen. You 

all have shed great light on this issue. And I am not sure which 

one of you was so amazed by the fact that there was so much questioning about the CFIUS process, and that it wasn’t thorough, and 

it wasn’t tough. And perhaps it is. But the fact remains that Americans don’t realize that about the process. 

66

And if you want to characterize this as a big PR bungle, you 

may, because that is about 50 percent of what has happened here. 

This all could have been much less devastating for America if they 

had been prepared for this, if it had been rolled out in a way that 

they could understand and appreciate. 

And the same is true for those of us here on Capitol Hill. I don’t 

think anybody would argue with that. I think our first panel realizes that now. But the fact remains that perception is reality, and 

this has gotten bigger than anybody certainly wanted it to. This is 

a situation that it is very hard to find a win in the end of this, no 

matter what happens. 

And so I’d venture to guess that CFIUS will be reformed. We 

want to do that carefully. But I think that this—and some of you 

have suggested that should not happen at all. But it must be now. 

We have to. We’re living in a post-9/11 reality, and these issues 

can’t ever happen again. And we need to make sure that as oversight stewards that we’re doing that right. 

And so I guess my question is how can we change the process 

to make it as transparent as we can, to regain the trust of America 

in this process. Because Americans don’t trust this process, and it 

is only as good as the trust that our citizens have in it. So I don’t 

know if there’s any right or wrong answer to that or anything that 

you might be able to provide to us today. But we will be looking 

at this, and we will be looking to you for suggestions. So anybody 

have any of them now? Mr. Marchick? 

Mr. MARCHICK. Madam Chairwoman, thank you very much. I 

think there are improvements that can be made in the process, and 

I think that your comments hit the nail on the head in terms of 

creating more transparency and more openness so that you can do 

your job as an oversight chairman. 

A few ideas to improve the process. First, I think that national 

security is not defined under the statute. That was an intentional 

design of the drafters of the legislation in 1988. It leaves the national security decisions to the President and to the President’s—

to the agencies. And I think that is appropriate. 

What I do think could happen is that there could be guidance 

from Congress and greater clarity from the Administration as to 

the factors that the President and the CFIUS agencies will consider when evaluating a national security issue. 

There are five statutory criteria in the Exon-Florio statute dating 

back to 1988. They primarily focus on two issues. One is securing 

the supply chain for DOD, and second is control of export—export 

control technologies. I think in today’s day and age, the issues that 

CFIUS look at are much, much broader. They include protection of 

critical infrastructure, protection against espionage from foreign 

agents, protection of the Department of Justice and the FBI’s ability to conduct law enforcement investigations. There’s a broad 

array of much more comprehensive factors that the CFIUS agencies do consider, and those could be better articulated either by 

Congress or by the Administration. 

Second is I think that there needs to be much more reporting to 

the Congress and to the public on the type of transactions that go 

through CFIUS, the type of mitigation measures that they use to 

67

address national security concerns, the number of transactions that 

are withdrawn or abandoned. 

Just to give you a couple examples, if you look at the data between 1988 and 2005, there were 1,593 transactions that went 

through CFIUS. Twenty-five of them went to investigation. Thirteen of them were withdrawn. Twelve of them were decided on by 

the President. That data obscures the real way that CFIUS works, 

which is a lot of transactions—and I’ve had clients that have had 

this experience—go to CFIUS. The parties go to CFIUS. They talk 

about the proposed transaction. And CFIUS will either say right up 

front, ‘‘It’s not going to happen.’’ Or after spending a lot of time reviewing the transaction and trying to find ways to mitigate a transaction, mitigate the national security concerns of a transaction, 

they’ll say, ‘‘You can send this transaction to the President, but 

there’s a unanimous view within CFIUS that the President will 

turn this down.’’ 

And it is pretty easy for a CEO of a company to make the decision ‘‘Do I want to withdraw this thing and have it go away quietly, 

or do I want the President of the United States to make a public 

decision that my acquisition is a national security risk to the 

United States?’’ 

