Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
How 'MASGA' could reshape shipbuilding ties between Korea, US
A hat with the slogan "Make America Shipbuilding Great Again" sits on a desk at the presidential office in Seoul, Aug. 3. Yonhap
By Nam Hyun-woo
Experts note feasibility of Korean firms' acquisition of US shipyards
With President Lee Jae Myung and U.S. President Donald Trump set to hold their summit in Washington Monday (local time), attention is now on how the two countries can reshape their shipbuilding ties through the so-called “Make American Shipbuilding Great Again” (MASGA) project.
The Korean government has credited the project with playing a key role in the two countries’ recent tariff agreement, which reduced the planned U.S. blanket tariff from 25 percent to 15 percent. The arrangement involves setting up a $150 billion fund aimed at revitalizing the American shipbuilding industry through Korean investment, but further details remain under wraps.
In a May report, the U.S. Center for Strategic and International Studies outlined several scenarios for shipbuilding cooperation between the United States and its allies. These included contracting maintenance, repair and overhaul (MRO) of U.S. ships, acquisitions of U.S. shipyards by Korean shipbuilders, jointly distributed production of warships and U.S. purchases of allied-built ships.
Of these scenarios, local experts said the most feasible way is for Korean firms to acquire U.S. shipyards, given the regulatory environment and political stance of Washington.
“The (Korean) government seems to be fixated on various details in preparing for the trip, but past experience suggests that President Trump is not particularly interested in such specifics, such as easing the Jones Act,” said Rhee Shin-hyung, head of Seoul National University’s Department of Naval Architecture and Ocean Engineering.
“For now, the most realistic scenario is Presidents Lee and Trump reaching a broad rhetorical agreement, such as ‘Korea will take care of the U.S. shipbuilding industry,’ with follow-up negotiations assisting Korean companies to build U.S.-flagged ships in America. This would entail costs for rebuilding shipyards, restoring supply chains in related industries and covering financial expenses such as repayment guarantees, which I believe the fund should be used for.”
Hanwha Ocean's Geoje shipyard in South Gyeongsang Province / Yonhap
The Jones Act is a U.S. maritime law restricting foreign-built and foreign-operated vessels from transporting goods between American ports. It also places limits on overseas MRO of U.S. warships.
Currently, U.S. Representatives Ed Case and James Moylan have jointly tabled the Merchant Marine Allies Partnership Act, a bipartisan bill that would allow U.S. coastal operations of ships built in allied countries in some conditions. Where U.S. companies currently face up to a 50 percent tax on ship modifications and repairs done outside the U.S., the act would lift that tax for repairs done in allies’ shipyards.
Along with the bill, U.S. lawmakers in February tabled the Ensuring Naval Readiness Act to permit the construction of U.S. naval vessels in allied nations, countering the existing Byrnes-Tollefson Amendment.
Both pieces of legislation, however, still remain under congressional review even with bipartisan support. Industry officials note that the Jones Act has been effective for over a century, despite repeated revision attempts, due to contentious stances in the U.S. shipping and shipbuilding industries.
A ship is under construction at the HD Hyundai Heavy Industries shipyard in Ulsan, July 31. Yonhap
Reflecting on this regulatory environment, Hanwha Ocean has been most proactive in investing directly in the U.S. shipbuilding industry. The company plans to increase the annual capacity of Hanwha Philly Shipyard, which it acquired for $100 million late last year, from 1.5 ships to 10 ships by 2035 through additional investment. Reportedly, the company is also considering building or acquiring another shipyard in the U.S.
HD Hyundai is focusing on partnerships with local companies. The company signed a memorandum of understanding with Edison Chouest Offshore (ECO), which operates shipyards in Louisiana. Under the agreement, the two companies plan to jointly build mid-sized container ships by 2028.
Rhee noted that other scenarios may not be feasible or beneficial for Korea. Currently, Hanwha and HD Hyundai have secured a number of MRO contracts for U.S. naval vessels, but they are only permitted to service non-combat ships. Selling Korea-built commercial ships may not be beneficial because the U.S. commercial shipping market remains too small, and Washington is unlikely to ease regulations to allow its naval vessels to be purchased from Korea.
“Ultimately, the project has to aim for building U.S. warships in the U.S.,” Rhee said. “Companies like Italy’s Fincantieri and Australia’s Austal are all producing U.S. military vessels through their local subsidiaries in the U.S. Given Korean shipbuilders’ competitiveness, I believe there is significant market potential.”
Ships under construction sit docked at Fincantieri Marinette Marine in Marinette, Wis., July 12, 2024. AP-Yonhap
Jang Sang-sik, head of trade trend analysis at the Korea International Trade Association, noted that acquiring a shipyard in the U.S. would be the first step, and cooperation can extend to naval vessles after issues such as trust and security are addressed.
“If Korean companies attempt to acquire U.S. shipyards, they could face hurdles such as regulatory approval from Washington, operational challenges under new ownership, workforce shortages, and tariffs on parts and materials shipped from Korea,” Jang said. “These are areas where institutional support from the U.S. would be needed, and such issues could be brought up during the summit.”
Jang said that if Korea proves itself as a trusted partner in the supply chain with the U.S., there could be a model in which ship hulls are assembled in Korea while weapons systems are installed in the U.S. Still, he said, such a process would inevitably take considerable time.
Korea Investment & Securities analyst Kang Kyung-tae expects the MASGA fund to be used for three purposes. He noted that the fund can support restoring infrastructure, by either acquiring and upgrading existing shipyards or building new ones. The fund can also facilitate technology transfer, research and development, and workforce training, as well as provide financing support for U.S. shipbuilders.