To Ease U.S. Concerns, Chinese Shipper Cosco Offers to Put California Terminal in a Trust

Editor’s note: A Chinese government influenced company should not be allowed to manage the Port of Long Beach.  At least until a US government entity manages the Port of Shanghai. This is an example of weaponized foreign investment in the US that the Committee on Foreign Investment in the US (CFIUS) should stop.

Chinese state-run Cosco Shipping Holdings Co. has offered to put a large container terminal in Long Beach, Calif., in a U.S.-run trust to allay U.S. national-security concerns about Chinese ownership of the facility, according to people familiar with the matter.

[ Costas Paris | June 20, 2018 | WSJ]

The terminal is part of Cosco’s proposed $6.3 billion purchase of an Asian shipping rival, which holds a long-term concession to operate the facility at the Port of Long Beach, one of the biggest gateways for imports into the U.S.

Cosco’s takeover of Orient Overseas International Ltd. 0316 4.23% , announced in July 2017, is undergoing a review by the Committee on Foreign Investment in the U.S., a federal panel that vets foreign purchases of American companies on national-security grounds.

Cosco executives met with CFIUS officials last week in Washington and proposed to place the Long Beach terminal in a third-party trust under U.S. management for up to a year, until it is sold, one person directly involved in the matter said. “Cosco will have no involvement or influence in the trust,” this person said. “It also filed a number of amendments previously required by CFIUS.”

It isn’t clear if that would satisfy concerns at CFIUS, which is chaired by the Treasury Department. A spokesman for the Treasury didn’t immediately provide comment.

The Long Beach terminal is one of the few in the U.S. that is almost fully automated and can handle some of the largest container vessels. The terminal is expanding to facilitate ships carrying more than 20,000 boxes each.

Cosco is looking for a buyer for the facility, another person said. Global port operators estimate the terminal is worth up to $1.5 billion.

CFIUS has scuttled several recent transactions, including Broadcom Ltd.’s $117 billion takeover of chip rival Qualcomm Inc. and the sale of MoneyGram International Inc. to Chinese billionaire Jack Ma’s Ant Financial Services Group.

Its review of the shipping deal comes at a tense time between the U.S. and China, with leaders threatening to impose new tariffs and regulators on both sides of the Pacific weighing in on more matters.

President Donald Trump escalated a trade conflict with China this week, asking his administration to identify a new list of $200 billion in Chinese goods that would be penalized with tariffs.

“We don’t expect the tariffs issue to become a barrier in the Cosco-OOIL deal,” said a senior Cosco official, who asked not to be named. “We have fulfilled what CFIUS has asked.”

A takeover of Orient Overseas would make Cosco the world’s third-biggest container operator in terms of capacity, behind Denmark’s Maersk Line and Switzerland-based Mediterranean Shipping Co. It also would create the second-biggest mover of U.S. imports with an 11.8% market share, according to the Journal of Commerce.

Cosco has minor investments in other U.S. ports, including another pier at Long Beach as well as at the ports of Los Angeles and Seattle. These assets haven’t been part of the discussions, the people said.

The proposed Cosco deal also would need approval from China’s Ministry of Commerce, which is waiting for CFIUS’s ruling. Cosco expects the Ministry of Commerce to approve the deal by the end of June.


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