American Shipbuilding Association

Defense Authorization Conferees Support Navy/Shipbuilding Industry

The Conferees on the Defense Authorization Bill, S. 1059, for fiscal year 2000 wrapped up their conference after providing "Extended Lease" authority of 20 years or more to the Secretary of the Navy for the services of non-combatant ships, and rejecting an attempt by Senator John McCain (R-AZ) to repeal the three-year waiting period before foreign-built ships are eligible to carry preference cargo.

The House Armed Services Committee has been laboring for three years to provide the Secretary of the Navy the authority to enter into long-term leases of the services of newly constructed non-combatant ships as an alternative to procuring the ships in the Shipbuilding and Conversion Account. This effort, championed by Representatives Herb Bateman (R-VA), Neil Abercrombie (D-HI), Duncan Hunter (R-CA), and Norman Sisisky (D-VA) had failed to receive the support of the Senate until this year when Senators Olympia Snowe (R-ME), Mary Landrieu (D-LA), and Trent Lott (R-MS) lent their support to the measure.

Section 1014 of the House Armed Services Committee bill, H.R. 1401, will give the Secretary of the Navy the authority to lease commercial type ships required to meet a multitude of DOD missions if the Secretary can demonstrate to Congress the merits of leasing rather than purchasing. This flexibility is desperately needed because not enough dollars or combatant ships are being requested by the Administration to sustain even a bare bones minimum fleet of 300-ships. With combatant programs underfunded, the Navy needs the flexibility to explore more cost-effective means to acquire the services of non-combatant ships that are equally critical, but which will always be a lower priority for our Nation’s warfighters.

Congressmen Herb Bateman (R-VA) and Gene Taylor (D-MS) led the charge in the House to prevent a proposal by Senator John McCain (R-AZ) from being enacted in conference that would have repealed the three-year waiting period before foreign-built ships were eligible to carry government food aid. The overwhelming opposition to this proposal by the House, and Senators John Warner (R-VA), Chairman of the Armed Services Committee, Olympia Snowe (R-ME), and Rick Santorum (R-PA) speaks volumes to Congress’s commitment to a strong shipbuilding industrial base and U.S.-flag merchant marine as dedicated transportation providers of taxpayer food aid to countries in need.

Had this waiver been adopted, several ships that were recently constructed by Avondale Industries and Newport News Shipbuilding would have been put at an economic disadvantage with dumped Asian-built ships. This would have bumped the owners of these ships from the food aid trade and destroyed their economic ability to operate and repay loans for the construction of these U.S.-built ships.

Administration Urged to Budget for Title XI in FY’01

In a letter to John Podesta, the White House Chief of Staff, ASA President Cynthia L. Brown urged the Administration to budget at least $50 million for the Title XI Ship Loan Guarantee Program in FY’01. Brown credited the Title XI program, which was the centerpiece of the President’s National Shipyard Initiative in FY’94, for reviving commercial shipbuilding in the United States by providing a government guarantee of a commercial loan for the construction of commercial ships in U.S. shipyards. The Title XI program, she said, has been instrumental in assisting independent tanker owners secure financing for the construction of state-of-the-art, environmentally safe double-hulled oil tankers, and in helping to return America to the construction of large oceangoing cruise ships. "Orders are expected for more cruise ships, for more double-hulled tankers, for ships to replace the dry cargo fleet of the Jones Act, and for building dual-use fast cargo ships for international commerce," said Brown. Limited funds remain in the Title XI account for these and other meritorious ship construction projects.

A budget request of at least $50 million for the Title XI program in FY’01 will be necessary to facilitate billions of dollars of ship construction in the United States. This program continues to be essential to sustaining the shipbuilding industrial base, which is critical to meeting America’s national security requirements.

McCain Targets PSA

Just prior to the August recess Senator John McCain (R-AZ) introduced S. 1510, The United
States Cruise Ship Tourism Development Act. This bill would gut the Passenger Vessel Services Act (PSA) by permiting foreign-built and owned cruise ships to re-flag in the United States and be allowed to operate in the U.S. domestic trades.

This bill comes at a time when the United States has recently reentered the cruise ship construction market after an absence of 40 years, and would undermine the efforts to rejuvenate cruise ship construction in the United States. Ingalls Shipbuilding in Pascagoula, MS is currently building two large, oceangoing cruise ships, with options for more, for American Classic Voyages for the Hawaiian trades. These state-of-the-art, 1,900 passenger cruise ships will be built to meet U.S. safety and environmental standards, and this construction project will be responsible for creating thousands of high skilled American shipyard jobs.

American construction, ownership, and operation of cruise ships for the U.S. domestic trade will benefit all Americans. American shipbuilding and ship operating companies abide by U.S. tax, environmental, and safety laws, and U.S. registered cruise ships pay taxes on their passenger revenue, unlike their foreign competitors, which avoid paying U.S. taxes on revenues that total billions of dollars each year.

McCain’s bill is silent on whether or not these foreign-built, foreign-flagged, and foreign-crewed vessels will be required to adhere to U.S. laws. Additionally, amending the Passenger Vessel Services Act will jeopardize the multi-billion dollar market potential for construction of cruise ships in the Unites States.

McCain Seeks to Eliminate the CCF

During the Senate debate on S. 1429, the Taxpayer Refund Act of 1999, Senator
McCain filed an amendment as a substitute to the bill, which would eliminate the Capital Construction Fund (CCF) for commercial vessels built in the United States. The Capital Construction Fund currently allows earnings derived from U.S-flag vessel operations to be deposited into a tax-deferred fund for future use in the construction of ships in U.S. shipyards. The amendment was not adopted.

Industry News

Fourth NASSCO-Built Sealift Ship is Launched

On 7 August, the U.S. Navy and the U.S. Army launched the USNS RED CLOUD, the fourth Sealift new construction ship built by National Steel and Shipbuilding Company (NASSCO), San Diego, CA, under the Strategic Sealift Program.

NNS Wins Navy Overhaul Contract

Newport News Shipbuilding, Newport News, VA, on 4 August was awarded a contract from the U.S. Navy valued at approximately $24.4 million for the overhaul of the USS GETTYSBURG (CV 64), a Ticonderoga-class guided missile cruiser outfitter with Aegis combat systems.

Raytheon Receives $414 Million Navy Contract

Raytheon Company, Lexington, MA has received a $414 million contract modification from the U.S. Navy for the remanufacture of up to 624 Tomahawk cruise missiles, which are long range, subsonic cruise missile launched from surface ships and submarines.

BF Goodrich and Coltec Complete Merger

BF Goodrich and Coltec Industries have completed their merger, and created a major multi-industry company with $6 billion in annual revenues and market positions in aerospace systems, performance materials, and industrial products. The new company will be headquartered in Charlotte, N.C. and have 27,000 employees 

Well Said !

"It will generally be advantageous to lay some burden upon foreign (shipbuilders and ship owners) . . . . when some particular industry is necessary for the defence of the country . . . . As defence, however, is of more importance than opulence (free trade), the act of navigation (shipbuilding and shipping laws) is, perhaps, the wisest of all commercial regulations . . . ."

Adam Smith
Wealth of Nations, 1776
On the importance of Protecting Shipbuilding and Shipping Laws