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Ship Transfers / Transfer of Naval Vessels

In June of each year, the Chief of Naval Operations (CNO) undertakes a Ship Disposition Review (SDR) to determine which vessels shall be decommissioned from active service; the total each year has been averaging eight vessels. This list will be published by Naval Sea Systems Command (NAVSEASYSCOM) in the Federal Register two months after the Review.

The US makes ship transfers, like other arms transfers, for a number of reasons: to enhance the defense capabilities of friends and allies in support of mutual security interests; to strengthen bilateral relations between the United States and recipient nations; as incentives for cooperation that the United States seeks from recipient nations; and to benefit the U.S. defense industrial base by promoting recipient nations' purchase of related U.S. defense articles and services. US statute and regulation require that the United States sell the ship (or any other defense article or service) to the country at its full cost. If a ship is leased, the lessee gains the advantage of being able to use the item for a defined period without having to incur the higher cost of an outright purchase. However, the lease cost reflects the full depreciation of the ship's value during the lease period and therefore is not a discounted rate.

Section 7303(b)(1) of Title 10 of the US code is the primary controlling authority for this case. It provides that a naval vessel in excess of 3,000 tons or less than 20 years of age may not be transferred to another nation except as explicitly authorized by law. This section of law distinguishes ship transfers from other types of major arms transfers in requiring the President to secure positive action by Congress before the transfer can be made. For other major arms transfers, the President may make the transfer unless, within a specified notification period, a law is enacted prohibiting the transfer.

Foreign Military Sales ( FMS ) Case Funds are provided by the foreign customer and used to execute the transfer. These funds pay for personnel, operations, travel and per diem, overhaul, reactivation, modernization, repairs, upgrades, logistics support, software modification and equipment modification. FMS Case Funds are also used to pay for training of foreign personnel. This training includes formal schools training, shipboard indoctrination training, on-the-job training, underway training, and industrial training.

The President is authorized to transfer vessels to foreign recipients on a grant basis under section 516 of the Foreign Assistance Act of 1961 (22 U.S.C. 3 2321j).

In 2006 Section 7307(a) of title 10, United States Code, was amended by adding at the end the following new sentences: "In the case of an authorization by law for the disposal of such a vessel that names a specific vessel as being authorized for such disposal, the Secretary of Defense may substitute another vessel of the same class, if the vessel substituted has virtually identical capabilities as the named vessel. In the case of an authorization by law for the disposal of vessels of a specified class, the Secretary may dispose of vessels of that class pursuant to that authorization only in the number of such vessels specified in that law as being authorized for disposal.''.

Transfers are accomplished by one of two methods known as the "Hot Ship" method or the "Cold Ship" method. Under the "Hot Ship" method, the foreign recipient takes custody of a recently active ship coincident with decommissioning. "Hot Ship" transfers are preferred and mutually beneficial because the U.S. Navy avoids the inactivation costs and the foreign recipient avoids reactivation costs. "Hot ship" transfers also provide the foreign crew a unique opportunity for on-the-job training by the USN crew prior to the transfer date. Through "Hot ship" transfer, the vessel remains active and is commissioned into the foreign navy upon being decommissioned from the U.S. Navy.

When a "Hot ship" transfer is not possible, transfers are accomplished via the "Cold Ship" method. Under the "Cold Ship" method, the recipient takes custody of a vessel that has been previously inactivated, decommissioned and maintained in the U.S. Inactive Fleet . Vessels of the Inactive Fleet are maintained in storage by PEO Ships for possible disposal, reactivation, or alternative uses such as testing platforms or museum ships. Should the United States and a friendly foreign country agree to transfer a vessel from the Inactive Fleet, the foreign recipient will perform reactivation of this "cold ship" and may purchase follow-on logistics and technical support from the U.S. Navy.

To support vessels transferred to foreign navies, the US Navy outsourced much of the FMS ship transfer process. The US Navy issued a contract to privatize the management of all ship transfers to FMS customers. This privatization includes ship reactivations, overhauls, combat system support, follow-on technical support, crew training and provisioning of spare parts. The ten-year FMS supportability contract was awarded in 1995 to a consortium of specialized companies known as the BAV Division of VSE Corporation. The BAV team was selected under best-value criteria as the surface ship supportability contractor for the security assistance programme office (PMS380) of the naval sea systems command and now provides the US Navy and over 40 foreign countries through FMS cases.

The BAV team is a consortium of 12 industry leaders each bringing extensive experience with foreign military sales (FMS) to the production of military warships. BAV provides wide experience of all classes of ship and systems that have been or will be transferred under FMS programmes, and the industrial resources essential to meet all life-cycle support tasks for FMS ship transfers. World-class facilities complement master ship repair (MSR)-certified shipyards and master ordnance repair (MOR)-certified electronics and weapon systems firms.

