American Shipbuilding Association

40 Members of Congress Urge Increase in SCN Funding

On 7 October, a bipartisan group of 40 influential members of the U.S. House of Representatives with oversight of the Department of Defense Authorization and Appropriations sent a letter sponsored by Representative Duncan Hunter (R-CA) to Secretary of Defense William Cohen expressing serious concern over the inadequate budget for naval shipbuilding, their opposition to recently announced cuts to the Navy’s Future Years Defense Plan (FYDP) for shipbuilding, and urging the Secretary to budget adequate dollars to reverse the decline of the Navy’s fleet. Sponsors of the letter include Ike Skelton (D-MO), Norman Sisisky (D-VA), Herbert Bateman (R-VA), Bob Stump (R-AZ), Gene Taylor (D-MS), Curt Weldon (R-PA), J.C. Watts (R-OK), Jim Turner (D-TX), Randy "Duke" Cunningham (R-CA), Jim Saxton (R-NJ), Tom Allen (D-ME), Robert Andrews (D-NJ), James Talent (R-MO), Roscoe Bartlett (R-MD), Tillie Fowler (R-FL), Robert Brady (D-PA), David Vitter (R-LA), Patrick Kennedy (D-RI), Robert Underwood (D-GU), Solomon Ortiz (D-TX), John Larson (D-CT), Joe Scarborough (R-FL), Rodney Frelinghuysen (R-NJ), James Moran (D-VA), James Maloney (D-CT), Robert Scott (D-VA), Joseph Pitts (R-PA), Ronnie Shows (D-MS), Robin Hayes (R-NC), Sam Gejdenson (D-CT), William Jefferson (D-LA), Owen Pickett (D-VA), Walter Jones (R-NC), Sonny Callahan (R-AL), James Walsh (R-NY), Neil Abercrombie (D-HI), John Baldacci (D-ME), Jerry Lewis (R-CA), and Robert Weygand (D-RI).

The members observed that years of insufficient naval budgets will result in a fleet of only 200 ships over time rather than the 305-ship fleet identified by the Quadrennial Defense Review (QDR) as the minimum to meet our national military strategy. Since 1994, the Navy has been procuring only six ships per year, well below the steady state build rate of 10 ships per year to sustain a 305-ship Navy. This rate has resulted in a 28-ship deficit. "The nation’s naval fleet will continue to dwindle, unless the growing bow wave is brought down through a stable rate of production now in excess of 10 ships per year. Delay will only increase the annual required rate of ship production, increase the cost to overcome the deficit, and threaten our financial ability to ever close the gap," they said.

The members urged Secretary Cohen to reverse the proposed cuts by the Navy to the FYDP of two ADC(X) combat logistics ships, a Virginia class submarine, and a DD-21 land attack destroyer, and to take immediate corrective measures to increase and stabilize the build rate at 10 to 12 ships to sustain a minimum 305-ship fleet. Congress emphasized that budget efficiencies could only be achieved through stable, higher rates of production.

"This year, naval commanders-in-chief testified that they are being forced to play musical chairs with a dwindling naval fleet," said the members. Additionally, "Since the Cold War, the Navy’s fleet has been cut almost in half while today the number of crises the Navy is responding to has increased more than three-fold. Critical strategic areas of the world are without the security of a forward deployed aircraft carrier battle group or amphibious ready group, and sailor retention rates are deteriorating because of extended tours at sea and separation from families," they said.

Defense Appropriations Conference Report Sent to President

With the leadership and strong support of House Defense Appropriations Subcommittee
Chairman Jerry Lewis (R-CA) and Ranking Member John P. Murtha (D-PA) and the Senate Defense Appropriations Subcommittee Chairman Ted Stevens (R-AK) and Ranking Member Daniel Inouye (D-HI), the House and Senate passed H.R. 2561, the fiscal year 2000 Defense Appropriations Conference Report on 13 October and 14 October by a margin of 372 to 55 and 87 to 11, respectively. The conferees appropriated just over $7 billion for the Navy’s Shipbuilding and Conversion Account (SCN) - $375 million more than the budget request, and added $350 million to the National Defense Sealift Fund for a 20th LMSR and to convert an existing LMSR to meet the MPF(E) requirement of the Marine Corps. The bill was signed by the President on 25 October.

The Appropriations conferees, at the urging of Majority Leader Trent Lott (R-MS) and Senator Thad Cochran (R-MS), added $375 million to the Navy’s SCN account in FY’00 to procure the LHD-8 Amphibious Assault Ship. Construction of the LHD-8 was originally scheduled to begin in 2005. Pushing up the construction start date will avoid a break in production of that ship class and will result in a savings to the taxpayers of almost $1 billion.

Full funding was restored in FY’00 for advanced procurement for CVN refueling – the House had cut $21.9 million from the CVN account. The conferees rescinded $43.8 million – $2.6 million less than the original House mark of $46.4 – in the FY’99 budget for the new attack submarine and carrier refueling programs. Unfortunately, cuts to these programs will adversely impact their production schedule and cost.

Congressmen Randy "Duke" Cunningham (R-CA) and Duncan Hunter (R-CA), with the strong support of Congressman Murtha, led the effort to ensure an increase of $320 million to the National Defense Sealift Fund for the construction of a 20th large, medium speed roll-on/roll-off (LMSR) ship to meet the growing demands for military sealift, and $30 million to convert an existing LMSR ship to meet the Marine Corps requirements for a maritime prepositioning force ship.

