ASA to Fight Pentagon Foreign Ship Leases

The American Shipbuilding Association (ASA) will again target the Defense Department’s practice of long-term leasing of foreign-built vessels. American shipbuilders view this practice as domestic work needlessly passed on to foreign competitors. "ASA will continue to work with Congress to urge that legislation be passed to limit the practice by the Department of Defense (DOD) of using long-term leases as a de facto means of buying foreign-built ships to meet dedicated military logistics requirements," the group said.

Critics recently decried the use of five-year leases, as the DOD announced plans to acquire 10 or more additional ships using the same tactics. The ASA maintains that by using renewable five-year leases, "the DOD is able to circumvent U.S. law requiring that ships for the military be built in the United States, and the 1990 Budget Enforcement Act passed to halt lease/purchases of capital assets because of concerns that leasing is more expensive than a direct purchase."

A bipartisan effort led by Reps. Jo Ann Davis (R-Va.) and Gene Taylor (D-Miss.) is underway in the House, with the intent to limit the leases of foreign-built ships to two years. Similar legislation is being contemplated in the Senate.

Advocates for the Jones Act and domestic shipping in general have been highly critical of the Maritime Security Program, in particular. The program provides an annual stipend of $2.6 million per ship for up to 60 cargo vessels which can be taken over by the DOD in time of need. Approximately 75% of the ships currently in the program are owned by foreign entities. The lack of U.S. owned and operated vessels that could be made available for DOD sealift requirements continues to cause concern in some quarters.