LONG BEACH: PROPOSED LEASE by CHINA OCEAN SHIPPING COMPANY (COSCO) at FORMER NAVAL BASE Shirley A

WikiLeaks Document Release http://wikileaks.org/wiki/CRS-97-476 February 2, 2009

Congressional Research Service Report 97-476 LONG BEACH: PROPOSED LEASE BY CHINA OCEAN SHIPPING COMPANY (COSCO) AT FORMER NAVAL BASE Shirley A. Kan, Foreign Aﬀairs and National Defense Division

Updated August 11, 1999

Abstract. At issue is a proposal by the City of Long Beach, California, to lease a terminal, to be built at property occupied by a closed naval station, to China Ocean Shipping Company (COSCO). COSCO is a commercial shipping company owned by China. Issues raised concern smuggling of guns by Chinese defense-related companies, proliferation of weapons of mass destruction, intelligence collection, and access to U.S. and Panamanian ports. In response, senior Clinton Administration oﬃcials wrote that COSCO’s use of a terminal to be built on former Naval property would not adversely aﬀect national security. The Navy will be transferring its closed facilities to Long Beach in 1999 and 2000. http://wikileaks.org/wiki/CRS-97-476 collection, and increased access to U.S. por collection, andincreased accesstoU.S. smuggling of guns by defe an expansion offacilitiesawarding toCOSCO,which has been linked by critics to Long raisedanumber of BeachandCOSCO Summary Former Naval Station Long Beach:ProposedLeaseby ChinaOcean This reportwillno smuggling ofguns by Chinesedefense-rela BeachCOSCO’s facilitiesatthePortofLong later canceledoveranissu shipping company acommercial Company ownedbywas (COSCO), (Thelease China. terminal, tobe builtat the site of a closedShipping naval station,Ocean toChina potential national security national of potential status issues, CRSreportprovi This October 17,1998. amendment toremovethewaiverauthority ActforFYAuthorization 1999( respectively, on May 29andSeptembe Defense submittedclassifiedreportson FBI’s Secretary the Asrequired, andthe ban. Director of the waive to President the 2826 thatprohibitstheNavy toconvey the ( FY1998-1999 Actfor Authorization pos Other Memberssaidtheproposedlease Navy willbetransferring itsclosed to be built on former Naval property wouldnotadversely affect national security. The offi Administration response, seniorClinton mass destruction,intelligence co CRS ReportforCongress Shipping Co.(COSCO) atFormer Naval Base A proposedlease(nowcanceled At issuewasaproposalbyCitythe ofL Some in Congress raisednationalsecur in Some Congressional Research Service Foreign AffairsandNationalDefenseDivision Received throughtheCRSWeb longer beupdated. Specialist inNationalSecurity Policy nse-related companies, wea companies, nse-related e unrelated to COSCO.) The proposed expansion of Theproposedexpansion COSCO.) to e unrelated llection, andaccesstoU.S. H.R. 3616/ Shirley A.Kan facilitiestoLong Beach in1999and2000. ) foruseofafutureterminal betweenthePortof P.L. 105-85 Long plan, Beach’s r 14, 1998. Conferees ontheDefense r 14,1998.Conferees ts and ports at the Panama Canal. ts andportsatthePanama ted companies,prolif (sec. 2822), andthePresidentsigned it on closed naval stationtoCOSCObutallows cials wrote that COSCO’s useofaterminal that wrote cials counter-intelligence ong Beach,California,toleaseacontainer des background andanalysis concerning issues. Some expressed concerns about concerns expressed issues. Some ity concernsaboutthisproposedlease.

