Update on 2004 Legislation
The American Shipbuilding Association continues in its efforts to strengthen the defense shipbuilding industry. The following highlights legislation supported by the American Shipbuilding Association to stimulate job growth throughout the shipyards and supplier base:
Limiting the Leasing of Foreign Built Ships
The House adopted legislation sponsored by Rep. Jo Ann Davis (R-VA) as part of the FY 2005 Defense Authorization bill (HR 4200, Section 1014) to limit leasing of foreign-built ships by the Department of Defense to no more than one year, thereby ending the use of leasing contracts as a de facto means of purchasing foreign-built ships. The Senate did not include a similar section in its bill.
The Navy has acknowledged that it is taking advantage of a loophole in scoring guidelines to accompany the Budget Enforcement Act and the U.S. build laws contained in Section 7309 of Title 10 U.S. Code to acquire, through long-term leases, foreign-built ships to meet dedicated, unique, long-term military requirements. These ships have been converted in foreign shipyards to meet these dedicated military requirements before being leased by the U.S. Government. The legislation in the House bill is intended to impose budget discipline to end costly long-term lease purchases of capital assets pursuant to the intent of the Budget Enforcement Act of 1990, in addition to stimulating job growth throughout the shipbuilding industrial base.
Twenty-five members of the Housed Armed Services Committee submitted a letter to Chairman Duncan Hunter (R-CA) and Ranking Member Ike Skelton (D-MO) urging the House to retain the Davis Amendment in conference with the Senate. Members signing the letter include Representatives: Jo Ann Davis (R-VA), Gene Taylor (D-MS), Neil Abercrombie (D-HI), Rodney Alexander (D-LA), Madeleine Bordallo (D-Guam), Jeb Bradley (R-NH), Robert Brady (D-PA), Susan Davis (D-CA), Lane Evans (D-IL), Trent Franks (R-AZ), Randy Forbes (R-VA), Robin Hayes (R-NC), Steve Israel (D-NY), Walter Jones (R-NC), Jim Langevin (D-RI), Rick Larsen (D-WA), John Larson (D-CT), Frank LoBiondo (R-NJ), Mike McIntyre (D-NC), Candice Miller (R-MI), Rob Simmons (R-CT), John Spratt (D-SC), Jim Turner (D-TX), Curt Weldon (R-PA), and Joe Wilson (R-SC).
Members of the Senate are sponsoring a similar letter to Chairman John Warner (R-VA) and Ranking Member Carl Levin (D-MI), asking the Senate to support the House legislation. Senators signing the June 11th letter include Senators: Fritz Hollings (D-SC), Thad Cochran (R-MS), Mary Landrieu (D-LA), Olympia Snowe (R-ME), Ted Kennedy (D-MA), Arlen Specter (R-PA), Maria Cantwell (D-WA), Trent Lott (R-MS), Herb Kohl (D-WI), Barbara Boxer (D-CA), Barbara Mikulski (D-MD), Debbie Stabenow (D-MI), John Breaux (D-LA), Paul Sarbanes (D-MD), Jack Reed (D-RI), Mark Dayton (D-MN), Dianne Feinstein (D-CA), Joe Lieberman (D-CT), Lincoln Chafee (R-RI), John Kerry (D-MA), Susan Collins (R-ME) and Richard Shelby (R-AL).
ASA appreciates the leadership of the Members who have spoken out in support of strengthening the U.S. shipbuilding industrial base, and providing DOD with the highest quality ships at the lowest cost to the taxpayer.
Tax on Delivery
Passing the Senate in May, the FSC/ETI bill included legislation sponsored by Senators Olympia Snowe (R-ME), Trent Lott (R-MS), and John Breaux (D-LA) to ease a severe cash flow burden placed on builders of naval ships under the Tax Code. Senators Snowe, Lott, Breaux, George Allen (R-VA), Thad Cochran (R-MS), Susan Collins (R-ME), Chris Dodd (D-CT), and John Warner (R-VA) also are the original co-sponsors of this legislation. While the Senate legislation, Section 646 of S 1637, fails to provide the needed reform to the Tax Code urged by these Senators, it is a positive first step in the right direction. Comparable legislation was not included in the House bill (HR 4520), which was passed in late June.
Currently, commercial shipbuilders are permitted to pay 40 percent of their estimated income tax during a construction contract, and the remaining 60 percent upon completion of the contract. Conversely, builders of naval ships are required to estimate what their profit will be years into the future and pay a percentage of estimated income taxes annually - before profit is known or received. Because the construction time of surface combatants is four years and eight years for submarines and aircraft carriers, the shipbuilding industry experiences severe cash flow constraints, which hinder its ability to invest in facilities and worker training, and pay suppliers. These cash flow constraints weaken the industry’s financial viability and competitiveness.