And so I think that much more detailed and comprehensive public data presented to you, Madam Chairwoman, would help the 

transparency of the process. And I would look to the type of reports 

the Department of Justice produces in Hart-Scott-Rodino, where 

they produce a very thick annual report, and you can have more 

frequent reports if you’d like. 

Chairwoman PRYCE. Yes, you may briefly—my time has expired. 

Mr. ERVIN. Yes. I laid out my recommendations, basically, in my 

statement. I don’t know, frankly, that in my judgment an expansion of the definition of national security to encompass in the post9/11 world critical infrastructure is required. To me, that is obvious. But I certainly would have no objection to such an expansion 

of the definition. 

But I think the key thing, as I say, is certainly when the 

acquirer would be a foreign government, and perhaps even when 

the acquirer is a foreign company, and the asset to be acquired is 

a key element of our critical infrastructure, there should be a 

lengthier investigation conducted by CFIUS. The President should 

conduct his own lengthy investigation, longer than 15 days. And 

then at the end of the day, it seems to me Congress must give its 

approval. 

I am quite confident if we had had that procedure here, the political pressures or such, that there would have been, just as there 

is now, bipartisan opposition to this deal such that it would not go 

forward. 

Chairwoman PRYCE. Thank you. I recognize the gentlelady from 

New York. 

Mrs. MALONEY. Thank you, and I thank all of the panelists. And 

I particularly want to welcome Clark Ervin. He served as the IG 

under the Bush Administration, the first appointee to the new committee that we formed for Homeland Security. And he’s writing a 

book on the gaps in our national security, and he’s a new father. 

68

So we welcome him and congratulate him on all these new events 

in his life. 

The GAO report came out with an extensive report that recommended steps to strengthen CFIUS. I’d like to place their report 

in the record, without objection. And I have authored a bill that 

embodies several of their recommendations, some of which have 

been mentioned by other panelists today. 

All of the panelists said on the earlier one that the definition of 

national security should be expanded. And they all agreed on that. 

But I agree with our last panelist, Clark Erwin, that it is very 

clear in the law now. And the law said that if it involved national 

security, there would be an automatic 45-day review. And they did 

not see that handing over 20 ports of critical infrastructure importance involved national security, which is mystifying to me. Absolutely mystifying. 

So I would want to change it that if a foreign country is buying 

the management—there have been foreign managers, particularly 

for their own lines, but as I understand it, this is the first time 

that a foreign government has control of the management of an entire port in the United States—in this case, 20—that certainly this 

criteria should trigger a longer review. And I would like to ask Mr. 

Ervin if he agrees. 

Mr. ERVIN. I certainly do. There’s no question about that. 

Mrs. MALONEY. And you mentioned you were writing a book on 

closing the gaps. And I understand that Hong Kong reviews every 

cargo coming into their port. And it is a substantial report. They 

X-ray it, they review it, they inspect it. And we in the United 

States are only inspecting 5 percent of our cargo, and I think we 

should have the same standard. If Hong Kong can review all of the 

cargo coming in, certainly the United States of America should. 

And I’d like to ask Clark Ervin, the report that came out from the Coast Guard, they came out with a report requesting $4.5 billion over the next 10 years for port security. And we put in the 

budget for this year roughly $175 million. Do you think that is an 

adequate commitment to port security in our country? 

Mr. ERVIN. Well, I don’t have a precise figure in my mind, Congresswoman—and by the way, thank you for your kind words—as 

to what I think the Coast Guard budget should be, but I would certainly make the larger point that we have not funded port security 

to the level that we should. We’ve spent something between $18- 

and $20 billion since 9/11 to secure aviation, and it seems to me 

we should have done that. And that is all to the good. 

