WASHINGTON — The aborted Dubai Ports World deal triggered a national debate and generated broader port security initiatives that are likely to preoccupy Capitol Hill.

Lawmakers have introduced about a dozen port-related bills in reaction to the public and Congressional uproar over the deal, and the issue of foreign ownership of key U.S. assets isn’t expected to go away soon, particularly in an election year. That leaves retailers and wholesalers that imported $89.2 billion in apparel and textiles to the U.S. last year concerned about the potential for more Congressional intervention in global commerce.

Domestic textile executives, however, view the potential fallout as an opportunity for U.S. Customs & Border Protection to receive more funding to increase inspections of containers for illegally transshipped goods.

Amid intense bipartisan political pressure, Dubai Ports World, which sought to operate terminals in six major U.S. ports, abandoned its efforts Thursday and said it would transfer those properties to an American-owned company. Dubai Ports World is based in and owned by the United Arab Emirates, which President Bush said was an ally in the war on terrorism, but which critics noted had backed the Taliban regime in Afghanistan and had an uneven diplomatic record.

The controversy spotlighted the vulnerability of ports to terrorist attacks.

“A lot of us watching this thought [Dubai Port World’s acceptance of a new 45-day review] meant it was over, but it wasn’t and it continues on,” said Robin Lanier, executive director of the Waterfront Coalition, a group that monitors cargo concerns for such retail members as Target, J.C. Penney and the Limited.

Erik Autor, vice president and international trade counsel at the National Retail Federation, noted that some 40 percent of the $22.4 billion in apparel and textile imports from China flows through the Port of Los Angeles-Long Beach, although many companies have been shifting shipments from Asia to the ports of Oakland and Seattle-Tacoma to avoid congestion in Southern California. In addition, a big portion of the sector’s imports from Latin America is shipped to the ports of New York and New Jersey, and Miami.

“I don’t know that we are through the woods yet on this thing,” Autor said. “More specifically, it raises the possibility that Congress may try to pursue ill-considered legislation prohibiting foreign operation of port terminals, which would create chaos at the ports because practically every terminal operation is foreign-owned.”

This story first appeared in the March 14, 2006 issue of WWD. Subscribe Today.

Officials from the Department of Homeland Security estimated that about 75 percent of all U.S. terminals are operated by foreign companies.

Retailers are fretting about several bills, such as one introduced by Rep. Duncan Hunter (R, Calif.), chairman of the House Armed Services Committee, which would require all containers entering U.S. ports to be inspected and also would block any foreign-owned company from owning or operating “critical infrastructure” such as seaports.

“Upwards of 16 million containers enter U.S. ports every year and I think the impact of inspecting every container would be devastating to the U.S. economy,” said Jonathan Gold, vice president of global supply chain policy at the mass-market Retail Industry Leaders Association. “I don’t think it would be realistic. You don’t need to inspect everything, but you do want to focus on ‘high-risk’ containers.”

Textile executives are hoping the issue will lead to more funding for Customs, which also inspects containers for illegal transshipments.

“The port story has really cast a spotlight on the fact that the enforcement capabilities of Customs are seriously under-funded,” said Cass Johnson, president of the National Council of Textile Organizations. “Right now, the chances of getting caught [with illegal shipments] is too low and that is an invitation to increased illegal activity.”

House GOP leaders said Friday they will propose legislation that would reform the process for investigating national security implications of foreign acquisition of such U.S. assets. Several lawmakers have introduced bills that would give Congress the final say in a foreign acquisition of U.S. ports and other infrastructure.

Action on port-related legislation is likely to come in the House as early as this week. Lawmakers are expected to vote on a $91 billion emergency spending bill for the war in Iraq and Hurricane Katrina recovery efforts, which also contains a provision to block Dubai Ports World from buying U.S. terminal operations from U.K.-based Peninsular & Oriental Steamship Navigation Co.

The outlook in the Senate is far less certain. Sen. Majority Leader Bill Frist (R, Tenn.) was forced to pull a lobbying reform bill from the Senate floor last week after an amendment was introduced by Sen. Charles Schumer (D, N.Y.) to quash the Dubai ports deal. Schumer has said he needs more information on Dubai Port World’s plan to transfer operations to a “U.S. entity.”

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