Statement of Policy - It's Time to Make "Buy American" America's Priority
The American Shipbuilding Suppliers Association (ASSA) defends and supports the work of House Armed Services Committee (HASC) lawmakers who are working to pass legislation that will gradually strengthen existing “Buy American” requirements on the Defense Department’s largest Programs of Record (PoR). The legislation would include language in the 2021 defense authorization bill directing major defense acquisition programs “shall be deemed to be manufactured substantially all from materials and components produced, or manufactured in the United States.” The current statutes describe “substantially all” as 50% — the new provision would increase that to 75% in October 2021 and then to 100% by 2026. ASSA supports the position of Congressman Donald Norcross (D-NJ). “If we have not learned our lesson during this pandemic, when are we going to learn it,” he said during the House Armed Services Committee’s mark-up of the bill.
ASSA could not agree more. “As a nation we’re currently struggling to manufacture adequate health care materials to protect our nation; we don’t want to be in the position where we can’t design, build and equip U.S. warships without a dependency on other countries,” said George Williams, CEO of ASSA.
It was in fact the Nation’s manufacturing industry that stepped up, pivoting their operations, to provide what was needed in response to COVID-19. If given the opportunities, the shipbuilding suppliers will do the same for the shipbuilding industry. By law, U.S. Navy ships are required to be built in U.S. shipyards (10 USC §7309). The national security justification for this is clear—whether it relates to sensitive nuclear technology, security of the supply chain, or maintenance of critical capabilities and skills in our industrial base. However, there is no such requirement for critical Hull, Mechanical & Electrical (HM&E) components—propulsion systems, machinery control systems, shafts, bearings, ships service power generation and many others—to be manufactured in the U.S.
The U.S. Navy has historically selected U.S. manufactured components for its major surface combatants and designated them as class standard equipment to be procured either as Government Furnished Equipment (GFE) or Contractor Furnished Equipment (CFE). In a major departure from that policy, the Navy has imposed no such requirement that certain ship components for U.S. surface combatants and auxiliary ships be manufactured in the U.S. by members of the National Technology and Industrial Base.
ASSA’s position is that Congressional direction is needed for components for all Navy Surface Ships and Unmanned Vessels to be required to be designed, engineered, manufactured and assembled in the U.S. Continued foreign encroachment on American Manufacturers is a matter of economics and national security. It’s time for this to be a national priority. “ASSA members want a seat at the table early on when the Navy is designing the ships so that they can be ready with the components required as a reliable, ever present, domestic source for U.S. Shipyards,” Williams said. “Instead, these decisions are relegated to shipyard primes or their foreign-owned partners, and there is no requirement for sourcing these components within the U.S. Shipbuilding Supplier Industrial Base.” This is decimating the American Shipbuilding Suppliers Industry so much so that one day, the U.S. may be totally dependent upon foreign countries to defend our Nation. There is a related piece of legislation that is relevant to this particular issue. The FY 2021 Defense Appropriations Act under the guidance of Chairman Pete Visclosky (D-IN) included a requirement that all preliminary requirements development, performance specification development, and related efforts for a host of new Navy ship classes now seeking R&D funding must include specifications that “all hull, mechanical, and electrical components are manufactured in the United States.” Some critics say they believe that if nobody in the United States manufactures a particular system or component then you have to either redesign the ship or the aircraft or seek an exemption. ASSA says this is simply not factual. Give the industry a product that can’t be made in America and they will show you that all components needed to build ships can and should be manufactured in the U.S. Demand will always create supply in a capitalist society. Representative Norcross’ Amendment includes a time table, incrementally raising the domestic percentages on an annual basis.
Some lawmakers are saying they support the increase in jobs the Buy American legislation would generate but worry that Representative Norcross’ proposed timeline is too aggressive. ASSA says it’s time to get aggressive or lose the industry to foreign competitors forever. “We don’t believe we have been aggressive enough to save American jobs and manufacturers,” said Williams. “This is not an objection but rather an attempt to kick-the-can down the road as it has been for the last 20-years. No decision is a decision.”
