WASHINGTON — U.S. President Donald Trump has conditionally cleared the way for as many as two warships to be built at foreign shipyards, raising expectations that Hanwha Ocean (042660.KS) could build U.S. warships at its Geoje shipyard in Korea. Some analysts, however, caution that Congress could complicate the picture.
Trump signed a memorandum titled "Rebuilding the U.S. Navy and Its Shipbuilding Industrial Base" on the 13th local time, stating that the measure applies to "foreign shipbuilders that build a shipyard in the United States or acquire ownership or a majority stake in an existing U.S. shipyard." Hanwha, which acquired the Philly Shipyard in Philadelphia, meets that condition. A consortium of Hanwha Ocean and Hanwha Systems bought a 100% stake in 2024. The memorandum carries less legal force than an executive order but is considered similar in practice and does not require congressional approval. Congress can, however, exert influence through the review of related budgets.
In detail, the memorandum requires that shipbuilders "hire and train U.S. citizens to work at U.S. shipyards, transfer proprietary technology used at their home-country parent shipyards to U.S. shipyards through licensing, and build all vessels beyond the first two at U.S. shipyards." It also attached a condition that the construction and maintenance of all vessels at U.S. shipyards after the first two draw on domestic U.S. supply chains. The warships that may be built at foreign shipyards are limited to three types: surface combatants, integrated cargo replenishment tankers, and roll-on/roll-off ships (ro-ro vessels).
Trump described the measure as following the "Finland model" established with Finland last October for building medium-sized icebreakers. The strategy is to build initial vessels quickly at foreign shipyards while transferring overseas expertise to the United States to achieve self-sufficiency. That model was a case in which the president used a waiver to the Burns-Tollefson Act, which in principle bans foreign construction of naval ships, and in this memorandum Trump again applied a "national security waiver."
Trump instructed the secretary of the Department of Defense (Department of War) to submit a ship procurement plan within 90 days of the memorandum taking effect. He also directed that a plan be submitted to channel funds pledged under trade agreements with various countries into investment in the U.S. maritime industrial base. This is interpreted as connected to MASGA, a $150 billion shipbuilding cooperation project that Korea has agreed to invest in the United States.
The U.S. House of Representatives recently passed a provision in the fiscal 2027 National Defense Authorization Act (NDAA) banning the use of defense funds for foreign-built ships, while the Senate is pushing an NDAA that would allow foreign construction only of non-combat support vessels. Coordination between the administration and the two chambers going forward is expected to be a variable for the final contracts of Korean companies.
Separately, the memorandum instructed the defense secretary to establish the fifth U.S. naval shipyard for the first time in more than 80 years to expand U.S. capacity to repair submarines and aircraft carriers. Expectations have emerged that Korean companies could benefit in the design, construction and procurement of facilities and parts during that process.
