By Andrew Petrozzi
BC shipyards won’t be building large ferries any time soon.
Because of recent federal government tariff measures, Canadian shipbuilders have abandoned plans to build cargo vessels, tankers and large ferries in exchange for contracts provided under the federal government’s $35 billion national shipbuilding procurement strategy (NSPS) for Canadian Coast Guard and Canadian Navy vessels.
That decision, at least four years in the making, was difficult for shipbuilders.
It will likely force them to abandon construction of certain vessels – specifically ferries longer than 129 metres – that the industry still believes it’s capable of building.
Canada’s NSPS, announced June 3, calls for the federal government to establish a “strategic relationship” with two Canadian shipyards and designate them to supply large combat and non-combat vessels.
Shipyards not designated to build large vessels will be eligible to tackle contracts for smaller ships.
Ship repair, refit and maintenance work will be open to all Canadian shipyards. In exchange, Canadian shipbuilders cede commercial vessel construction to lower-cost offshore manufacturers. That formalizes a practice already in full swing for decades. It also lowers costs for ship owners, primarily Great Lakes fleet operators, who want to modernize their fleets.
Subsequently, in October, the federal government announced a new duty remission framework that waived the 25% tariff on all imported cargo vessels and tankers as well as ferries longer than 129 metres.
The cost to the federal government: an estimated $250 million in import duties that would have been collected over the next 10 years.
While shipbuilders agreed to the duty remission on cargo vessels and tankers, it did not support waiving the duty on ferries longer than 129 metres, according to a Department of Finance Canada official and Allied Shipbuilders Ltd.’s president Malcolm McLaren, who is also a director of the Shipbuilding Association of Canada.
Peter Cairns, president of the association, did not respond by press time.
B.C. shipyards, including Allied, had built BC Ferries’ 167.5-metre Spirit of British Columbia and Spirit of Vancouver Island “S-class” ferries in the early 1990s.
The ships remain the largest in the ferry fleet.
The finance official said discussions for national procurement and tariffs had been going on long before the June and October announcements. She added that Canada did not remove the tariff permanently, which would have weaken its negotiating position on the international stage.
McLaren said building tankers or cargo vessels is nothing like building navy or coast guard ships.
“They might both float in the water, but that’s where the similarity ends.”
While he agreed there was “basic logic” to what the federal government had done, he said most British Columbian shipbuilders think large ferries can still be built here.
Washington Marine Group (WMG) declined to comment for this story.
On October 13, Vancouver Shipyards Co. Ltd., part of the WMG’s shipyard division, announced it had cleared the first hurdle in the government selection process to be one of the two shipyards to build Canada’s future naval and coast guard vessels. It said there are five short-listed yards left in the running.
“If B.C. shipbuilding is to survive and prosper in the 21st century, it’s vitally important that the West Coast win an equitable portion of the $35 billion in federal naval and Canadian Coast Guard construction,” John Shaw, WMG shipyards’ vice-president, program management, said in a release. On the same day, the federal government announced that Allied had been awarded a $5.9 million contract to complete major repairs to the Canadian Coast Guard vessel Tanu.
McLaren said about 20% of Allied’s revenue over the past 10 to 15 years has come from the Canadian Coast Guard. The other 80% is primarily private-sector work, including some BC Ferries contracts
“The national shipbuilding policy was that federal government ships would be built in Canada provided they can get competitive pricing, but that came out a few years ago, and we are quite happy to see it,” said McLaren.
“They didn’t throw everything out. The freighters are one issue, but they have said they’re going to carry on. The Canadian government is still going to be supportive of Canadian industry.”