President Donald Trump has paved the way for foreign shipbuilders that invest in U.S. shipyards to construct up to two U.S. Navy vessels in their home countries. This initiative expands the so-called 'Finnish model,' which allows initial production abroad before shifting subsequent manufacturing to the United States, to the construction of U.S. Navy ships.
Among domestic companies, Hanwha, which owns the Philadelphia shipyard, is seen as the most likely to benefit directly from this move. However, it does not mean that U.S. Navy vessels can be built immediately in South Korea. Each project will still require approval from the U.S. government and notification to Congress.
First Two Vessels Built Abroad... Subsequent Ships in the U.S.
According to the White House on August 13, Trump signed a memorandum aimed at rebuilding the U.S. Navy and shipbuilding industry, directing the Department of Defense to develop a plan utilizing the Finnish model for acquiring new naval vessels.
The initiative targets foreign shipbuilders that either construct new shipyards in the U.S., own existing shipyards, or hold more than a 50% stake in U.S. shipbuilding operations.
These companies must employ and train American workers and ensure that shipbuilding technologies and methods used in their home countries can also be applied in U.S. shipyards. They are also required to establish a supply chain for shipbuilding and maintenance within the United States.
In exchange, the initial two vessels can be constructed at the foreign shipyard, with subsequent ships required to be built in the U.S.
The White House described this as a measure to expand the Finnish model, which was previously applied to the U.S. Coast Guard's medium icebreaker program, across the entire U.S. shipbuilding industry.
The scope includes not only support vessels that supply fuel and supplies to warships but also surface combatants engaged in combat missions.
Trump has instructed the Department of Defense to devise a plan within 90 days for acquiring surface combatants capable of attacking submarines or enemy vessels and protecting fleets and transport ships. Tankers that supply fuel and supplies to naval vessels at sea, as well as roll-on/roll-off (Ro-Ro) transport ships, are also included in this initiative.
Generally, the U.S. restricts the construction of military vessels at foreign shipyards. However, exceptions can be made for national security reasons. This memorandum opens the door for such exceptions to be applied to actual U.S. Navy shipbuilding projects.
The memorandum also limits excessive alterations to ship designs already validated by foreign shipbuilders, requiring approval from senior Department of Defense officials for any design changes to minimize cost increases and construction delays.
Hanwha, Owner of Philadelphia Shipyard, a Strong Contender
In South Korea, Hanwha is regarded as the company that most closely meets the conditions outlined in the memorandum.
Hanwha Systems and Hanwha Ocean acquired the Philadelphia shipyard in 2024 with a $100 million investment. Hanwha already owns a shipyard in the U.S., aligning with the conditions set forth in the memorandum.
Last year, Hanwha announced plans to invest an additional $5 billion in the Philadelphia shipyard, aiming to construct new docks and piers and expand production facilities to increase annual construction capacity to a maximum of 20 vessels in the long term. The company plans to broaden its business scope from liquefied natural gas (LNG) carriers and naval vessel blocks to include military shipbuilding.
Hanwha has already entered the U.S. Navy-related market. In March, Hanwha Defense USA and the Philadelphia shipyard were selected as subcontractors for the U.S. Navy's next-generation logistics support ship (NGLS) program. Last month, they were also chosen for a project to build missile tracking vessels (MRIV) for the U.S. Missile Defense Agency (MDA) at the Philadelphia shipyard.
Hanwha is also pursuing the acquisition of the U.S. operations of Australian shipbuilder Austal, which constructs vessels for the U.S. Navy and Coast Guard. If successful, this acquisition would further secure a foundation for military shipbuilding in the U.S.
This initiative can also be seen as a move to concretize the shipbuilding cooperation agreed upon by South Korea and the U.S. last year. The joint fact sheet from the South Korea-U.S. summit included plans to expand investment in U.S. shipyards, workforce training, maintenance, repair, and overhaul (MRO), and supply chain cooperation, as well as to explore the possibility of constructing U.S. vessels in South Korea.
However, additional procedures are necessary before U.S. Navy vessels can be built in South Korean shipyards. For each project, the Secretary of Defense must determine that overseas construction is necessary for national security, and contracts cannot be finalized until 30 days after notifying Congress.
Congressional oversight also poses a variable. There are ongoing efforts in Congress to restrict the overseas construction of combat ships and certain support vessels. The White House has expressed opposition to these restrictions, arguing that they could hinder the strategy to rebuild the U.S. shipbuilding industry using foreign shipyards.
* This article has been translated by AI.
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