AFL-CIO Sues Coast Guard to Block Kit Ships

Friday, January 12, 2007
The Metal Trades Department of the AFL-CIO has sued the U.S. Coast Guard to block controversial rulings that violate the 80-year-old Jones Act to allow U.S. shipbuilders to mass produce so-called "kit ships."

The suit, filed in the U.S. District Court for the Eastern District of Pennsylvania, charges that a ruling issued on May 24, 2006 and affirmed on November 15, 2006 by the Coast Guard's National Vessel Documentation Center, ignores the requirements of the Jones Act that stipulate that ships moving between U.S. ports must be "built in" the U.S.

The Documentation Center's rulings effectively authorized plans by Aker Shipyards Philadelphia (APSI) and NASSCO, a division of General Dynamics, to produce a series of tankers that are assembled from thousands of parts and modules imported from Korea. "If these ill-considered, illogical and unacceptable regulations remain in place, America will lose its shipbuilding industry completely," declared Metal Trades Department President Ron Ault.

U.S. shipbuilders now account for less than one percent of the world market share. Aside from an anemic flow of orders from the U.S. Navy, the nation's six major shipbuilders have been counting on a surge in demand for modern double-hulled tankers to replace an outdated fleet delivering commodities to U.S. ports. The Coast Guard's interpretation of the Jones Act now puts that prospect in jeopardy, Ault explained.

The Metal Trades Department estimates that 55,000 skilled shipbuilding workers it represents are directly imperiled. Another 250,000 jobs supported by U.S.-based marine equipment suppliers -- pipe and chain manufacturers, specialty steel mills, valve producers, and manufacturers making propulsion equipment and specialty fittings -- would quickly collapse.

"The American shipbuilding industry is the last remaining piece of heavy manufacturing still performed in the United States. Because of its high degree of specialization and the proportions of its products, it is efficient and capable of doing much more than it does today – possibly even building large containment vessels for nuclear plants for export. Yet, it could disappear overnight -- along with vital institutional memory and skills. Aker and NASSCO got into this process willingly, but the remaining yards will be forced to follow or die," Ault said. Aker and NASSCO each entered into partnerships with two of Korea's giant shipbuilding companies -- Hyundai Mipo and Daewoo Shipbuilding, respectively. The terms of those contracts provide proprietary Korean designs for new tankers, along with stipulations that require the U.S. partners to exclusively use bow and stern assemblies, piping, winches, even entire engine rooms and crew quarters supplied by the Korean partners. On September 19, 2006, Aker launched the first in a series of 10 kit ships it plans to lease through one of its subsidiaries.

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