But as I said early on, it seems to me the most area of vulnerability is our ports. Everyone agrees. And the one thing that President Bush and Senator Kerry agreed on in the 2004 Presidential 

debates was that that is the number one vulnerability. And everyone knows that terrorists are most likely to smuggle a weapon of 

mass destruction, or attempt to do so through our ports. So we 

need to spend substantially more money. There’s no question about 

that. 

Mrs. MALONEY. And I believe you raised some very important 

issues that even though they are managing the port, there still is 

the opportunity for activities that an American company would not 

allow. And I think we should have a higher standard. I look forVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
69

ward to this review. But it was testified by the former panel that 

there was absolutely nothing we could do about it, that if it was 

approved, it would go forward. 

And many of my constituents, of all the things that have happened, they feel deeply that we need greater port security, and they 

feel that this does not reach the level of common sense for the critical infrastructure of our country. 

Mr. ERVIN. Well, I certainly agree with that. There’s no question. 

If I might just expand on one point that I touched on in my remarks, which has not been remarked on very much here. It is very, 

very important to understand what words really mean. It is really 

important to understand exactly what role port terminal operators 

play in security. It is not sufficient to say, as I said in my statement, that the Coast Guard remains in charge of port security, and 

that Customs will continue to conduct inspections. Too few inspections are conducted. 

As you noted, Hong Kong is somehow capable of inspecting 100 

percent of cargo. Perhaps that should be done in this country. Certainly, more inspections should be conducted. But the point is right 

now, only 6 percent are. 

And it is one thing for Customs to set standards. The point is 

whether those standards are complied with. And whether those 

standards are complied with on a day-to-day basis, on an on-theground basis, is largely up to the port terminal operators. I do not 

want a country with such a record in charge of hiring security personnel, being privy to what the port vulnerabilities are, and to 

what the plans against which the Coast Guard is measuring security are. Obviously, if that information were in the hands of a terrorist, it could be easily exploited to perpetrate murder and mayhem in our country, and that is something that, needless to say, 

all of us should want and work very hard to try to avoid. 

Mrs. MALONEY. Thank you. 

Chairwoman PRYCE. The gentlelady’s time has expired. Ms. Lee? 

Ms. LEE. Thank you, Madam Chairwoman. Let me thank the 

panel again for being here. And I want to pose the same question 

I asked the previous panel. But first let me just once again remind 

you of what the 9/11 Commission said. The 9/11 Commission report 

concluded that terrorists have the opportunity to do harm as great 

or greater in maritime and surface transportation than the 9/11 attacks. 

Several months ago, this report came out. And for the most part, 

the grades were primarily D’s and F’s in terms of the implementation of the follow-up. Given the fact that we all have to see domestic security, port security, and airline security as central in ensuring the protection of the American people from a terrorist attack, 

how do you see this deal in terms of the scoring now? Just a simple 

do we go from an F to a D, a D to a C, a C to a B, a B to an A? 

How would this fit now with the recommendations of the 9/11 Commission report? Because obviously, we need to do much more to enhance port security and airline security, and so we have to measure 

all of these transactions within the context of the world we live in 

now. 

70

And so I’d just like to start asking each of you to kind of comment on what this does to the overall scoring of the recommendations of the 9/11 Commission report. 

Mr. GLASSMAN. Ms. Lee, are you referring to this impending 

sale? 

Ms. LEE. Yeah. 

Mr. GLASSMAN. I think it has very little effect. This is a company 

that was just named the best container operator in the world last 

year by a peer group. It has a very good record. It is very well respected. 

The real problem in security, protection against a seaborne 

WMD, is at the source. My colleague at the American Enterprise 

Institute, the real expert on this, Veronique DeRugy, says, number 

one, stop terrorists from acquiring fissile material for building a 

bomb. We only spent $250 million to do that. 

Number two, stop such material from getting on the ships in the foreign ports. Last year, we only spent $139 million on that. And 

by the way, Dubai was—UAE was the first country in the Middle 

East to participate in the program that we do have, the Container 

Security Initiative. And third is protection in the ports itself, which 

is where we spend most of our money. 

