American Shipbuilding Association

ASA Board of Directors Meet With Transportation Secretary Slater

On 16 November, Mr. Dick Vortmann, President of NASSCO, Mr. Pat Keene,
President of Ingalls Shipbuilding, Mr. John Welch, President of Electric Boat, and ASA President Cynthia Brown met with the Secretary of Transportation, Rodney E. Slater, to seek his support of a $50 million FY’01 budget request for the Title XI Ship Loan Guarantee Program. The shipbuilding presidents, speaking on behalf of the six major American shipbuilding companies, emphasized that the orders for commercial ships since 1994 would not have happened but for the Title XI program. The Board discussed with the Secretary several planned shipbuilding programs that will require more funding than that which is available in the account, thereby making an increased budget request and appropriation an urgent requirement.

The Secretary confirmed his strong commitment for the Title XI program because of the thousands of jobs it has created across the country and the many benefits of commercial technology and construction to the ASA shipbuilders, which in turn pass these benefits on to the U.S. Navy through reduced costs and improved processes and products. Following the meeting Dick Vortmann stated, "the ASA Board was reassured by the Secretary’s support and enthusiasm for commercial shipbuilding, the critical role Title XI plays in promoting this goal, and his commitment to secure adequate funding for the program in FY’01."

Congressman Duncan Hunter Introduces the
All American Cruise Act of 1999

On 16 November, Congressman Duncan Hunter (R-CA) introduced H.R. 3392, the "All American Cruise Act of 1999," to promote the construction of cruise ships in U.S. shipyards, and to facilitate the development of a United States-owned and registered cruise industry. According to the California Congressman, "my bill is a prime example of a ‘Made in the USA’ initiative."

The cruise industry has never been more popular. The United States is the largest cruise ship market in the world, and has a huge growth potential. Surprisingly, all of the large ocean going cruise ships serving the American market are foreign-built and flagged in foreign countries to avoid U.S. tax law. In 1998, almost seven million North Americans vacationed on one of the 120 foreign-built, foreign-registered cruise ships operating from a U.S. port. By 2003, the number of passengers is expected to reach 10 million, and the number of foreign-built ships will grow to 160 if the competitive barriers imposed on American companies through the U.S. tax code are not removed. Unfortunately, the companies reaping the benefits of the American cruise market are foreign-owned and operated. According to Congressman Hunter, "European builders of cruise ships receive numerous tax incentives and other assistance from their governments to reduce the price of their ships. Foreign cruise companies operating from U.S. ports pay no U.S. income tax, another immediate tax advantage for the foreign competitor."

U.S. companies should be encouraged to build, register, and crew their ships in the United States. If U.S. companies are to compete on a level playing field with their foreign competition, U.S. tax laws must be changed to provide tax parity to American companies wishing to serve the U.S. market, and Congressman Hunter’s bill does just that. H.R. 3392 would provide tax credits to U.S. builders of cruise ships of 20,000 gross tons and greater, U.S. cruise ship owners would be exempt from paying U.S. corporate income tax, and they would be able to depreciate their ships over a five-year period rather than the current 10-year period. Also, the current $2,500 business tax deduction limit for a convention on a cruise ship would be repealed to give the same unlimited tax deduction for business conventions held at shore-side hotels. Additionally, a 20 percent tax credit would be granted to companies that operate environmentally clean burning engines manufactured in the United States – fuel costs are higher for environmentally friendly engines. And the legislation calls for Completed Contract Method of Accounting in which a shipyard will pay taxes on the construction or overhaul of a cruise ship of 20,000 gross tons or greater only after delivery of the ship.

H.R. 3392 would also amend the Capital Construction Fund (CCF) to allow U.S. owners of cruise ships to make deposits into their CCF from revenues earned not only from the operation of cruise ships in the non-contiguous trades, but also the domestic point-to-point trades and "cruises to nowhere," and to invest such funds in the construction of ships to serve these trades. CCF deposits and withdrawals would also be exempt from the Alternative Minimum Tax and capital gains tax rate.

