SENATE COMMITTEE ON COMMERCE, SCIENCE, & TRANSPORTATION
Hearing on Reviving Commercial Shipbuilding
For questions on the note below, please contact the Delta Strategy Group team.
On October 28, the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Coast Guard, Maritime, and Fisheries held a hearing entitled, “Sea Change: Reviving Commercial Shipbuilding.” Witnesses in the hearing were:
- Matt Paxton, President, Shipbuilders Council of America
- Jeff Vogel, Vice President of Legal, TOTE Services
- Dr. Salvatore Mercogliano, Professor, Campbell University
- Tuuli Snow, Talent Acquisition & Engagement Manager, Snow & Company, Inc.
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways from opening statements and discussion.
Key Takeaways
- Subcommittee Chairman Sullivan (R-AK) outlined how the U.S is facing a strategic challenge in addressing its limited domestic shipbuilding capacity compared to foreign competitors, especially China. He highlighted the need to rebuild and accelerate a robust, competitive U.S. commercial shipbuilding industry alongside strengthening the U.S.’s broader maritime industrial base, citing how the U.S. builds less than one percent of the world’s commercial ships while China accounts for nearly half of global production. He raised how China’s dominance is backed by state planning, subsidies, and coercive trade practices, questioning the role of Chinese subsidies within the sector and criticizing how U.S. capital has supported the increase in Chinese shipbuilding.
- Subcommittee Chairman Sullivan praised the Trump administration’s executive order on restoring America’s maritime dominance, highlighting the forthcoming Maritime Action Plan from the administration, due November 5, and how it will lay out the policies, investments, and reforms needed to restore and secure the U.S.’s shipbuilding competitiveness. He also highlighted the One Big Beautiful Bill Act’s (OBBBA) investments in shipbuilding as not only critical to national defense, but to also provide steady demand signals to shipyards, suppliers, and industry.
- Committee Chairman Cruz (R-TX) referenced how the SHIPS Act for America Act would guarantee annual commercial ship production of fifteen to 25 ships per year through subsidies dispersed by a Maritime Security Trust Fund and capitalized by various revenue streams, including new tonnage taxes on international shippers bringing goods into the U.S. and fines on importers for failing to meet certain ship preferencing requirements. Mercogliano framed how gaining U.S. investment from venture capitalists in U.S. shipbuilding and creating incentives to invest, such as through tax deferments or opportunities for long-term leases or loans, would decrease the sector’s dependence on government funding.
- Discussions raised how U.S. shipbuilders do not compete on a level global playing field, with Paxton citing how the disparity between the U.S. and international markets is driven by pervasive foreign industrial targeting and non-market practices. Vogel stated that to restore the U.S.’s shipbuilding strength, the U.S. must be decisive in addressing heavily subsidized foreign competition and provide a clear demand signal for U.S.-built ships.
- Mercogliano proposed that the Maritime Security Program and Tanker Security Program should be expanded to offset higher U.S. operating costs, with consistent cargo flows secured through Cargo Preference laws, government contracts, or incentives for private shippers. He referenced how offering tax rebates to companies that ship goods on U.S.-flagged vessels or reducing tariffs on goods transported on U.S. ships would help level the playing field. He cited a key step as reflagging vessels and promoting the benefits of U.S. registry, including a careful reexamination and modernization of the Jones Act.
- Mercogliano highlighted China’s level of vertical integration as a driving factor in its growing market share and how China, Japan, and Korea are in a three-way war in shipbuilding. He cited that China’s production increase of sixteen percent over the last three years as the exact amount that Japan and Korea have lost, and that the loss of market share is one of the reasons for Japan and Korea’s interest in investing in the U.S.
- Vogel called for Congress to ensure that OBBBA-appropriated shipbuilding funds are swiftly allocated and to support the design of cost-effective construction through a commercial model. He discussed how Congress and the administration can encourage private investment by modernizing regulations and supporting build-charter agreements, allowing U.S. companies to use private capital for the rapid commercial construction of non-combatant government ships. He voiced support for tax incentives for shipyard investment and for ensuring that alternative marine fuels are not disadvantaged by outdated tax rules.
- Committee Ranking Member Cantwell (D-WA) discussed the need to protect the Jones Act, expand and streamline Title 11 loan guarantee programs, and modernize infrastructure, alongside doing more to maintain U.S. cargo through Cargo Preference oversight. She asked about the role of tax incentives, with Vogel responding that a 25 percent tax credit for investment in shipyards can accelerate the reinvestment in commercial shipyards needed, and how the fuel parity tax could ensure that companies making investments in the newest technology are not unfairly disadvantaged.
- Several comments referenced the benefits of incorporating innovative practices, with Subcommittee Chairman Sullivan referencing the $450 million in the OBBBA for software and AI deployment in U.S. shipyards. Committee Ranking Member Cantwell cited the need to invest in the technology and training to establish cutting-edge maritime ecosystems, raising how the integration of AI or blockchain technology could help the U.S. move faster.