raisedsomesecurity issuesconcerning ˜ ed no security ed threats.TheDefense P.L. 105-261

) contained a compromise in Section in acompromise contained ) The Library ofCongress pons proliferation,intelligence and Panamanianports.In and congressional action. ) retained Rep. Hunter’s ) retainedRep. eration of weapons of eration ofweapons implications, dated, implications, Updated August 11,1999 Order Code 97-476 F http://wikileaks.org/wiki/CRS-97-476 community wherethebaseislocatedhas the DefenseBase Closur to According 1994.Thenavalshipyardclosed inSeptember closure and realignment round oftheDODbase Navy— Beach —ahomeportforsome ships in Station Naval the at taking place operation spokesman KennethBacon sa COSCO Plan Long Beach’s 1 operating in the United States commercially forsome time.” COSCO’sfacilities inthe On March20,1997,DOD spokesmanKenneth U. presenceat government, COSCO’s Chinese of intelligence about collection Chinese ofLongPort increase would Beach Potential Implications for National Security Seattle. COSCOalsohashad ports. They are:Baltimore, Charleston, L COSCO shipsincommercial shipping orinwartime. Liberation Army (PLA). The PLA oritscommercial businesses,use however,may proliferation casesby described below, COSCOisnotrun the military, the People’s does notprovideany subsidies toCOSCO. government hasstatedthatitdoesnotinte COSCO isownedby theChinesegovernme shipping corporation, operates only company interestinthepr toexpress terminal. It has sub-leasedspace in the P million a year. facility into a moderncargo terminal, and plan, thePortofLongthe Under Beach ofLong Port through the arrives Beach. States United the to exports ofChina’s one-fourth busiest portinNorthAmerica,handling mo thousands ofothertransporta would generate about1,600engineering, e and usetheproperty tobuildanewcontainer Confirmed by avisit totheLong Beach naval facilities andportinJanuary 1998. The navalfacilitiesatLong Beach areclosed. There were concerns among some that an expansion of COSCO’s presence at the presenceat ofCOSCO’s anexpansion that some among There wereconcerns hasoperated ofLongCOSCO at thePort The City ofLong Beachproposedto acqui COSCO’s ships have made direct calls, de calls, ships COSCO’s direct have made tion, trade,andservicejobsnearby. Long Beachisthe facilities for trucking and ra facilities fortrucking and id on March 20, 1997, that “right nowthereisnoNavy that id onMarch20,1997, about 600 ships, the world’s la about 600ships,theworld’s U.S. navaloperations.Alt would spend$200milliontoconvertthe145-acre CRS-2 ong Beach, New York,Norfolk,Oakland,and the responsibility todetermineitsreuse. e andRealignment Actof1990,thelocal the terminal operator wouldpayterminal the atleast$14.5 oposed terminal.COSC acific Container Terminal. COSCO was the rfere with COSCO’s bus COSCO’s rfere with re than3.5millioncontai smuggling ofguns andothercontraband, Despite the gun-smuggling and chemical terminal. Under the plan, the new terminal nvironmental, and construction jobsand construction nvironmental, and was designated forclosure during the 1991 Beach since1981butdoesnothaveitsown Long Long at station Beach.”Thenaval S. ports representsS. commercial operations. nt’s Ministry ofCommunications.That atLong Beachclosed in September 1997. livering andreceiving cargo, seven livering at U.S. re the closed naval stationfromtheNavy (BRAC) process. Th Bacon said that “COSCO has been Bacon saidthat“COSCOhas 1 DepartmentofDefense(DOD) hough COSCOisownedby the il servicesaroundthecountry. rgest oceanshipping fleet. O, China’smerchant ners annually. About iness operationsand e navalstationwas http://wikileaks.org/wiki/CRS-97-476 Leasing ofCaliforniaBaseto Chinese,” Policy Issues the otherinvolvedalleged sh undermined U.S.nationalintere tothePLA ordefe ties has where COSCO have beentargets ofU.S. ballistic missiles,anumberofChinesedefe reported casesofChinesepro and rewardacompany involvedinshipments facilitate increased illegal smuggling ofcontrabandintelligenceChinese and collection, setting upsubsidiariesinTaiw by theportofKaohsiung COSCOtocallat owned PLA, ships the from allows facesathreat which Taiwan, that out pointed Some there hasnotbeenanaval 1997, September in argued, sincethe naval stationclosedin COSCO’s shipshavemadeca They wasactive. station also contended th Beach since1981withoutraising nationalsecu enforcement agents may be present at COSCO’sfacilities. smuggling quotas. andevasionoftextile under surveillanceby U.S.lawenforcemen United States have been subjecttoU.S.la 3 2 Probed,” Probed,” Mann, Jim and Ronald J. Ostrow.