Conferees on the FSC/ETI bill are being urged to retain and improve Section 646 of the Senate bill to provide equal treatment in the Tax Code for all naval shipbuilders. Representatives Nancy Johnson (R-CT) and William Jefferson (D-LA) are leading the effort to amend Section 646 to apply the 40/60 Percentage of Completion Method of Accounting (PCM) to eight years to cover the construction period of all naval vessels, and make the effective date of Section 646 applicable to ships delivered after the date of enactment.
Congressman Duncan Hunter Receives 2004 Herbert H. Bateman Award
In a ceremony held on June 23, the American Shipbuilding Association honored Congressman Duncan Hunter (R-CA) with the Herbert H. Bateman Award for consistent, outstanding leadership in support of a strong shipbuilding industry. Throughout his nearly 24 years on the House Armed Services Committee, Rep. Hunter has been an advocate of a stronger defense shipbuilding industrial base, and has consistently worked for larger defense procurement budgets to fund the required number of naval ships.
Named after the late Representative Herb Bateman (R-VA), the Herbert H. Bateman Award was established by the American Shipbuilding Association in 2000. This Award is the shipbuilding industry’s highest recognition of an individual in the Executive or Legislative Branches, or industry, who has devoted years of consistent, outstanding, and inspirational leadership in fighting for a stronger shipbuilding industry.
Among his many accomplishments, Rep. Hunter worked to establish the National Defense Sealift Fund in 1990 and promoted the construction of thirteen ships in the United States, thereby giving our country the ability to deliver military equipment quickly to our forward deployed troops in the war in Iraq. The construction of these ships also helped to keep two shipyards in business during the 1990’s, and created thousands of shipbuilding jobs. In 2003, he created a clean product tanker construction program to reduce the U.S. military’s dependence on foreign-built ships to supply our forward deployed forces. Additionally, Rep. Hunter has tirelessly worked to increase Navy procurement budgets to ensure that our Nation has a fleet of the most capable ships in the world to defend our homeland. His long and impressive record in support of a larger naval fleet and supporting the shipbuilding industrial base makes Rep. Hunter a deserving recipient of the Herbert H. Bateman Award.
Previous recipients of the award include Representative Herbert H. Bateman (R-VA) (2000), Senator Olympia Snowe (R-ME) (2001), Representative Gene Taylor (D-MS) (2002), and Senator Ted Stevens (R-AK) (2003).
Rep. Jo Ann Davis Honored as Sea Power Ambassador of the Year
In recognition of her efforts in promoting America’s sea services and shipbuilding industry, Rep. Jo Ann Davis (R-VA) was recognized in a June 23 ceremony as Sea Power Ambassador of the Year.
Congresswoman Davis is the sponsor of HR 375, legislation which states that it is the “policy of the United States to build and maintain as soon as possible a naval fleet of no fewer than 375 ships.” This legislation is critical in underscoring the demise of America’s naval fleet as a result of inadequate budgets that have been sinking America’s naval fleet to well below 300 ships despite security requirements for a much larger force.
Congresswoman Davis also authored legislation contained in the House Defense Authorization Act, HR 4200, that limits leasing of foreign-built ships by the Department of Defense to no longer than one year. Her legislation is critical in preventing further erosion of an already severely diminished defense shipbuilding industrial base. Her efforts will also save U.S. taxpayer millions of dollars by urging direct purchase rather than the more costly long-term lease acquisition approach.
Representative Davis’s work has earned her the title of Sea Power Ambassador of the Year.
New Partner Members
ASA welcomes nine new Partner companies: AGM Container Controls located in Tucson, Arizona; AMSEC, headquartered in Virginia Beach, Virginia; Apex Steel Corporation of Englewood, New Jersey; Flo-Tork, based in Orrville, Ohio; PCE of San Diego, California; Sargent Controls and Aerospace, located in Tucson, Arizona; Village Marine in Gardena, California; Waggaman Crane Services of Waggaman, Louisiana; and Nelson Stud Welding headquartered in Elyria, Ohio.
Well Said!
“[This ship] will be a needed constituent in the continued dominance of the seas
by the United States Navy… this powerful instrument of war
will be part of a deterrent that maintains the peace…”
Former Secretary of Defense James Schlesinger
Christening of the USS Jimmy Carter
June 5, 2004
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