MARITECH Funding

At the urging of Representative Rodney Frelinghuysen (R-NJ), the conferees appropriated $21.7 million for the Maritime Technology Program (MARITECH) – $2 million above the budget request. In their original marks, the House added $5 million to the account and the Senate funded the budget request of $19.7 million. The MARITECH Program has produced the development of commercial ship designs and technologies to reduce the cost of building commercial and naval vessels.

U.S-Build Preserved

The House conferees rejected Section 8159 of the Senate bill, a provision sponsored by Senator John McCain (R-AZ), which would have allowed the Secretary of Defense to waive current laws that require ships and major ship systems for all branches of the Armed Forces to be constructed in the United States.

Senate and House Ask President to Increase Title XI Funding

Prominent members of the Senate and House have asked President William J. Clinton to budget $50 million for the Title XI Ship Loan Guarantee Program in fiscal year 2001. Members of the Senate and House sponsoring bipartisan letters to the President include Senators Mary Landrieu (D-LA), Olympia Snowe (R-ME), Trent Lott (R-MS), Rick Santorum (R-PA), Daniel Inouye (D-HI), Daniel Akaka (D-HI), Robert Torricelli (D-NJ), Arlen Specter (R-PA), Chuck Robb (D-VA), Barbara Boxer (D-CA), Ernest "Fritz" Hollings (D-SC), Jeff Sessions (R-AL), Dianne Feinstein (D-CA), and Christopher Dodd (D-CT) and Representatives Gene Taylor (D-MS), Herbert Bateman (R-VA), Norman Sisisky (D-VA), Sonny Callahan (R-AL), Duncan Hunter (R-CA), Owen Pickett (D-VA), Robert Borski (D-PA), Randy "Duke" Cunningham (R-CA), Neil Abercrombie (D-HI), William Jefferson (D-LA), Robert C. Scott (D-VA), Robert Brady (D-PA), Ronnie Shows (D-MS), and David Vitter (R-LA).

Congress noted that the Title XI program has been instrumental in reviving commercial shipbuilding in the United States, creating thousands of highly skilled jobs, and helping to sustain the defense shipbuilding industrial base. Since the revival of the Title XI program in FY’94, the Maritime Administration (MARAD), which administers the program, has approved over $3.8 billion in financing for the construction of commercial ships in the United States. Specifically, Title XI has been instrumental in assisting independent tanker owners secure financing for the construction of environmentally safe double-hulled oil tankers, and most recently in returning America to the construction of large oceangoing cruise ships after a 40-year absence from the market. 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. These orders will not be placed without Title XI.

Senate Commerce Committee Holds Hearing on Cruise Ship Legislation

The Senate Committee on Commerce, Science, and Transportation on 6 October held a hearing on S. 1510, The United States Cruise Ship Tourism Act of 1999, introduced by Senator John McCain (R-AZ). For the second year in a row, Senator McCain has introduced legislation to emasculate the laws of the United States by amending the Passenger Vessel Services Act (PSA) to allow foreign-built, foreign-owned and operated cruise ships into the U.S. market.

Currently, only foreign-built and owned vessels serve the U.S. cruise ship market for several noteworthy reasons. First, foreign governments offer tax incentives and discounts in the construction of vessels built in their shipyards resulting in as much as a 50 percent reduction in price. Second, in order to avoid U.S. taxes, these same cruise companies choose to register their vessels in countries that do not tax the revenue earned from ships engaged in the carriage of passengers. These "flags of convenience" earn almost 90 percent of their revenue from U.S. taxpayers, yet these companies pay no U.S. corporate income tax. Carnival, for example, earned $652 million in tax-free income last year by having its ships registered under a foreign flag. Additionally, the International Council of Cruise Lines, representing the cruise ship companies that serve the U.S. market, stated before the Committee that any legislation to amend the Passenger Vessel Services Act, including S. 1510, would not change their current operations nor encourage their members to engage in U.S. coastwise trade.

In response to S. 1510, Cynthia L. Brown, ASA President stated that the cruise ship market "should be nurtured to provide maximum benefit to the U.S. economy, not jeopardized by legislation that would surrender it to foreign interests."

Industry News

Kitchen Named President of Avondale

Congratulations to Thomas M. "Tom" Kitchen, who has been named President of Avondale Industries, New Orleans, LA. Kitchen joined Avondale in 1977 and most recently has served as Vice President and Chief Financial Officer of the company.

NASSCO Awarded $17.4 Million R&D Contract

National Steel and Shipbuilding Company (NASSCO), San Diego, CA, has been named the prime contractor on a $17.4 million research and development contract by MARITECH Advanced Shipbuilding Enterprise (ASE) Program.

EB and NNS Mark Birth of New Submarine Class

On 2 September, Senator John Warner (R-VA) ceremonially presided over the inscription of the new attack submarine name "Virginia" in the keel of the first submarine of the class (SSN-774) at Electric Boat’s Quonset Point facility in Rhode Island. Electric Boat and Newport News Shipbuilding are teamed to build the first four submarines of the Virginia class.