You know, it doesn’t help us to detect a bomb in the Port of 

Philadelphia a few minutes before it goes off. The place to detect 

it is before it’s been put on a ship, and that is really where we need 

to put our efforts. 

Mr. MALAN. Ms. Lee, I don’t represent either of the parties in 

this transaction, and I don’t have a lot of understanding of the details of the transaction. The one comment I’ll make is that obviously, everybody at the hearing has pointed to the fact that port 

security is incredibly important. In my testimony, I pointed out 

that it may not relate 100 percent to the ownership of the company 

on the port side. 

Mr. Ervin pointed out that Hong Kong is screening 100 percent 

of the packages that come through the port. That doesn’t relate to 

the capital—that is their decision to screen every single one that 

comes through their port. 

So I would urge as we look at this that we not just look at ownership. We look at the vulnerability of the fact we’ve got 

vulnerabilities in our port, as you’ve pointed out, and as the 9/11 

Commission pointed out. 

Mr. REINSCH. Well, I think as far as U.S. ports are concerned, 

Ms. Lee, it wouldn’t make a lot of difference. The important things 

for domestic port security are the recommendations that Mr. Ervin 

made, which I think are wise. 

One of my colleagues on the NFTC staff has seen the Hong Kong 

operation, and it is an impressive one, and I think it is a fair question why we can’t or don’t do something similar. 

I do think, however, that one of the things the committee might 

want to keep in mind with respect to this transaction is that, as 

Mr. Glassman said, a significant part of port security really is trying to stop things from being on-loaded at the port of embarkation, 

as well as checking them here when they come in. It is far better 

for us if we can catch people before they put bad things on board 

the ship. That demands a very high degree of cooperation, both 

71

with port authorities overseas and with terminal operators overseas. Hence, the Container Security Initiative that the Administration has talked about and Congress has supported, as well as some 

other initiatives. 

This company operates ports all over the world, not simply the 

ones they’re going to acquire in the United States. In fact, these 

are the first facilities they’ll have in the United States. 

To the extent that we can extend and enhance and deepen our 

cooperation with this company, that will help us in our ability to 

detect and deter the on-loading of dangerous things in other ports. 

Mr. ERVIN. Ms. Lee, Chairman Kean has spoken to just that 

point. And he, like I, for what it is worth, thinks that if this deal 

goes forward, that would be a step back with regard to port security. I don’t recall what grade the 9/11 Commission assigned to port 

security today. It was either a D or an F. And whatever the next 

letter grade is below would be the grade, it seems to me, that 

would be earned if this deal were to go forward. 

If I might just take 1 minute to just respond to the point that 

it is a good thing that the UAE is a participant, the first participant, as I understand it, in the Container Security Initiative. Everyone agrees, as has been said here, that it makes sense to push 

the borders out. It may well be too late to search a cargo container 

when it comes to the United States. 

But the GAO did a report on the Container Security Initiative 

just last year. They pointed out that 35 percent of cargo is not targeted, is not assessed to determine whether it should be inspected 

or not. So one third, we have no idea whether it should have been 

inspected. Of the remaining two-thirds that might be inspected, the 

GAO reported that in these ports abroad, 28 percent of the time 

when we ask foreign inspectors to conduct inspections—and by the 

way, we don’t do the inspections ourselves. We’re dependent upon 

them to do it. Twenty-eight percent of the time, nearly one in 

three, they refused to do it. 

I don’t know what the specific record of UAE is in this regard, 

but I would urge the committee to obtain that information from the 

Department of Homeland Security. It might come out— 

Chairwoman PRYCE. The gentlelady’s time has expired. Thank 

you. Mr. Bachus? 

Mr. BACHUS. Thank you. Gentlemen, let me ask this one question. I just want to clarify. I want to see if I’ve got this right in 

my mind. How many of you were for the ports deal? You’re satisfied that it is a good deal? So one out of four? Or two. Okay. 

