Seapower/Maritime

Sea Power, Jan 2002

The end of the Cold War, however, brought a dramatic decline in new naval construction and ship-repair requirements, causing the industry as well as its supporting infrastructure to downsize rapidly. Thus, the industry's 30-year concentration on naval construction diminished its commercial shipbuilding ability and posed a major challenge to its reentry into the international shipbuilding arena. The decline poses a significant problem not only from the standpoint of national security, but also economically. Since the naval buildup of the 1980s, 75,500 production jobs have been lost in the shipbuilding and repair industry, more than a 50 percent decline. According to the U.S. Department of Labor, the U.S. shipbuilding and repair industry employed only 63,900 production workers in mid-2001.

American Shipbuilding Policy

During the early 1990s, the administration and Congress instituted several programs to aid the U.S. shipbuilding industry. The cornerstone of the administration's plan was the National Shipbuilding and Shipyard Conversion Act of 1993, included in the National Defense Authorization Act of 1993 (Public Law 102-484). That legislation expanded the existing Title XI Federal Ship Financing Program by authorizing the Secretary of Transportation to guarantee obligations issued to finance the construction, reconstruction, or reconditioning of eligible export vessels. It also authorized guarantees for shipyard modernization and improvement of U.S. shipyard facilities.

The Shipyard Act also established a National Shipbuilding Initiative (NSI) program to help the industrial base meet several national security objectives. Following are updates on MARAD's major activities under NSI:

Financing Ship Sales Through Title XI Loan Guarantees. The Title XI program, authorized under the Merchant Marine Act of 1936 and administered by MARAD, assists the U.S. shipbuilding and repair industry in developing and obtaining the private financing often critical to attracting domestic and foreign buyers.

As modified by the Act, Title XI authorizes MARAD, in addition to its previous authority to guarantee financing for U.S. shipowners of U.S.-built vessels, to guarantee up to 87.5 percent of loans to purchasers of the ships built in U.S. yards (including vessels for export) and loans for modernization of U.S. shipyards. These loans may be amortized over a period of up to 25 years. Terms of the Title XI program would be modified as needed if the United States ratifies the multinational Organization for Economic Cooperation and Development (OECD) Shipbuilding Agreement.

The Title XI loan-guarantee program has been an important factor in improving the ability of U.S. shipyards to obtain shipbuilding contracts. During fiscal year 2001, MARAD approved 12 Title XI financing guarantees amounting to approximately $730 million. The Title XI program continues to attract a substantial level of interest with over $4.8 billion in pending applications and a portfolio of approximately $4.9 billion.