Op-Ed: MARAD’s support programs for shipyards and operators

Todd Hiller spoke at Marine Log's Ship Repair USA conference on MARAD's support of the ship repair industry through various programs.

By Todd Hiller

The Marine Log Ship Repair USA Conference, held annually in New Orleans, La., brings together some of the finest minds and leading stakeholders in the ship repair industry, providing a unique platform to discuss the latest advancements, challenges, and opportunities within our sector. The ship repair industry is not just a vital component of the maritime economy but also a cornerstone of global trade, national security, and environmental stewardship.

The Role and Importance of the Ship Repair Industry

The ship repair industry plays a critical role in maintaining the operational readiness, safety, and efficiency of maritime vessels. These vessels are the lifeblood of international commerce, facilitating the movement of goods and resources across the globe. Our work ensures that these vessels remain seaworthy, compliant with regulatory standards, and capable of meeting the demands of a rapidly evolving industry.

Safety and Compliance: Ensuring vessels meet international and national safety regulations is paramount. Regular maintenance, timely repairs, and comprehensive overhauls prevent accidents and mitigate environmental hazards. This is essential for safeguarding human lives and our marine ecosystems.

Economic Impact: The ship repair industry significantly contributes to the economy, particularly in coastal regions and port cities. It provides a multitude of skilled and semi-skilled jobs, from welders and electricians to engineers and logisticians. Furthermore, the industry stimulates local economies by driving demand for parts, materials, and auxiliary services.

Operational Efficiency: Properly maintained vessels operate more efficiently, reducing downtime and avoiding costly delays. Efficient operations are crucial for the uninterrupted flow of global trade, which underpins the economies of many nations.

Environmental Sustainability: Upgrading and retrofitting vessels with advanced, eco-friendly technologies can substantially reduce their environmental impact. Innovations in fuel efficiency, emission controls, and waste management are integral to global efforts to combat climate change.

The Success of Programs Offered Through the Maritime Administration

The U.S. Maritime Administration (MARAD) has been instrumental in supporting the ship repair industry through various programs, including the Small Shipyard Grant Program, Title XI, and the Capital Construction Fund (CCF). These programs provide essential financial support, fostering innovation, sustainability, and competitiveness within the industry.

Small Shipyard Grant Program

The Small Shipyard Grant Program provides financial assistance to small shipyards for capital improvements and employee training. For FY24, MARAD received 78 grant applications with a total federal fund request just shy of $50 million. Of the 78 grants, 55 were from the east, west and gulf coasts combined. Nine were from the Great Lakes, 11 were from inland shipyards and three were from outside of the continental U.S. Unfortunately, MARAD only received $8.75 million in funding for the program, which was $11.25 million less than FY23. Currently, this year’s grant applications have completed review and evaluation with an anticipated award announcement set for early July 2024.

Impact on Small Shipyards: This program is particularly beneficial for smaller shipyards that might not have the financial resources to invest in necessary upgrades. Grants can be used for purchasing advanced equipment, modernizing facilities, and enhancing workforce skills.

Success Stories: Numerous small shipyards have reported significant improvements in productivity and service quality because of these grants. For example, some shipyards have used the funds to install new lift systems or upgrade their welding capabilities, leading to more efficient repair operations as well as the hiring of more workers.

In recent years, several shipyards have received funding for crucial upgrades and equipment acquisitions. C&C Marine and Repair in Belle Chasse, La., secured a $749,000 Small Shipyard Grant in 2021, which improved welding efficiency and quality while reducing costs and enhancing competitiveness. Tampa’s International Ship Repair & Marine Services obtained $880,000 in 2022, upgrading welding equipment, enhancing productivity, and reducing downtime. Additionally, Alabama Shipyard, Mobile, Ala., received $700,000 last year for capital improvements, including the installation of self-sustaining air compressor modules to address operational concerns. These investments have led to increased efficiency, improved safety, and economic benefits for the local communities.

Title XI – Federal Ship Financing Program

The Title XI program offers loan guarantees to shipowners, shipbuilders, and ship repair yards for the construction or modernization of ships and shipyards. This program mitigates financial risks associated with large-scale investments, making it easier for industry players to secure financing. The repayment term allowed under the program generally is much longer with a higher funding level and lower interest rates than those available from the commercial lending market.

Impact on Ship Repair Industry: Title XI loan guarantees enable shipyards to invest in state-of-the-art repair facilities and technologies, enhancing their ability to undertake complex repairs and overhauls. This ensures they can meet the evolving needs of the maritime industry.

Case Studies: Numerous shipyards have successfully utilized Title XI guarantees to expand and modernize their operations. For instance, some shipyards have invested in dry docks and specialized equipment, allowing them to handle larger vessels and more sophisticated repair tasks.

In 1997, HAM Marine proposed a $25 million expansion and upgrade of its shipyard facilities to meet the growing demand for vessel repair, modifications, and offshore drilling vessel construction. In 1999, Panama City, Fla.-based Eastern Shipbuilding Group received $6.5 million to construct a 700-foot bulkhead/side launch facility, doubling the maximum vessel length to 550 feet and improving efficiency and safety. These upgrades resulted in slightly lower prices for customers and improved safety for workers. Recently, Nichols Brothers Boat Builders, Freeland, Wash., applied for Title XI financing to enhance steel production efficiency using automated panel line implementation and facility upgrades, driven by advancements in robotics.

Capital Construction Fund (CCF)

The CCF program encourages U.S. shipowners to accumulate capital for the construction, reconstruction, or acquisition of vessels by deferring federal income taxes on certain deposits of money or other property.

By allowing shipowners to build a reserve of untaxed income, the CCF program facilitates significant investments in vessel modernization and repair. Many shipowners have taken advantage of the CCF program to fund major repairs and upgrades. These investments have led to improved vessel performance, compliance with environmental regulations, and extended operational lifespans. This supports the ship repair industry and ensures the U.S. fleet remains competitive and up to date with the latest technological advancements.

Workforce Development and Training Programs

MARAD supports various training programs aimed at developing a skilled workforce for the ship repair industry. These initiatives include partnerships with maritime academies, technical schools, and industry associations.

By funding training programs, MARAD ensures that the ship repair industry has access to a pool of well-trained professionals, which is crucial for maintaining high standards of repair and safety within the US.

MARAD’s support for apprenticeships provides on-the-job training opportunities, allowing new workers to gain practical experience under the guidance of seasoned professionals. This helps bridge the gap between academic learning and real-world application.