"You ... are owned by the holding company ... and that is owned by the government of Dubai and it is enforcing that boycott," Sen. Bill Nelson, D-Fla., told Edward Bilkey, the chief operating officer of Dubai Ports World, in a Senate hearing Tuesday.
The hearing was one of in a flood of inquiries called at short notice this week as Capitol Hill boiled with an election-year frenzy of efforts to review or simply stymie the take-over deal, which was approved by a secretive, congressionally-mandated federal panel, as posing no threat to U.S. interests, but which has fuelled concern about port security.
Dubai is one of the United Arab Emirates, a federation of seven small but vastly wealthy and oil-rich Gulf kingdoms. In common with most other Arab states, the emirates have a long-standing boycott of Israeli goods and services.
It has been illegal since 1977 for U.S. companies to comply with the boycott, by agreeing not to do business with Israel, or by certifying that their products do not contain any Israeli materials. Companies are also required to report any requests for such certification or agreements to the U.S. Department of Commerce.
Last year, two firms were fined for issuing certifications "in connection with requests by entities in the United Arab Emirates to support the Arab League boycott of Israel," according to a Commerce Department official authorized to speak to the media.
And in 2004, the most recent year for which complete records are available, 118 U.S. companies reported receiving boycott requests in connection with exports to the United Arab Emirates, according to Commerce Department figures obtained by Nelson's office.
It was not immediately clear where all of these requests had come from. One official who has worked the Arab boycott issue said requests sometimes came from purchasers rather than customs agencies. And the Commerce Department official said the two requests that firms had been fined last year for complying with "were not issued by the government of Dubai or by the government of the United Arab Emirates."
But the news, first reported by the Jerusalem Post, nonetheless added fuel to the controversy surrounding the deal, highlighting the status of Dubai Ports World, wholly owned by a quasi-governmental entity, the Ports, Customs and Free Zone Corporation, or PCFC, owned in turn by the Emir of Dubai.
But the PCFC also runs customs and other regulatory functions for the port of Dubai and the associated Jebel Ali free trade zone. It is in carrying out these functions, critics charge, that the corporation helps enforce the boycott.
Neither the Dubai Embassy in Washington, nor the P.R. agency for Dubai Ports World in London responded to requests for comment.
Bilkey told reporters after the hearing that Dubai Ports World did regular business with Israeli shipping companies.
Officials and lawyers cautioned that the take-over would likely be structured in such a way as to comply with the letter of U.S. law and regulations.
"To my knowledge, there is nothing (in the anti-boycott regulations) that would affect the legality of the deal," said one former senior U.S. trade official. "It depends on how they set it up."
The former official also said that requests for agreements not to do business with Israel or Israeli firms -- the so-called secondary boycott -- had been abandoned by the Gulf Cooperation Council, the customs union of which the United Arab Emirates is a part.
"They have publicly said they don't do that," the former official told United Press International.
Dan McLaughlin, spokesman for Nelson said that the "spirit and the intent of the law" were at stake. "The reason it is illegal (to comply) is because we oppose the boycott," he told UPI.
"Why should any U.S. port do business with (Dubai Ports World) when they are so implicated in the boycott?" McLaughlin asked.
McLaughlin said Nelson was also concerned about the broader issues raised by the boycott question.
"This is a foreign policy problem," he said. Dubai Ports World "is government-owned. It can therefore be an instrument of (the emirates') foreign policy."
"In fact," he said, referring to the charges that PCFC had helped enforce the boycott, "it has already proven to be."
"What other issues will we be at cross-purposes with them on?" he asked of the United Arab Emirates. "We see all kinds of problems stemming from this."
Problems were also piling up for defenders of the deal, as the powerful pro-Israel lobby appeared to be swinging behind opposition to the take-over.
"That Dubai Ports World is owned by the emirate of Dubai, which actively supports the Arab economic boycott of Israel, should be grounds enough to torpedo any deal with the United States on port operations," said Abraham Foxman, the national director of the Anti-Defamation League, in a statement.
"Dubai should not benefit from America's open trade policies unless it discontinues its anti-Israel activity," Foxman concluded.
"It is clearly against American law for companies doing business in the United States to participate in the Arab boycott of Israel," Josh Block of the American Israel Public Affairs Committee told UPI.
"No company should be participating in the boycott," he continued, saying it "undermines American policy in the region, unfairly singles out Israel and lessens the chances for peaceful resolution of the many Middle East conflicts."
But one observer argued this latest development presented the administration with a chance to finesse an issue that has become a huge distraction from the president's agenda.
Neil Hare, a former senior official with the U.S. Chamber of Commerce, and now a public relations strategist, told UPI that President George W. Bush could both "avoid bowing to congressional pressure on the security front and save some face in the Arab world" by nixing the deal on the boycott question.
The president would be seen as "remaining steadfast to a long-standing U.S. position supporting Israel," Hare said.