Shipbuilders sue to bar upgrades in China

The Shipbuilders Council of America, concerned about U.S. shipowners sending more vessels overseas for cheap upgrading, has sued to stop Oakland-based Matson Navigation Co. from using a Chinese shipyard.

The Shipbuilders Council and Pasha Hawaii Transport Lines filed a lawsuit against the Coast Guard, the Department of Homeland Security and the National Vessel Documentation Center, arguing that a Matson plan to alter three ships was improperly approved.

The council said it opposed allowing overseas work on U.S. ships because it wanted them to be repaired and upgraded in U.S. shipyards. It said shipowners shouldn’t be allowed to charge high U.S. rates for those ships after reducing their upgrading costs at foreign yards. The suit was filed Thursday in U.S. District Court in Alexandria, Va.

U.S. shipping fleets are protected from foreign competition by the Jones Act, which requires U.S. ownership, construction and crew for all waterborne commerce between U.S. ports.

Matson has said it plans to spend $45 million to alter three containerships so that they can accommodate vehicles. The company, which stands to save millions of dollars by using a Chinese shipyard, has said it is committed to supporting U.S. builders and is sending some of the work to U.S. yards.

Matson, which wasn’t named in the complaint, said Tuesday that it believed the overseas work was properly approved by the Coast Guard.

The Shipbuilders Council is the largest U.S. shipbuilding association, representing 36 firms that own and operate more than 100 shipyards. Pasha is a rival of Matson in the market between Hawaii and West Coast ports.

“It is unfair for these ships to go overseas for cheap upgrading work and come back to the United States to charge high rates,” said Allen Walker, president of the Shipbuilders Council.

Federal regulations allow U.S.-flagged ships to be rebuilt overseas if the work involves no more than 10% of the vessel’s steel weight, he said.

Walker said his group didn’t see the need to do ship conversion work overseas because three to four U.S. shipyards had the capacity for that task.

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Reuters was used in compiling this report.