“U.S.Se andRonaldJ. Mann,Jim SeeCRSIssue BriefIB92056, Critics of the lease argued that a larger COSCO presence at U.S. portswould leasetoCOSCOargued the of Proponents ! ! the ship’s cargo until August 26, 1993. Before the completion ofthe the ship’scargo untilAugust 26,1993.Before the completion agree to allow U.S. representatives toparticipate ina Saudi inspection of originally disclosed the issue, along withextensiveChina details. didnot chloride. Oneunusualfactorinth gas —specifically,mustard gasnerve thiodiglycol and andthionyl believed that the shipwas carryingfor chemicals that could be used reaching Iran. from Yinhe, cargoship, States Chinese TheUnited The “Yinhe”Case government. Chinese the ispa Corporation, which ofthePLA, andNo Department the smuggling: Polywh Technologies, port of Oakland. TwoChinesecomp reportedlysmuggled aboardaCOSCO Gun Smuggling Case agents. is notthesubjectof ongoing inves Los AngelesTimes , updatedregularly, by Shirley A.Kan. sanctions,butnotCOSCO. , May 23,1996;Sanger, David E. . In July 1993,the United States sought to preventa liferation ofnuclear,chemical Chinese Proliferation ofWeaponsChinese ofMassDestruction: Current an through another country. . In. 1996,2,000AK-47assaultweaponswere lls to other cities around the lls toothercitiesaroundthe sts. Oneinvolvedthesmuggling of assault weaponsand ipping ofchemicalstoIran: 3 rt ofChina’sdefense COSCO is not being charged in this case being charged not and this is in COSCO New York Times York New CRS-3 September 1994andthenavalshipyard closed ws. COSCO’sshipshave tigations by Federal law enforcement at a focus on Long Beach was unfair, because unfair, afocusonLongat was Beach is case was that the Chinese media is casewasthattheChinese . TherehasbeendiscussionaboutCOSCO izes Assault Arms AsSmugglingArms izes Assault By China Is rinco, orChinaNorthIndustries nse-industrial compan Moreover, American workers andlaw American Moreover, anies wereunderinvestigation for t forcriminalactivities,including gun- presence closetothe ich isownedby theGeneral Staff nse-industrial compan related to weapons pr related toweapons ship, Empress Phoenix, into the into ship, EmpressPhoenix, that COSCOhasbeenatenantatLong rity concerns —evenwhilethenaval concerns rity 2 Critics have cited at least twocases , March13,1997. industries andownedby , andbiological weapons,and “SenatorsAsk forInquiry on country. Moreover,they Port ofLongPort Beach. ies ororganizations been reportedtobe oliferation. In the ies andallegedly http://wikileaks.org/wiki/CRS-97-476 P. Sullivan. Analysis security threat tothe Panama Canal.” the twoportsby HutchisonPortHoldings of theCommitteeonForeign Relationsconc agreed toremovetherequirementthatChin companies. Aspart of the negotiations a China. Thiswas the firsttime that China allowed foreignestablishing investment in such companyservice in branchoffices andsix Land) transportation upacontainer set to addition, Chinaagreed toallowtwoU.S.co San Diego, CA,PortHueneme,andHonolulu,HI. Kings Bay, GA,PortCanavera Portsmouth, NH,NewLondon andGroton,CT, 12 ports Those four-day’s advance notice. for12ports.Entrynotice, except byw ships allowed vessels flying the Chinese advance flag toenter any24-hour’s U.S.portwith flying vessels fl are opento American the ships and of Chinese ports by U.S.ships.Theagreement provided40 Chinese ports that Maritime TransportAgreement Terminals, aworld-class port ope Panama’s ambassador responded to the article, stating “Hutchison International in thesametypes ofcapitalis sayingterms, “I don’tthinkweshouldbete ofPitts Port McCarville, Presidentofthe James report. news the commercially according “two to sites,” strategic Atlantic, onthe OceanandCristobal Pacific onthe Balboa Canal: Panama ofthe sides on both The25-year China. southern allows lease muchofHong operates COSCO.” Hutchison and“membersofHu Chinese government” Anews reportconglomerates. alleged that this Hong Kong companythe has “ties to Ltd., Whampoa Ltd., asubsidiary ofHutchison February 1997,thegovernment 6 5 4 made abusinessdecision,notoneofstate.” by relying onitscompetitive advantages andits government. notonthe strengthof We March 19, 1997; Morgan-Gonzalez, Eduardo.LettertotheEditor. 