Similar to legislation of 1997 that created the U.S-flag Cruise Ship Pilot Project, H.R. 3392 provides a temporary waiver to the U.S-build requirement of the Passenger Vessel Services Act to a U.S. company that first signs a binding contract with a U.S. shipyard for the construction of two cruise ships. The waiver would allow a company to re-flag a foreign-built ship in the United States to develop a market and earn revenue while new cruise ships are being built in the United States. The foreign-built ship would be required to leave the U.S. trade 12 months after the delivery of the second U.S.-built cruise ship, or 12 months after the delivery of the last ship of a series, if more than two ships are built.

Congressman Hunter stressed the national security implications of his bill. "Taking legislative action to ensure a robust domestic shipbuilding industry will ensure that U.S. taxpayers have access to competitive prices, technology, and a ready supply of ships and labor in times of conflict," he said. ASA President, Cynthia L. Brown commended Congressman Hunter for his legislation and noted that this "bill would create hundreds of thousands of high technology, high skilled manufacturing and seagoing jobs for Americans; strengthen the American defense shipbuilding industrial base; and ignite a powerful engine that would propel all segments of the U.S. economy toward strong growth and prosperity into the 21st Century. Furthermore, American tourists would be assured that they would be vacationing on the safest constructed and operated ships in the world."

1999 Year In Review

Sea Power Forums

In 1999, the American Shipbuilding Association hosted three educational forums on American Sea Power in the 21st Century. The forums were hosted jointly by the Navy League, the National Defense Industrial Association, the Naval Submarine League, the Surface Navy Association, the U.S. Naval Institute, and the Association of Naval Aviation, and were cosponsored by more than 100 Members of Congress. The forums have highlighted the growing risks to our national and global security as America’s naval fleet continues to decline. The forum participants, including high-level DOD, Navy, Marine Corps, and Coast Guard officials, Members of Congress, and industry leaders, emphasized that a bare-bones minimum naval fleet of 300-ships could only be maintained by procuring 10 to 12 ships per year. ASA will host additional Sea Power forums in 2000.

Sea Power Ambassadors Program

In January of 1999 ASA worked with the Navy League to launch the Sea Power Ambassadors Program – a nationwide effort to increase public awareness of Sea Power and to educate citizens, media, and elected officials about the importance of maintaining a strong, credible naval fleet. Over 300 former U.S. Navy and Marine Corps officers and Navy League members with significant experience and knowledge about the importance of Sea Power in maintaining peace and prosperity in the world have volunteered as Sea Power Ambassadors. To date, 200 speeches have been made or scheduled nationwide to community organizations by the Ambassadors. Local newspapers have written editorials on the crisis confronting American Sea Power and media interviews have been held with the Ambassadors.

Salute to Congress

In June of 1999, ASA held its annual "Salute to Congress" Congressional Reception, with record high attendance by Members of Congress and their staff. With over 50 Members attending, the standing room only annual event provided a unique opportunity for Members of Congress and leaders of the shipbuilding industry to discuss the state of American shipbuilding.

Cruise Ship Construction

Another first in 1999 was the reentry of the United States into the cruise ship construction market, after a 40-year absence. Ingalls Shipbuilding of Pascagoula, MS was awarded a competitive contract to build two state-of-the-art, 1,900-passenger cruise ships for the Hawaiian Islands trade, with options for four more.

Industry News

Ingalls Christens Aegis Destroyer

On 6 November, Ingalls Shipbuilding, Pascagoula, MS christened the U.S. Navy Aegis guided missile destroyer, LASSEN (DDG 82) at the shipyard. Cosponsors of the ship are Mrs. Linda Lassen, and Mrs. Barbara Pilling, wife of Admiral Donald L. Pilling, USN, Vice Chief of Naval Operations. The principle speaker was Representative Steven T. Kuykendall (R-CA).

Avondale Delivers Coast Guard Icebreaking Research Ship

On 10 November, Avondale Industries, New Orleans, LA delivered to the U.S. Coast Guard the USCGC HEALY (WAGS-20), a world class high latitude icebreaking research ship.

NNS Recognized for Environmental Program

Newport News Shipbuilding (NNS), Newport News, VA, was recently recognized by Virginia Governor Jim Gilmore as the runner up for his annual Environmental Excellence Award for Manufacturers for its superior environmental program.