American Shipbuilding Association

Mark Your Calendar!

The American Shipbuilding Association (ASA) is pleased to announce that a forum on American Sea Power in the 21st Century will be held on Tuesday, February 27, 2001, at 12:30 P.M. in room SC-5 of the Capitol.  The forum is Congressionally sponsored and jointly hosted by ASA, the Navy League of the United States, the Naval Submarine League, the U.S. Naval Institute, the National Defense Industrial Association, and the Association of Naval Aviation.

These forums are intended to increase awareness of Sea Power’s critical role in defending the security of America and her allies, and the increased risk to our security as a result of neglect of our Sea Power Fleet.  The confirmed speakers are General James Jones, Commandant of the U.S. Marine Corps; Vice Admiral Dennis McGinn, Deputy CNO Warfare Requirements and Programs (N7); Rear Admiral Joseph A. Sestak Jr., Director, Navy Quadrennial Defense Review Support Office, and Bill Fricks, Chairman & CEO of Newport News Shipbuilding. Please join us on the 27th at 12:30 P.M. in room SC-5 of the Capitol.

A New Congress …
Time for A New Commitment to our National Security

The U.S. Navy has shrunk from a fleet of 594 ships in 1987 to 315 ships today, while deployments have increased more than 300 percent.  Regional Commanders-in-Chief have repeatedly warned that the fleet is stretched perilously thin and needs to be increased to 360-ships to meet their present mission requirements.  To reach this size fleet, the U.S. must build a minimum of 12 ships per year for the next 30 years.  Unfortunately, this number would still be inadequate because Navy budgets for the last eight years have built on average only six ships per year – half the stable build rate required for a 360-ship Navy. Today, America is procuring fewer ships than at any time since 1932, during the depths of the Great Depression. If these budget trends continue, the fleet will drop to 180-ships.  The new Administration and the 107th Congress will be faced with the challenge of rebuilding the Nation’s naval fleet.

Members of the House and Senate Armed Services Committees, and the House and Senate Appropriations Committees will be on the front line of this challenge. The composition of these committees is listed below. At press time, House Democrats had not yet announced committee assignments.

On the Senate Armed Services Committee, Senator John Warner (R-VA) has retained the Chairman’s gavel and Senator Carl Levin (D-MI) will continue as the Ranking Minority Member.  Senators Olympia Snowe (R-ME) and Jeff Bingaman (D-NM) both have left the committee and will serve on the Senate Finance Committee in the 107th Congress.  With Senator Snowe’s departure from the committee, it is expected that Senator Jeff Sessions (R-AL) will become the new chairman of the Senate Sea Power Subcommittee. The newly appointed Senators to the Armed Services Committee are: Daniel Akaka (D-HI), Jim Bunning (R-KY), Jean Carnahan (D-MO), Susan Collins (R-ME), Mark Dayton (D-MN), Bill Nelson (D-FL), and Ben Nelson (D-NE). 

The Senate Appropriations Committee will see few changes in its membership, Chairman Ted Stevens (R-AK) and Ranking Member Robert Byrd (D-WV) will be returning to these leadership positions for the 107th Congress, and departing from the committee and the Senate are Senators Slade Gordon (R-WA) and Frank Lautenberg (D-NJ).   The newly appointed Senators of the Appropriations Committee are: Mike DeWine (R-OH), Mary Landrieu (D-LA), and Tim Johnson (D-SD).

The House Armed Services Committee has a new chairman, Representative Bob Stump (R-AZ) who moves up from the Vice-Chairman spot that he held in the 106th Congress.   Joining the House Armed Services Committee are Representatives: Heather Wilson (R-NM), Ken Calvert (R-CA), Rob Simmons (R-CT), Ander Crenshaw (R-FL), Mark Steven Kirk (R-IL), Jo Ann Davis (R-VA), Edward Schrock (R-VA), and Todd Akin (R-MO).

On the House Appropriations Committee, Chairman Bill Young (R-FL) and Defense Subcommittee Chairman Jerry Lewis (R-CA) are both retaining their leadership positions, and departing from the committee and the House are Representatives John Edward Porter (R-IL) and Ron Packard (R-CA). Joining the House Appropriations Committee are Representatives: John Doolittle (R-CA), Ray LaHood (R-IL), John Sweeney (R-NY), and David Vitter (R-LA).

American Shipbuilding Association
Unveils 2001 Priorities

The American Shipbuilding Association (ASA) welcomes the opportunity to work with the new Administration and the 107th Congress to recapitalize the Nation’s naval fleet and to strengthen the defense shipbuilding industrial base, upon which the Nation depends for its national security.  To this end, ASA’s 2001 priorities are:

Rebuild America’s Naval Forces:  Naval Commanders-in-Chief have stated that a fleet of 360 ships is required to meet the Nation’s military strategy.  Yet, the fleet numbers 315 today, and is falling as a result of a decade of budgeting for only six ships per year on average.  A naval force of 360-ships requires a steady build rate of 12 ships per year for 30 years.   This doubling of the annual numbers of ships procured will require increased budgets and changes to the Department of Defense acquisition policies to ensure that the Nation meets its requirement in the most cost-effective and affordable manner possible.  Ship acquisition policies need to be established taking into account the unique nature of shipbuilding and the long construction period involved.  These acquisition approaches should include a Shipbuilding Multi-Year Procurement Policy; budgeting for certain types of ships over several years rather than completely in the year in which they are contracted; and a change to current scoring regulations to allow for the long-term lease of noncombatant auxiliary ships.