27, 1997. See CRS Issue BriefIB92088, Woellert,Lorraine. U.S. Upset at Deal Panama Ceding Ports toChina. CRSReport96-767, In June 1996, the United States and China agreed to extend theagreement. In extend to In 1996,theUnitedStatesandChina agreed June Chinese accesstothePanama Another question involved access of Chinese Another questioninvolvedaccessofChinese , by Shirley A.Kan. not foundaboardtheship. inspection, the StateDepartmentsaid Chinadeclaredthatno inspection, Chinese Proliferation ofWeaponsChinese of Panama-U.S. Relations:C tic endeavorsaswehaveb l, FL, PanamaCity, FL, FL, St.Joe, Pensacola,FL,Port of 1988regulates theuseofAmericanports by Chinese of Panamaawardedalease rator based in Hong Kong, ma 4 Canal has been another ques another Canal hasbeen 6 CRS-4 nd for reasons ofreciprocity, theUnited States burgh, viewedthisdevelopmentineconomic Hutchison PortHoldings Ltd. tooperate ports ese vessels enter the 12 ese vesselsenterthe ag, subject to 24-hour’s advance notice, and notice, ag, subjectto24-hour’sadvance rribly surprisedtosee 5 mpanies (American President Lines and Sea- mpanies (AmericanPresidentLinesand A staffreporttoSe luded onMayof 14,1997,thatdevelopment didnotincludeLong Beach. They were to those12 portsrequired flags Chinese ith chemicals werefound.Afterthe “does not translate intoadirectnational translate “does not thatthesuspectedchemicalswere tchison’s boardof Kong’s portsand one ofHong Kong’s oldestandlargest Hampton Roads, VA, Charleston,SC, Hampton Roads,VA, ships to U.S. ports.TheU.S.-China ships toU.S. ontinuing PolicyConcerns MassDestruction: Backgroundand een encouraging themtodo.” to HutchisonPortHoldings Washington Times tion raised bytion critics.In nators HelmsandBiden de, by far,thebestoffer the Chineseproceeding ports listedaboveonly directors consultto several terminals in Washington Times , by Mark , March , http://wikileaks.org/wiki/CRS-97-476 1996, Chineseshipsnowprovide24-hour’snoticeforentry intoallU.S.ports. that ithopestoleaseashipping company otherthanCOSCO. terminal anewcontainer Long build to plans process). proceeding with Beachis closure Long Beach, withtransferofthetitle to environmental impactreport.In August Beach Board ofHarborCommissioners railyard, That andasealaunchfacility. proposal toredevelopthenava step inthe required environmental eval report onthedisposalofclosednavalst commitment.” environmental assessmentof fortheporttoproposeareuse legal California CourtofAppealsrule and won.OnApril29,1998,the on April4,1996.Longappealed Beach authorities intent of hadsigned aletter andCOSCO director executive port’s the because terminal, that theBoard ofHarborCommissioners That ruling questioned thepro O’BrienCOSCO onApril21,1997.Judge i review. the prejudiced lease ofthe existence the however,argued that terminal, orde RobertO’BrienJudge inLosAngeles as aterminalinSeptember1996andreaffi 1996. Long had Beach HarborCommissioners California-based corpor Inc., a TheCity America ofLong terminal. of the Terminals BeachandCOSCO Po the and BoardofHarborCommissioners the of VernonandCompton,Long Status of Long Beach’s Plan Status ofLongBeach’s after giving four-day’s notice. 8 7 Company (COSCO)isa national security issue.” OceanShipping City ofLong the between agreement andPort China Beachandthe Intelligence,Bureau ofCustoms,“there Coast isnoevidence Guard, and that the that, based onintelligence briefings fromthe Central Intelligence Agency, Office of Naval dated Dear Colleague letter Action Congressional U.S.PactsEase PortCallsby Chinese. Memorandum ofU.S.