Treasury Dept. - CFIUS and National Security in Dubai Ports World Bid for Port Operations

U.S Department of Treasury ^ | February 24, 2006 | Press Release

[HAL9000]

February 24, 2006
JS-4071

CFIUS and the Protection of the National Security in the
Dubai Ports World Bid for Port Operations

History of the Dubai Ports World proposed acquisition of P&O

All members of the Committee on Foreign Investment in the United States (CFIUS) understand that their top priority is to protect our national security, including homeland security.

On November 29 of last year, two companies publicly announced a proposed transaction: Dubai Ports World (DPW), a state-owned company located in the United Arab Emirates, proposed to acquire The Peninsular and Oriental Steam Navigation Company (P&O), a British firm that operates in a number of U.S. ports and other ports around the world. The acquisition would include terminal port operations at a number of U.S. ports - not the ports themselves.   The Department of Homeland Security (DHS), particularly the Coast Guard and U.S. Customs and Border Protection, is in charge of port security.

DPW and P&O believed that this proposed transaction could raise national security issues that should appropriately be reviewed by the U.S. Government.  The companies contacted CFIUS on October 17 and voluntarily told the Committee of their intention to file a notification with CFIUS for a national security review.  They also held a complete briefing for DHS and other CFIUS members with security, defense, or law enforcement responsibilities on October 31.

Each of the CFIUS 12 members (departments and agencies) conducts its own internal analysis. In this case, the Departments of Transportation and Energy were also brought in to the CFIUS review to widen the scope and to add the expertise of those agencies reviewing the transaction. 

On November 2, well before DP World and P&O filed with Treasury, CFIUS requested an intelligence assessment of the foreign acquirer.  A little more than 30 days later -- still well before the companies formally filed with CFIUS or the review began -- the intelligence community provided CFIUS with a threat assessment regarding whether the foreign acquirer -- DPW -- has the intention or capability to threaten U.S. national security.

On December 6, the companies held another pre-filing briefing for all CFIUS agencies.

On December 16, the companies officially filed their formal notice with CFIUS, requesting a review.  The 30-day formal review began on December 17.  During that 30-day review period, DHS, which is the CFIUS agency with specific expertise on port security, negotiated an assurances letter with the companies.  DHS also consulted with all other CFIUS members before the assurances letter was finalized on January 6.

On January 17, roughly 90 days after the parties to the transaction first approached CFIUS about the transaction and roughly 75 days after a thorough investigation of the transaction had begun, all CFIUS members agreed that this particular transaction should be allowed to proceed, pending any other regulatory hurdles before the companies. 

 Background on the Committee (CFIUS):

CFIUS operates under the authority granted by Congress in the Exon-Florio amendment (Section 721 of the Defense Production Act of 1950).

CFIUS brings together twelve department and agencies with diverse expertise to ensure that transactions are considered from a variety of perspectives and that all national security issues are identified and considered in the review of a foreign acquisition.

The Secretary of the Treasury serves as the Chair of CFIUS. Other CFIUS member agencies are: The Departments of State, Defense, Commerce, Homeland Security, and Justice, and the Office of Management and Budget, the Council of Economic Advisors, the National Security Council, the National Economic Council, the Office of Science and Technology Policy, and the US Trade Representative. 

The Departments of Energy and Transportation, the Nuclear Regulatory Agency, and other U.S. agencies sometimes participate in the consideration of transactions that have an impact on the industries under their respective jurisdictions. 

Treasury receives notices of transactions, serves as the contact point for the private sector, establishes a calendar for review of each transaction, and coordinates the interagency process.

The intelligence community also provides CFIUS with an independent assessment of whether the foreign acquirer poses a threat to the national security. 

Upon receipt of a filing, CFIUS conducts a 30-day review, during which time each CFIUS member agency conducts its own internal analysis of the effects on national security implications of the notified transaction, and particularly an analysis of the foreign acquirer.  The agency(ies) with primary concern with a particular transaction will take the lead in negotiations with the foreign company. 

All CFIUS decisions are made by consensus of the entire committee.  The review process allows for any agency that sees a potential threat to the national security, as is its obligation, to raise those concerns within the review process.  In such a case, an extended 45-day investigation period would commence.

The Exon-Florio amendment prohibits disclosure to the public of any documents or information about a transaction that is provided to CFIUS or the President pursuant to Exon-Florio.  Federal employees could be subject to criminal and other sanctions for making an unauthorized disclosure of such information.

[Shermy]

"The Secretary of the Treasury serves as the Chair of CFIUS."

But Snow said he didn't know about it until after it was "approved."

"Other CFIUS memberagencies are: The Departments of State, Defense, Commerce, Homeland Security, and Justice, and the Office of Management and Budget, the Council of Economic Advisors, the National Security Council, the National Economic Council, the Office of Science and Technology Policy, and the US Trade Representative."

Member agencies? The CFIUS website says the committee members are designated persons:

http://www.treas.gov/offices/international-affairs/exon-florio/

In 1993, in response to a sense of Congress resolution, CFIUS membership was expanded by Executive Order 12860 to include the Director of the Office of Science and Technology Policy, the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy. In February 2003, the Department of Homeland Security was added to CFIUS. This brought the membership of CFIUS to twelve under the chairmanship of the Secretary of Treasury. The other members are the Secretaries of State, Defense, and Commerce, the Attorney General, the Director of the Office of Management and Budget, the U.S. Trade Representative, and the Chairman of the Council of Economic Advisers.

