President Bush heard about the controversial $6.8 billion sale of six American port operations to a company based in Dubai only a few days ago, a White House spokesman said on Wednesday. The deal has been criticized by members of Congress on both sides of the aisle: “This is totally inappropriate in the 9/11 world,” said New York Republican Rep. Peter King. What does a port operator actually do?
It gets cargo containers off of ships and puts them onto trucks or trains. A port operator also provides other services to the shipping industry: It does the paperwork to get incoming shipments through customs and uses its computer system to help connect the goods with potential recipients. But an operator’s reputation depends on its efficiency at loading and unloading—how many “crane-moves” it makes per hour, and how long it takes for a ship to come into port, offload, and get back out.
If the deal goes through, the Dubai company won’t own the U.S. ports it manages. In general, a private port operator purchases a contract with the local government (i.e., the public port authority) to run a business on-site. In exchange for that right, the operator promises a certain level of productivity, measured in terms of how much cargo it moves in a given amount of time. (This statistic is measured in “TEU,” the “20-foot equivalent units” that correspond to a standard-sized cargo container.)
To increase efficiency at a port, an operator can invest in new gantry cranes or other lifting equipment. If it has a long-term contract, it might also expand the number of berths for ships and build roads connecting those berths to the rest of the port. You might run into a bottleneck if there isn’t enough space on the ground to store and stack the long, metal containers, so some operators choose to expand the storage areas by paving nearby land.
Most operators invest in a computerized yard management system to help each trucker connect with his payload. A storage area filled with multicolored cargo containers can start to look like a maze of gigantic Rubik’s cubes. (Click here for a nice photo gallery.) In the old days, truckers, marine clerks, and crane operators would bark directions at each other through radios and keep track of shipments with a clipboard. Many ports now use automated systems with optical scanners; crane operators and truckers get printed-out instructions on where to pick up and deliver cargo. (Some ports have become fully automated, with computer-controlled cranes that deposit containers directly onto computer-controlled vehicles.)
The port operator also handles personnel issues. If they bring in new equipment or a new computer system, they’ll have to train the workers on how to use it. The operator also has to negotiate with the powerful dockworkers’ unions, especially when it wants to eliminate jobs with technology upgrades. (A labor dispute in 2002 resulted in a 10-day shutdown of almost 30 ports on the West Coast.)
What about security? Each operator must file a security plan with the Coast Guard and submit to inspections and audits. Other government agencies also work to keep an eye on the containers coming through the port.
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Explainer thanks Prabir Bagchi of George Washington University.