Let me ask the two of you. I’ll just address it to both you gentlemen. That is Mr. Glassman and Mr. Reinsch? 

Mr. REINSCH. Reinsch. 

Mr. BACHUS. Reinsch? Okay. One difference that I see is that, 

you know, it’s been said that this is a transfer from one foreign corporation to another foreign corporation? Is that what basically is 

your understanding, that one foreign corporation owns—I mean is 

the terminal operator, and it is transferring to another foreign corporation? 

Mr. REINSCH. That is factually correct in this case, yes. 

Mr. BACHUS. You know, that is what I was—you know, to read 

the paper, that is what you would assume. But now, when you acVerDate 0ct 09 2002 11:01 Oct 25, 2006 Jkt 030179 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 F:\DOCS\30179.TXT HFIN PsN: TERRIE
72

tually look at the legal documents, it appears to be that P&O 

Steam Navigation Company owns a wholly-owned U.S. subsidiary, 

P&O Ports North America. So really, the terminal operator right 

now is a wholly-owned American subsidiary. Is that not correct? 

Mr. REINSCH. I think that is why CFIUS would have jurisdiction 

over the case, because they’re taking over an American— 

Mr. BACHUS. Right. So, I mean— 

Mr. REINSCH. But the parent is British. 

Mr. BACHUS. So right now, despite the fact that the press, I 

think, has pretty much said that this is, you know, a British company that is operating the ports, in fact, it is an American company, a wholly-owned United States subsidiary of a British company. But it is a U.S. entity, P&O Ports. 

Now, the purchaser is not really—it is not—it is PCFC, but it is 

a wholly-owned subsidiary of Dubai Ports. But unlike the fact that 

it is not a U.S. subsidiary, it is a Dubai corporation. So you’re 

transferring ownership from a U.S. subsidiary of a company to a 

foreign subsidiary of a company. And is that not significant? 

Mr. MARCHICK. Sir, I am not familiar with the corporate structure, but I would be very surprised if Dubai goes forward with this 

deal that they would not set up their own U.S. subsidiary. 

Mr. BACHUS. No, that is what they’ve done. It is Thunder—it is 

called Thunder FZE, a Dubai Corporation. 

Mr. MARCHICK. And it is very common for— 

Mr. BACHUS. And I am not even sure that it is a public corporation. I don’t know. It may be a private corporation, which would 

even present problems that we don’t have with—you know, obviously, there’s control and visibility into a U.S. subsidiary that is 

not true of a private wholly-owned subsidiary, a foreign privateowned subsidiary of another foreign corporation. 

Mr. MARCHICK. Well, it is typical for foreign companies to create 

a U.S. subsidiary, to own 100 percent of that U.S. subsidiary. 

Mr. BACHUS. Sure. 

Mr. MARCHICK. And the U.S. Government has jurisdiction over 

the entire U.S. subsidiary, whether the foreign company is public 

or private. 

Mr. BACHUS. Exactly. And what Dubai Ports is doing is not creating a wholly-owned U.S. subsidiary. In fact, one of the mitigating 

agreements we could enter in is saying, ‘‘Okay. If you want to operate—if you want to own the terminal operator, you will create a 

wholly-owned U.S. subsidiary.’’ 

Mr. MARCHICK. Sir, for tax reasons, for other reasons, they have 

to create a U.S. subsidiary. I don’t think they can operate this company without creating a U.S. entity for tax purposes and organizational purposes. And that U.S. subsidiary will be the subsidiary 

over which the United States has jurisdiction and with which— 

Mr. BACHUS. The British did it, though. 

Mr. MARCHICK. Yeah. I’d be surprised if the Dubai company— 

Mr. BACHUS. Well, I’d be surprised too. But what I am saying to 

you is what seems to be missed in all this, and I have read in the 

paper today, yesterday, last week, that this is a British corporation, 

and a Dubai corporation is taking the place of a British corporation. And hey, you know, we let the British do it. Why don’t we let 

73

UAE do it? That is not what is happening here. And I don’t know 

why there hasn’t been more focus on that. 