[Wuli]

I see, the media can find moles to leak when it wants to unveil some evil "conservative" plot, but when some mid-level bureaucrats, personally friendly with some high-powered lobbyists tell us:

"All members of the Committee on Foreign Investment in the United States (CFIUS) understand that their top priority is to protect our national security, including homeland security.", and then tell us:

"The Exon-Florio amendment prohibits disclosure to the public of any documents or information about a transaction that is provided to CFIUS or the President pursuant to Exon-Florio. Federal employees could be subject to criminal and other sanctions for making an unauthorized disclosure of such information.",

we must simply trust its all on the up-and-up, while we can't get a single disclosure of who said exactly what to whom in the vetting of this deal.

But we do know it has the strangest set of bed-fellows who agree with it.

[calcowgirl]

Here are a couple of links to lengthy but informative documents:

http://www.gao.gov/new.items/d02736.pdf

General Accounting Office (GAO)
Report to the Chairman, Subcommittee on National Security, Veterans Affairs, and International Relations, Committee on Government Reform, U.S. House of Representatives
DEFENSE TRADE: Mitigating National Security Concerns under Exon-Florio Could Be Improved
September 2002

(snip)

The Committee initiates investigations only when it cannot identify potential mitigation measures in the review period to resolve national security issues arising from the acquisitions or when it needs time beyond the 30-day review to negotiate potential mitigation measures and the companies involved are not willing to request withdrawal of their notification. Of 320 acquisitions notified to the Committee from 1997 through 2001, only 4 were investigated; and only 1 resulted in a presidential determination. For acquisitions in which the Committee identified national security concerns but was unable to mitigate them within the 30-day review period, it allowed companies to withdraw and resubmit their notification to provide further information and/or provide additional time to mitigate those concerns. Also, the additional time allowed agencies to take actions under other laws and regulations that could address the Committee’s concerns. Where these actions would address concerns, the Committee could approve the acquisition without resorting to an investigation.

(snip)

The Committee operates at two levels: staff representatives who perform initial reviews of companies’ notices and principals who are the decision makers on issues of national security. The Secretary of the Treasury serves as the Committee Chair and Treasury’s Office of International Investment coordinates the Committee’s activities. This office has the dual responsibility of monitoring foreign investment in the United States and advocating free trade and world markets open to foreign investment, i.e., the U.S. open investment policy. In implementing Exon-Florio, the Committee seeks to preserve the confidence of foreign investors that they will be treated fairly while implementing the intent of Exon-Florio. That is, to provide a mechanism to review, and if the President finds appropriate, to restrict foreign investment that threatens to impair the national security.

http://www.treas.gov/press/releases/js2981.htm

Deputy Secretary Robert M. Kimmitt
U.S. Department of the Treasury
Testimony before the United States Senate Committee on Banking, Housing, and Urban Affairs
October 20, 2005

Chairman Shelby, Ranking Member Sarbanes and distinguished members of the Senate Committee on Banking, Housing and Urban Affairs, I appreciate the opportunity to appear before you today to discuss the Committee on Foreign Investment in the United States (CFIUS), and how CFIUS conducts national security reviews of foreign acquisitions of companies as required under the Exon-Florio amendment. I am here speaking on behalf of the Administration, the Treasury Department, and the Committee on Foreign Investment in the United States (CFIUS).

(snip)

[SpaceBar]

Seems odd. One would think that a group called Committee on Foreign Investment in the United States would have foreign investment in the United States as their top priority not protecting national security. But hey, that's just me.

[calcowgirl]

It is definitely high on their priority list. From the GAO Report linked above:

The Secretary of the Treasury serves as the Committee Chair and Treasury’s Office of International Investment coordinates the Committee’s activities. This office has the dual responsibility of monitoring foreign investment in the United States and advocating free trade and world markets open to foreign investment, i.e., the U.S. open investment policy.

And, from Kimmitt's testimony:

In my view, the concept of national security includes both traditional foreign policy and defense criteria and economic considerations. Indeed, I believe there is an inherent link between our national security and a strong U.S. economy that facilitates free and fair trade, market-based exchange rates, and the free flow of capital across borders. We are mindful of the positive benefits of foreign investment to our country and therefore seek to maintain the traditional U.S. open investment policy.

Indeed, we cannot protect the national security without a strong economy, and foreign investment strengthens the U.S. economy. . . .

[Willie Green]

"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."

-- President Andrew Jackson - (1824)

Reform CFIUS to Stop Foreign Raiders from Dismantling the Defense Industrial Base

[Wuli]

Well, regardless of the name of the committe it was actually established so that all "national interest" concerns, security included, could be brought together at a supposedly high level and a consensus agreement reached by this committee. The priority is not supposed to be "foreign investment" at the expense of national security, nor should it be blind and totally nuetral to major political issues.

[Freee-dame]

Exon-Florio amendment bump