Completed Ship Delivery Method of Accounting for Naval Ships:  The Defense Science Board, in its review of the health of the defense industry, emphasized the need to strengthen the industry’s cash flow to enable greater investment and to attract and retain a skilled workforce.  Under the Tax Code, naval shipbuilders must estimate what their profits may be three to seven years into the future and pay a percentage of their “anticipated” income taxes on an annual basis.  This “Percent of Completion Method of Accounting” diverts critical financing funds needed in a ship’s construction phase to income tax payments that may or may not be realized.  This reduces a company’s ability to invest in facilities and production processes, which could reduce naval ship costs, and weakens the financial health of the industry.  A change in the tax code to allow a shipbuilder to pay taxes on income earned upon delivery of the ship would strengthen the financial operating ability of a shipyard with no reduction in the amount of taxes paid to the U.S. Treasury.

Promote Title XI Financing of Commercial Ship Construction:  The Title XI Ship Loan Guarantee Program of the Maritime Administration has made financing for the construction of cruise ships and environmentally safe double hulled tankers in the United States possible.  These commercial shipbuilding programs have been instrumental in reducing the cost of naval ships and in sustaining the skilled workforce and vendor base of the defense shipbuilding industry during historically low rates of naval ship production.  The inadequate budget for Title XI in the last three years has resulted in a shortfall of available financing to meet demand.  Title XI needs to be recapitalized at $100 million in fiscal year 2002 to provide financing for billions of dollars in pending commercial shipbuilding programs.   Since FY’93, the U.S. Treasury has received over $100 million in revenues from applicant fees collected from Title XI.  

Support the Jones Act and Passenger Vessel Services Act:  These laws require vessels transporting cargo and passengers between two U.S. ports to be built in the United States, and be owned and crewed by American citizens.  The purpose and need for these laws is to strengthen and sustain a shipbuilding and repair industrial capability in the United States and to provide a pool of trained merchant mariners to meet our national security requirements.

Principal Assistant for Shipbuilding and Conversion
Appointed to Operational Navy Staff

The American Shipbuilding Association has been urging the Navy to appoint an officer on the OPNAV staff with the responsibility of championing the defense shipbuilding industrial base and the Navy’s requirements. Admiral Vernon Clark, Chief of Naval Operations, and Vice Admiral David McGinn, Deputy Chief of Naval Operations for Naval Warfare Requirements and Programs (N7), announced on January 12, the appointment of Mr. Edward N. Comstock to this position with the title of: Principal Assistant Shipbuilding and Conversion, Navy Appropriations Sponsor, N76C. 

The new position on VADM McGinn’s staff was created to serve as direct liaison with the CNO, to advise on shipbuilding requirements to sustain the battle force structure of the Navy; the importance of increasing and stabilizing the Navy ship procurement rate; and the benefits of commercial ship construction to sustain the defense industrial base.

Some specific responsibilities include:

• Determine the number of naval ships required by class to be built to meet the Nation’s military strategy.
• Advise the CNO on necessary adjustments to budgets and build rates of each class to correspond with the requirement.
• Advise the CNO of the impact of annual budgets and build rates by class of ship on the shipyards and the defense shipbuilding supplier base.
• Review and recommend alternative budgeting policies taking into consideration the unique nature of shipbuilding to affordably meet the Navy's force structure.

Mr. Comstock will serve as the principal point of contact between the Deputy Assistant Secretary of the Navy for Ships and the CNO. Adding this task to the CNO’s current organization provides a planning and communication link between the Fleet’s requirements and the Office of the Secretary of the Navy in strengthening the Navy and the defense shipbuilding industry.

McCain Reintroduces Legislation to Amend the
Passenger Vessel Services Act - S.127

On January 22, 2001, Commerce Committee Chairman John McCain (R-AZ) reintroduced his cruise ship proposal in the 107th Congress, S. 127.   This legislation could jeopardize the U.S.-build, U.S.-crew, and U.S.-ownership provisions of the Passenger Vessel Services Act before the World Trade Organization.

Under the 1994 General Agreement on Trade and Tariffs, the Jones Act and the Passenger Vessel Services Act were exempted, as those laws were written, from consideration before the World Trade Organization (WTO). The European Union, Japan, and several other countries are opposed to this exemption and maintain that any change to these laws would subject the Jones Act or the PVSA to WTO action.   The Office of the U.S. Trade Representative has advised that if S.127 becomes law — the PVSA could loose its WTO exemption; thus allowing foreign-built, foreign-crewed, and foreign-owned ships into the U.S. domestic passenger coastwise trade.

Well Said!

“Our shipbuilding rate is inadequate to recapialize the
fleet and sustain even the current 300-ship force.”

Admiral Vernon Clark, Chief of Naval Operation