-Sino Maritime Discussions, signed 14,1996. June The Navy announcedonMaythat 26,1998, As orderedby O’Brien, Judge theHar A lawsuit(unrelated to concerns about Some Members in Congress disputed that th that Some MembersinCongressdisputed ation, hadsigned aleaseforth March 25,1997,RepresentativesHo cess of approving theenvir cess of 7 l stationby building amarine Since the Coast Guard August lifted thosein restrictions the developmentandthatth d in favor of the Port of Longd infavorofthePort Beach, agreeing thatitwas BeachHeritage (ahistoric Washington Times take place in 1999 and2000(aspartofthebase CRS-5 decision didnotinvolveCOSCO.TheLong uation. The Navy a 1998, theNavy itsclosedfacilitiesto leased rmed itinMarch1997,af bor Commissioners canceled the lease with lease the canceled bor Commissioners ation andshipyard atLong final Beach, the was predisposedtoapprovetheproposed was voted on June 1,1998,toendorsethe onJune voted COSCO) brought by closed navalstationbeforecompleting an red areview.Opponentsoftheplanned ssued atentativeruling onMay 20,1997. rt ofLongrt Beachhaddelayed construction approved theplantoreuseproperty it completedtheenvironmental impact ere werenationalsecurity issues.In a e proposedterminalinNovember onmental impactreportandheld (from AP), April 1,1997. containerfacility, intermodal e proposal was not a“pre- wasnot e proposal preservationgroup) against pproved LongBeach’s rn andDreierconcluded the neighboring cities ter SuperiorCourt 8

http://wikileaks.org/wiki/CRS-97-476 Senator Inhofe introducedse such conveyance ofany closedmilitary inst House-passedDefense Taylorthe amended shipping company ownedorcontrolledbyfo a to prohibittheconveyance of property at th introdu COSCO. RepresentativeHunter of Naval Intelligence, CustomsService, and Coast Guard commented onthe review. Departments ofTreasury, State, smuggling,or other crimes inthe United States. CFIUS includes representativesthe of engaged is espionage, in nor(3)COSCO security; national U.S. threaten Beach could commercial ports ones foroperating at U.S. found“nocredibleevidence”th (CFIUS) a review by the inter-departmental Committee onForeign Investment inthe United States 18, 1997,NationalSecurity AdviserSamuelBerg Navy.” U.S. the to OnJune threat orstrategic “posesatactical COSCO that believe not Congressman Solomon,Navy Secretary John concerns”resulting from COSCO’s commerce in the United States. In reply to “a reviewofDepartmentDefensereco occur.” not this plannedreuseshould Defense William Cohen requesting reviews ofwhether “there are any security reasons that Berger Security and Samuel Secretary National Adviser to letters wrote of and Feinstein the Presidentsigned onOctober17,1998 Conferees retainedHunter’samendm ban. the amendment by Representative Hunter toremove the authority forthe President towaive September 14,1998. Beach forcounter-intelligence andnational s at LongDefense submitted classified reports onimplications ofCOSCO’sexpansion U.S.counter-intelligence burden. As require the conveyance wouldnotadverselynati affect any that determines increased President the if (e.g., by asubsequentlease)isprohibited. allows thePresidenttowaiveban.Eith convey theclosed to prohibits theNavy November 18,1997( prohibit theconveyance ofthe closed na Critics in Congress raised nationalsecur raised Critics inCongress Some Membersrequestedo However, the Defense Authorization DefenseAuthorization the However, The Defense Authorization Actfor The DefenseAuthorization P.L. 105-85 parate bills (H.R. 2715 and (H.R. parate bills Defense, Commerce, and Justice. The CIA, andJustice. FBI, Defense,Commerce, Office fficial assessment.On ), containsacompromisein On MayOn 5, 1997,Secretary Cohenrespondedthat CRS-6 ced legislation (H.R.1138)onMarch20,1997, val stationatLong BeachtoCOSCO. (P.L. 105-261 e Naval Station, Longe NavalStation, naval stationatLong but BeachtoCOSCO According tothislaw, a waivermay be used rds reveals no significant national securityno rds reveals er directconveyance orindirect conveyance FYs 1998and1999,signed intolawon allation. In Octobe Act forFY 1999(H.R. 3616)containsan ; (2) COSCO’s planned expansion inLong; (2)COSCO’splannedexpansion national securityrisk ecurity, dated,respectively, onMay 29and Authorization bill(H.R.1119)toprohibit at: (1) COSCO hasreasonsotherthan at: (1)COSCO Dalton wrote on June 3,1997,thathedoes Dalton wroteonJune d, the FBI’s director and the Secretary of ent (in sec. 2822) in the final version that version ent (insec.2822)inthefinal ity concernsabouttheproposedleaseto reign country. In Rep. June, Hunter and onal securityonal or significantly increasethe er reportedtoMemb March 11,1997,SenatorsBoxer ). S. 1306)tomorenarrowly Section 2826 thatnarrowly r 1997, Rep.Hunterand Beach, toacommercial is being addressedand ers ofCongress that