BAV provides all ship transfer, repair and follow on technical and management support to the United States Naval Sea Systems Command Security Assistance Program Office. In addition to ship transfer, industrial infrastructure assistance, and follow-on technical support, the BAV FMS package includes life-cycle logistics support and assistance with procurement of US Navy stock and commercial items for outfitting and repair parts.

1995 Ship Transfers

In May 1995, the Administration submitted to Congress a legislative proposal to authorize the transfer of eight Perry-class frigates (FFG) to five friends and allies: Bahrain (1), Egypt (2), Oman (1), Turkey (3), and United Arab Emirates (UAE) (1). All but the FFG for UAE were proposed for transfer on a grant basis; the FFG for UAE would be leased. The final version of the FY96 defense authorization bill, which would become law on February 10, 1996, authorized four grants and four sales or leases of FFGs as follows: Bahrain (one grant), Egypt (one grant and one sale or lease), Oman (one sale or lease), Turkey (two grants and one sale or lease); and UAE (one sale or lease). New authority was provided to allow U.S. Foreign Military Financing (FMF) assistance to pay lease costs for these ships.

1999 Ship Transfers

The FY 99 ship transfer legislation was approved by Congress and signed into law by the President on 17 October 1998. The package included 48 platforms, 23 of which are new trans-fers. The remaining 25 platforms are conver-sions of old leases (the platform is already in the hands of the allied government) into a permanent sale. Following completion of the congressional notification requirements, Letters of Offer and Acceptance (LOAs) were provided to the 11 countries affected by the program. The most significant items in the FY 99 package were the four Kidd-class DDGs being offered to Greece and the three Oliver Hazard Perry-class FFGs offered to Turkey. In the case of the DDG transfers, Congress authorized an innovative "combined lease sales program." This program allowed the allied navy to take custody of the platform under a "deferred cost" lease while they make payments over a five year period to the total sales price of the ship. Title to the ship is only transferred after the full sales price is paid. The combined lease sales program was created in an effort to support US national defense requirements and those of US allies by offering a pricing package that otherwise might have been beyond reach. Given the high cost of today's sophisticated combat systems platform, this approach may prove increasingly more valuable to the US government as a means to keep compatible and interoperable surface platforms at sea in the hands of friendly governments.

CountryHull NumberPlatformYear
ArgentinaLST 1179NewportFY 99
BrazilAO 179MerrimackFY 99
LST 1183PeoriaFY 99
LST 1186CayugaFY 99
ChileARD 5WaterfordFY 99
LST 1189San BernadinoFY 99
GreeceARDM 2AlamagordoFY 99
DDG 16StraussFY 99
DDG 18SemmesFY 99
DDG 24WaddellFY 99
DDG 993KiddFY 99
DDG 994CallaghanFY 99
DDG 995ScottFY 99
DDG 996ChandlerFY 99
FF 1055HepburnFY 99
FF 1068VreelandFY 99
FF 1075TrippeFY 99
MexicoARD 30San OnofreFY 99
FF 1094PharrisFY 99
PhilippinesAGOS 4TriumphFY 99
PortugalAGOS 5AssuranceFY 99
SpainLST 1196Harlan CountyFY 99
LST 1197Barnstable CountyFY 99
TaiwanAFDM 6CompetentFY 99
FF 1073PearyFY 99
FF 1078Joseph HewesFY 99
FF 1083CookFY 99
FF 1086BrewtonFY 99
FF 1087KirkFY 99
FF 1088BarbeyFY 99
LSD 38PensacolaFY 99
LST 1180ManitowocFY 99
LST 1181SumterFY 99
TurkeyFF 1059WS SimmsFY 99
FF 1063ReasonerFY 99
FF 1076FanningFY 99
FF 1079BowenFY 99
FF 1080PaulFY 99
FF 1084McCandlessFY 99
FF 1085Donald BearyFY 99
FF 1090AinsworthFY 99
FF 1091MillerFY 99
FF 1092Thomas C. HartFY 99
FF 1093CapodannoFY 99
FFG 10DuncanFY 99
FFG 27Mahlon S. TisdaleFY 99
FFG 30ReidFY 99
VenezuelaAFDM 2No NameFY 99

2004 Ship Transfers

On 09 June 2004 the President requested authority to transfer vessels to foreign 2 recipients on a grant basis under section 516 of the Foreign Assistance Act of 1961 (22 U.S.C. 3 2321j), as follows:

  • To the Government of Chile, the SPRUANCE class destroyer USS 5 O'BANNON (DD-987).
  • To the Government of Portugal, the OLIVER HAZARD PERRY class guided missile frigates GEORGE PHILIP (FFG-12) and SIDES (FFG-14).