Now, I will say this. I come into this with a little different viewpoint. We have an Administration that has done everything right 

as far as terrorism in the last several years. So you can criticize 

them all you want to. We have not had a terrorist attack in our 

country, and I give the Administration an A-plus in that regard. 

And I think that we had a case here of the President not being 

fully advised by those around him. And that is just the opinion that 

I have. And I think that they were— 

Mr. GLASSMAN. Mr. Bachus, could I just add to that? 

Mr. BACHUS. Yes. 

Mr. GLASSMAN. I completely agree with what you just said about 

the Administration, and I think we need to give the Administration 

the benefit of the doubt. They have a perfect record on security. 

And I think one of the reasons that the record is as good as it is 

on security is because after 9/11, the Administration put a lot of 

pressure on countries like the UAE. They said, ‘‘You cooperate with 

us, or else.’’ 

And in my opinion, the UAE has cooperated. It hasn’t been perfect. But my gosh, you know, there are more port visits to the UAE 

than to any other port in the world. We fly our U2’s, our reconnaissance planes, out of there. They turn over terrorists to us. Certainly, they didn’t have a great record before, but we put pressure 

on them. And so I think this is of a—frankly. 

Chairwoman PRYCE. The gentleman’s time has expired. 

Mr. BACHUS. Can I—just to respond. 

Chairwoman PRYCE. Very quickly, please. 

Mr. BACHUS. I think it is absolutely correct that there are going 

to be some negative implications if Congress stops this deal. There 

will be some national security implications working the other way. 

And I think we just have to decide it is a balancing act. There are 

some definite negatives to saying to Dubai after this deal is moving 

forward, no. I mean, there’s going to be some consequences. 

Chairwoman PRYCE. The Chair recognizes Mr. Sherman. 

Mr. SHERMAN. Thank you. I would point out that we had a perfect record as far as preventing terrorists—for preventing international terrorism hitting the United States during the entire 

1990’s, at a time we were doing virtually nothing about terrorism 

and were absolutely awful in our national security. And the fact 

that we have not been hit again since 9/11 is, I think, if you look 

at the foreign policy situation, a case where bin Laden has decided 

that hitting America’s allies better fits his strategy. In fact, hitting 

us on 9/11 increased our efforts against his operations. Hitting 

Spain decreased Spain’s efforts against those who were allied with 

bin Laden. 

And so it is a political decision. You certainly can’t say that a 

decade without a terrorism attack on U.S. soil is a decade of great 

national security enforcement. Otherwise, we have had virtually 

half a decade since 9/11. We had a whole decade in the 1990’s, and 

we were spectacularly poor in our anti-terrorism efforts then. 

Mr. Glassman points out that it is important to prevent the terrorists from succeeding abroad, from getting their plans put together, from being able to bring in weapons of mass destruction 

74

and getting their hands on nuclear material, etc. But then goes on 

to talk about how cooperative the UAE has been. 

I would simply say—and I don’t know if you were here to hear 

the first panel. But in July 2005, Hamas issued a press release 

thanking the UAE for its very generous financial support, its 

unstinting support, in the words of that press release. And, you 

know, the UAE didn’t control that press release, but their response 

was to bask in the glory of associating themselves with Hamas, 

rather than to deny it. 

And as I said before, many of those very close to the current 

president of the UAE, including the current president himself, had 

been involved in providing funds to terrorist organizations like 

Hamas and Islamic Jihad. It is hard to see how allowing this transaction is consistent with the idea of stopping the terrorists from 

being able to build their bombs in their sanctuaries abroad. 

I’ve heard these comments about whether it is a separate corporation or not. I would point out that so far, Dubai Ports has simply said that it would be a separate business unit. And my guess 

is that once they talk to their tax lawyers, they’ll set up a separate 

U.S. corporation. But I don’t think we in the United States should 

be fooled that that which they do to dodge our taxes somehow 

makes us more secure. 

