DOD Leases of Foreign-Built Ships: Background for Congress

Ronald O'Rourke
Specialist in Naval Affairs

Prior to the enactment of the FY2008 defense authorization act (H.R. 4986/P.L. 110-181 of January 28, 2008), 10 U.S.C. §2401 stated DOD may not lease a vessel or aircraft for a period of more than five years unless it is specifically authorized by law to make such a lease. Operating under this provision, the Department of Defense (DOD) in recent years used lease options and renewals to lease some foreign-built cargo ships for total periods of almost 10 years—a length of time that some observers argue effectively circumvented a legal requirement that U.S. military ships be built in U.S. shipyards. These observers, particularly the American Shipbuilding Association (ASA), proposed reducing the current five-year legal limit on ship leases to two years for foreign-built ships. DOD opposed the idea, arguing that its ship leases are the most cost effective way to meet its needs for the ships in question.

Section 1011 of the FY2008 defense authorization act amended 10 U.S.C. §2401 to permit the Secretary of a military department to lease a vessel for a period of greater than two years, but less than five years, only if the Secretary provides a notification of the lease to the House and Senate Armed Services and Appropriations committees (including a detailed description of its terms, a justification for entering it rather than purchasing the vessel, a determination that entering into it is the most cost-effective option, and a plan for meeting the requirement upon the lease's completion), and a period of 30 days of continuous session of Congress has expired.

The explanatory statement on the final version of the FY2010 DOD appropriations act (H.R. 3326/P.L. 111-118 of December 19, 2009) directed the Navy to update its March 2008 report on the leasing of foreign-built ships and address impacts on American seafarers, sealift capabilities, and naval shipbuilding.


Date of Report: June 10, 2010
Number of Pages: 11
Order Number: RS22454
Price: $29.95

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