Opponents also say “let’s study the issue.” ASSA says the only thing that needs to be studied is the loss of jobs, tax revenue and lost manufacturing operations due to foreign procurements and encroachment. Others cite international agreements that rely on offsets as an issue. These are smaller issues to face than what our Nation is facing when we do not pass legislation that requires the Navy and shipyards to Buy American. Some critics say that being required to “Buy American” will be more costly. Extra costs could be largely or completely offset by the direct benefit to the U.S. Treasury derived from buying from domestic manufacturers. Our manufacturers pay U.S. corporate income tax and employ American workers, who pay American taxes. American manufacturers use American made components and sub-assemblies from American sub-suppliers, all paying income tax. This takes people off the unemployment rolls, makes them productive, makes them gain experience in their trades and teaches them skills. Buying components from foreign sources provides no benefit to the U.S. Economy or to the U.S. Industrial Base. COVID-19 has shed the light on why America should not rely on a global supply chain when the most reliable supply chain is right here in the United States. Another factor that must be taken in to consideration is the identification of life-cycle cost as a critical evaluation factor, separate from initial acquisition cost. This ignores the cost to the government of initial introduction into the logistics system, the training necessary for new systems, the location of repair services (e.g., does the equipment need to leave the U.S.?), and the cost and availability of parts and services for the lifetime of the ship.
John Luddy, Vice President for National Security Policy at the Aerospace Industries Association told Inside Defense that a policy based on arbitrary percentages can be “problematic.” ASSA believes the biggest problem the industry faces is foreign encroachment and statutes that do not have any teeth in them to force the Navy and the shipyards to buy from American manufacturers. The sheer volume alone that would be generated for American Manufacturers would shore-up the industry to deliver the products needed, while maintaining national security. The manufacturing companies that make up this shipbuilding supplier base are very specialized in responding to the unique requirements of U. S. warships; their facilities are capital-intensive; they require a highly skilled workforce; they are familiar with stringent Navy requirements for operations in demanding environments, e.g. cyber security, shock, vibration, EMI, acoustic, etc.; their highly engineered products generally do not lend themselves to commercial markets; they provide critical business to 3rd and 4th tier suppliers within the shipbuilding supplier base; and the loss of opportunity to U.S. suppliers would increase the cost on other Navy platforms. Most importantly, maintaining a robust domestic manufacturing capability allows for a surge capability by ensuring rapidly scalable capacity when called upon to support major military operations—a theme frequently emphasized by DoD and Navy leaders.
These capabilities are a critical national asset and once lost, it is unlikely or extremely costly to replicate them. This would be a difficult lesson that is not in the government’s best interests to re-learn. One such lesson exists on the DDG-51 restart, where the difficulty of reconstituting a closed production line of a critical component manufacturer—its main reduction gear—required the government to fund the manufacturer directly as Government Furnished Equipment (GFE), since the U.S. manufacturer for the reduction gear had ceased operations. As a result, significant time and financial resources were expended by the government, shipbuilders and suppliers to reconstitute the ability to manufacture this critical component.
Without a clear statement from the government that the U.S. shipbuilding supplier base will be a priority, the value of programs to sustain the supplier industrial base are minimal. Furthermore, this flies in the face of the concerns expressed in the recent industrial base report about the decline of critical suppliers and loss of vital workforce skills.
In the absence of clear direction from the Navy on domestic sourcing of critical components, Congress should consider providing such direction through a statutory requirement that key critical components must be designed, engineered, manufactured and assembled in the U.S. The Administration has been espousing these theories since the September 2018 report was released on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.” In short it states:
“America’s manufacturing and defense industrial base...supports economic prosperity and global competitiveness, and arms the military with capabilities to defend the nation. Currently, the industrial base faces an unprecedented set of challenges: ...the decline of critical markets and suppliers; unintended consequences of U.S. Government acquisition behavior; aggressive industrial policies of competitor nations; and the loss of vital skills in the domestic workforce. Combined, these challenges ... erode the capabilities of the manufacturing and defense industrial base and threaten the Department of Defense’s (DoD) ability to be ready for the ‘fight tonight,’ and to retool for great power competition.”
However, in the absence of clear direction from the Navy on domestic sourcing of critical components, Congress must provide such direction through provisions like the Norcross amendment and the Visclosky-led appropriations bill that require key critical components to be designed, engineered, manufactured and assembled in the U.S. “ASSA strongly supports the Buy American provisions in both of these bills,” said Williams. “It’s time to make Buy American America’s priority.”
ASSA is a member driven, national organization, advocating for the American Shipbuilding Supplier Base to the U. S. Congress, Navy, Coast Guard and shipbuilders to ensure the long term stability of the U. S. national maritime industry. ASSA CONTACTS: Media Contact: Tish Haas Williams, 228-216-9048, email@example.com CEO: George Williams, 228-861-3548, firstname.lastname@example.org
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