Winston & Strawn’s Papavizas says proposed Ships Act could create U.S. shipbuilding boom - If Congress acts

The recently proposed Bi-Partisan Ships for America Act or Ships Act could lead to a major new shipbuilding mobilization in the United States, if Congress moves expeditiously to enact the measure and ensures sufficient funding, according to Charles Papavizas, a maritime attorney with the firm of Winston and Strawn based in Washington, D.C.

In an interview with AJOT, Papavizas explained: “On December 19, 2024, the “Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act of 2024,” to be known as the “SHIPS for America Act of 2024,” was introduced in the U.S. Congress. The legislation is an ambitious effort to increase substantially the U.S. merchant marine in the international trade and the U.S. shipyard industrial base after a long period of U.S. government neglect.”

Jennifer A. Carpenter, President & CEO of the American Waterways Operators (AWO), representing the U.S. inland and coastal tugboat industry, is also the President of the American Maritime Partnership. Carpenter hailed the bipartisan legislation proposed to reform the commercial maritime and shipbuilding sectors so the U.S. can better compete with China.

According to Representative John Garamendi (D-CA) who introduced the Ships for America Act alongside Senator Mark Kelly (D-AZ), Senator Todd Young (R-IN), and Rep. Trent Kelly (R-MS) the legislation is designed with the following provisions:

• Coordinate U.S. maritime policy by establishing the position of Maritime Security Advisor within the White House, who would lead an interagency Maritime Security Board tasked with making whole-of-government strategic decisions for how to implement a National Maritime Strategy. 
• The bill also establishes a Maritime Security Trust Fund that would reinvest duties and fees paid by the maritime industry into maritime security programs and infrastructure supporting maritime commerce. 
• Establish a national goal of expanding the U.S.-flag international fleet by 250 ships in 10 years by creating the Strategic Commercial Fleet Program, which would facilitate the development of a fleet of commercially operated, U.S.-flagged, American crewed, domestically built merchant vessels that can operate competitively in international commerce. 
• Enhance the competitiveness of U.S.-flagged vessels in international commerce by establishing a Rulemaking Committee on Commercial Maritime Regulations and Standards to cut through bureaucracy and red tape within the Coast Guard that limits the international competitiveness of U.S.-flagged vessels, requiring that government-funded cargo move aboard U.S.-flag vessels, and requiring a portion of commercial goods imported from China to move aboard U.S.-flag vessels starting in 2029. 
• Expand the U.S. shipyard industrial base, for both military and commercial oceangoing vessels, by establishing a 25 percent investment tax credit for shipyard investments, transforming the Title XI Federal Ship Financing Program into a revolving fund, and establishing a Shipbuilding Financial Incentives program to support innovative approaches to domestic shipbuilding and ship repair. 
• Accelerate U.S. leadership in next-generation ship design, manufacturing processes, and ship energy systems by establishing the U.S. Center for Maritime Innovation, which would create regional hubs across the country.  
• Make historic investments in the maritime workforce by establishing a Maritime and Shipbuilding Recruiting Campaign, allowing mariners to retain their credentials through a newly established Merchant Marine Career Retention Program, investing in long-overdue infrastructure needs for the U.S. Merchant Marine Academy, and supporting State Maritime Academies and Centers for Excellence for Domestic Maritime Workforce Training and Education. The bill also makes long-overdue changes to streamline and modernize the Coast Guard’s Merchant Mariner Credentialing system. 

Not a Done Deal

Papavizas warned the Ships Act is not a done deal: “The Ships Act will have to be re-introduced in the new Congress” in 2025 and the indicators of whether it will be enacted are as follows:

1) Do all the current cosponsors of the legislation remain and will it pick up new cosponsors?

2) What will be the actions taken in the House: “Will hearings be scheduled expeditiously by House Transportation and Defense committees? If that happens then there is a better possibility that the legislation will be enacted.”

However, then there is the question of appropriations: “There are sources of funding specified in the Ship Act, but they may not be sufficient to appropriate the amounts specified in the legislation in which case additional funding may be necessary. There are incentives to invest in new ships that include a tax credit … that credit can be as much as 40% which will help defray the US shipbuilding costs.”

Papavizas notes that the U.S. Maritime Administration ship financing program, the Title XI program, “is not likely to be very useful in providing ship financing.”

If the Ships Act passes, it is proposed to acquire and build 250 U.S. flag vessels: “Initially the new shipowners will be able to reflag 10 foreign-built ships of a maximum age of 14 years for the first three years which then goes up to 20 ships in the following years. However, the owners will also need to order a similar number of newly-built ships from U.S. yards and with a goal of 250 ships.”

The size of these orders should attract new shipbuilders from U.S. allies “such as Japan and South Korea maybe Singapore to establish new shipyards in the United States since the existing U.S. yards cannot grow easily. This will offer a new opportunity for foreign shipbuilders to build ships at new U.S. shipyards to meet the shipbuilding target market of 250 ships provided under the Ships Act.”

Offshore Wind

Papavizsas said that his law firm, Winston and Strawn, represents a number of offshore wind developers. He said that the incoming Trump administration may quickly decide whether the approved offshore wind projects progress or not.

Papavizas noted that major delays by successive U.S. administrations in the permit approval and regulation process have seriously delayed many projects around the country: “The original offshore wind legislation was passed in 2005, but it took until the Obama administration in 2009 to provide the necessary regulations. So, the delays during the Obama administration slowed things down, and then things slowed down further during the first Trump administration and then sped up during the Biden administration. The regulatory delays by successive administrations are the main reason the development of offshore wind has been so slow. “

Impending Trump Executive Order Will Decide Offshore Wind’s Fate in U.S.

After January 20, 2025, Papavizas says, “We will need to see what the wording is in the Trump administration’s executive order on energy. If the wording states nothing about offshore wind that would be great. If the order states it will not authorize new projects that still is okay because eleven (11) projects have been authorized, but if the order says the administration will withdraw support for the existing projects, then that would be bad.“