The key is ownership, and the ownership in this case is in the 

UAE Government, a government which basks in the praise it receives from Hamas for its generous contributions to that terrorist 

organization’s activities. 

I don’t know who to address this question to, but I’d want to shift 

gears to another issue, and maybe Mr. Ervin knows the answer. 

How do we finance our port security? Is it through fees on shippers, or is it from the general fund? 

Mr. ERVIN. Well, I am not an expert in that particular aspect of 

port security, Congressman, but I believe it is a combination of 

things. But I believe that the lion’s share of the financing comes 

from general appropriations to the Department of Homeland Security’s component parts. 

Mr. SHERMAN. And I would say that this whole process illustrates the tremendous political power of importers. We now have 

the largest trade deficit in history. We lose all the good manufacturing jobs. The dollar is precarious. And the possibility of worldwide depression is all there because of that enormous trade deficit. 

But the power of the importers is not just here in Washington. 

It is at the ports, where we have under-funded port security, because we’ve been unwilling to impose fees on those bringing things 

in through our ports. Why? Not because we’re doing a great job and 

we don’t need to do anymore. Not because we’ve got all the money 

we need in the general funds, and we’re happy to fund it that way. 

The reason we fail to collect fees adequate for a truly robust port 

security program, one that looks at the containers there as well as 

here, is the enormous political power of importers. 

I have yet to see a circumstance where the economic interest of 

importers has been subordinates to national security. I am sure 

there’s one or two cases where that has happened. I am just not 

aware of any. 

It looks like my time has expired. Thank you. 

75

Chairwoman PRYCE. The gentleman’s time has expired. And Mr. 

Scott. 

Mr. SCOTT. Thank you. I want to deal with a couple of issues. 

First of all, I’d like to set the record straight once and for all. Because I think that it is disingenuous of this Administration and 

those of you who are supporting this deal to play the race card. 

That is absolutely wrong. There’s nothing racist about protecting 

this Nation’s ports and national security. 

We do business with Arab countries, Islamic countries. We do 

business with foreign countries. This is no direct attack on that, or 

indirect attack on this. We do so much business with investment 

from foreign countries that 90 percent of what we spend on our 

government comes from foreign investment. We borrow that 

money. 

And just on the interest we’re paying these foreign countries is 

more than we’re spending on our own homeland security. This has 

nothing to do with that. It has everything to do with a country that 

has, at best, an extraordinarily mixed and checkered past of soaring magnitude when it comes to financing terrorists, working with 

terrorist organizations. A country that has that kind of a history, 

it is not healthy for us to engage in this type business. Maybe some 

other business. 

And that needs to be put to rest. This Administration does itself 

a disservice, and it certainly does this country a disservice, to try 

to simplify this as being some kind of racist deal. And for the fact 

of them even bringing this up lets you know that this deal is very 

shallow. 

I am very concerned that there may be something else rotten in 

the cotton in this deal. I can’t understand it, when it is just so obvious that it is not a deal that should have been going forward in 

the first place with all of these holes in it. 

And the President of the United States said many times in the 

war on terror, ‘‘If I err, let me err on the side of caution.’’ This ain’t 

caution here. This is throwing our security to the wind. And American people see it very, very clearly. 

I want to talk about another point. I mentioned in my earlier 

points about Hong Kong and the fact that they check 100 percent 

of their duty, their cargo. 100 percent. And they handle 22 million 

cartons per year, 22 million pieces that they check, whereas we 

handle only 11 million, 12 million. They handle almost twice as 

much, check 100 percent of it, and they’re not even a target of terrorists. Here we are, a target of terrorists, the number one target, 

and we don’t check 6 percent of it. 

These are the questions that we need to be grappling with, gentlemen. Clearly, to me, our first order of business is to put this bad 

deal behind us and run very quickly to secure our ports and put 

forward a reform package for CFIUS—I guess that is the way you 

pronounce it. I may be butchering it a bit, but your organization—

not in any way to be destructive of it, but to help this process. 