The President requested authority to transfer vessels to foreign recipients on a sale basis under section 21 of the Arms Export Control Act (22 U.S.C. 2761), as follows:

  • To the Government of Chile, the SPRUANCE class destroyer FLETCHER (DD-992).
  • To the Taiwan Authorities, the ANCHORAGE class dock landing ship ANCHORAGE (LSD-36).

2005 Ship Transfers

On 09 May 2005 the President requested authority to transfer vessels to foreign recipients. The Naval Vessels Transfer Act of 2005, P.L. 109-134, was introduced and passed in the Senate on 18 October 2005 as S1886. It passed without amendment in the House on 6 December 2005. There were no accompanying committee or conference reports. It was enacted on 20 December 2005 as P.L. 109-134. It authorizes the transfer of eight (8) U.S. Navy ships among five (5) different countries.

Pursuant to Section 516, FAA, the following five (5) ships were authorized for transfer as grant excess defense articles (EDA):

  • Ex-USS Heron (MHC-52) to Greece;
  • Ex-USS Pelican (MHC-53) to Greece;
  • Ex-USS Fletcher (DD-992) to Pakistan
  • Ex-USS Cushing (DD-985) to Turkey.

The value of these five ships shall not be counted against the aggregate value limitation of $425,000,000 each fiscal year per Section 516, FAA. Additionally, notwithstanding Section 516(e)(1), FAA, any expense incurred by the U.S. in connection with these five transfers shall be charged to the receiving countries.

Pursuant to Section 21, AECA, the following three (3) ships were authorized for transfer through FMS:

  • Ex-USS Heron (MHC-52) to Greece;
  • Ex-USS Trenton (LPD-14) to India;
  • Ex-USS O'Bannon (DD-987) to Turkey.

To the maximum extent practicable, the President shall require, as a condition of the transfer, that the receiving country have any required repair or refurbishment of the ship be performed at a shipyard in the U.S., including a U.S. Navy shipyard. The authority for these transfers shall expire two (2) years after enactment of this Act.

2006 Ship Transfers

On 26 May 2006 the President requested authority to transfer vessels to foreign recipients on a grant basis under section 516 of the Foreign Assistance Act of 1961 (22 U.S.C. 2321j), as amended, as follows:

  • To the Government of Lithuania, the OSPREY class minehunter coastal ships KINGFISHER (MHC-56) and CORMORANT (MHC-57).
  • To the Government of Portugal, the OLIVER HAZARD PERRY class guided missile frigates GEORGE PHILIP (FFG-12) and SIDES (FFG-14).
  • To the Government of Turkey, the OSPREY class minehunter coastal ship BLACK HAWK (MHC-58).

The President requested authority to transfer vessels to foreign recipients on a sale basis under section 21 of the Arms Export Control Act (22 U.S.C. 2761), as amended, as follows:

  • To the Government of Mexico, the AUSTIN class amphibious transport dock ships OGDEN (LPD-5) and CLEVELAND (LPD-7).
  • To the authorities on Taiwan, the OSPREY class minehunter coastal ships ORIOLE (MHC-55) and FALCON (MHC-59).
  • To the Government of Turkey, the OSPREY class minehunter coastal ship SHRIKE (MHC-62).

The Department of Defense estimated that the sale of these vessels may net the United States $84.5 million in Fiscal Year 2007.

2007 Ship Transfers

On 29 March 2007 the President requested authority to transfer vessels to foreign recipients on a grant basis under section 516 of the Foreign Assistance Act of 1961 (22 U.S.C. 2321j), as follows:

  • To the Government of Lithuania, the OSPREY class minehunter coastal ships CORMORANT (MHC-57) and KINGFISHER (MHC-56).
  • To the Government of Turkey, the OLIVER HAZARD PERRY class guided missile frigates GEORGE PHILIP (FFG-12) and SIDES (FFG-14) and the OSPREY class minehunter coastal ship BLACKHAWK (MHC-58).

The President requested authority to transfer vessels to foreign recipients on a sale basis under section 21 of the Arms Export Control Act (22 U.S.C. 2761), as follows:

  • To the authorities on Taiwan, the OSPREY class minehunter coastal ships ORIOLE (MHC-55) and FALCON (MHC-59).
  • To the Government of Turkey, the OSPREY class minehunter coastal ship SHRIKE (MHC-62).

The Department of Defense estimated that the sale of these vessels may net the United States $52.7 million in Fiscal Year 2008. Because these naval vessels displace in excess of 3,000 tons or are less than 20 years of age, section 7307(a) of title 10, United States Code, requires statutory approval for the transfers. This section also would authorize the President to transfer a vessel to another recipient if the intended recipient declines to accept the proposed transfer without requiring the Department of Defense to request additional transfer authority.



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