We need you. But there are some things broken here. And I 

think God works in strange and mysterious ways, and I think he 

sent this whole deal for us to wake this country up. I think this 

is a Paul Revere deal, an alarm bell. And I really thank God for 

76

it, because it is exposing us to a need that we need to rapidly deal 

with. 

Now, I just want to ask one point about a process within it, and 

I’ll be brief, Madam Chairwoman. The critical point in the CFIUS 

process is this business of the mitigation. Once a deal, once something is happening, you see it, and it goes through this process. 

Then you have mitigation agreements or letters of assurance. 

They’re negotiated between CFIUS and foreign companies to address the security concerns. But they’re not monitored. They’re not 

enforced. There’s no agreement regarding which agency is responsible for monitoring these agreements. In addition, there’s no mechanism for CFIUS to overturn a decision based on a failure to comply with the agreement. 

Chairwoman PRYCE. The gentleman’s time has expired. If you 

want to ask a brief question, please go ahead. 

Mr. SHERMAN. Exactly. I’d like to get somebody’s comment of 

that. And Mr. Clark, I just want to state that as Humphrey Bogart 

said to the police captain in Casablanca, ‘‘You got it right, my 

friend. You got it right.’’ But could somebody just address the holes 

in the mitigation process, the point I just brought up? Thank you. 

Mr. MARCHICK. Thank you, Mr. Scott. And thank you for the opportunity to engage with you on this. And we’d be happy to work 

with you and your staff to talk about reform ideas and share our 

thoughts and input with you. 

First of all, I agree with you that there is good to come from this 

deal, and that there are two things. One is the focus on port security, and you and Mr. Ervin and the Chair have spoken eloquently 

about that. And I think this is a wake-up call, and I hope that we 

can use this to focus on strength in our ports. 

The second is that I think this brings focus on this process and 

greater transparency, which I think is helpful. And I think, hopefully, future oversight hearings by you will continue that process. 

The irony of this deal is that it has created a perception that 

CFIUS has too light a touch, that when they balance the security 

and economic factors, that the security factor is not given enough 

weight. In my experience—and I am not involved in this deal. I 

have no interest at all—since 9/11, the security side of the equation 

has so far outweighed the economic interest and the need for us to 

track foreign investment that it has created a process that is overbearing in many cases. And I’d be happy to brief you on the types 

of security requirements that have been imposed on foreign companies investing in the United States. 

The Congress has not given Homeland Security and other agencies the authority to regulate security in a lot of these areas: chemical security, port security, etc. And so any time a foreign company 

comes to the CFIUS process, there’s piling on. That is all the ideas 

and all the concerns that the agencies have about a particular industry, they pile on security requirements on one particular company. 

Now, in terms of enforcement, the agreements—and I’d be happy 

to share with you some examples of agreements—are very clear in 

terms of who has the authorization and the responsibility to enforce them. It is typically the Department of Justice, the Department of Defense, or the Department of Homeland Security. They 

77

have very, very tough enforcement provisions, criminal and civil. 

They have very, very tough follow-up. We have had clients where 

the FBI calls and says, ‘‘We’re sending four agents down there. 

We’ll be there tomorrow,’’ and they stay for 3 days doing an audit. 

Talk about scaring a corporation. Talk about making sure people 

are focused. 

Chairwoman PRYCE. I am going to have to stop you there. We 

will have an opportunity, Mr. Scott and members of the panel, for 

additional questions or additional responses, if you so desire. Without objection, the hearing record will remain open for 30 days. Remember to submit those, or for you to augment your statements 

with further information for us. 

And with that, we have been at this very long and hard. Thank 

you very much for your insights and your perceptions and your patience, and we will be adjourned as this hearing concludes. 

[Whereupon, at 6:17 p.m., the subcommittee was adjourned.] 

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