The Pentagon is approaching a Nov. 12, 2026, deadline for a review that could reshape naval procurement by allowing allied shipyards to build initial warships before transferring production to the United States. For American defense contractors and investors, the proposal could link overseas designs and capital with efforts to expand domestic shipbuilding capacity.
The review follows President Trump’s Aug. 13 memorandum directing the Pentagon to develop a competitive acquisition plan for surface combatants capable of antisubmarine warfare, surface warfare and convoy escort missions.
The deadline concerns a procurement framework. It doesn’t represent the selection of a country, ship design or contractor, and completion of the review wouldn’t itself produce a shipbuilding award.
The administration is exploring the approach as rising costs, construction delays and shortages of skilled workers constrain American shipyards. Drawing on allied production capacity could help deliver ships sooner while supporting investment in U.S. facilities.
The White House calls the approach the “Finland Model,” referring to an icebreaker arrangement that combines initial construction overseas with subsequent production in American yards.
Under Trump’s memorandum, participating foreign suppliers could build the first two ships abroad. They would also have to establish a U.S. shipyard or acquire ownership or a majority stake in an existing facility, train an American workforce, license shipbuilding technologies and develop a domestic supply chain. Ships after the initial pair would be built in the United States.
Designs under consideration include South Korea’s Chungnam-class frigate, an export version of Japan’s Mogami-class and Türkiye’s Istanbul-class, according to USNI News. U.S. officials have examined foreign designs as potential foundations for a new frigate competition.
The choice presents a trade-off between delivery speed, acquisition cost and compatibility with the existing fleet.
In an Oct. 23 analysis, the U.S. research organization CNA identified South Korea’s production speed and relatively low cost as advantages. Japan’s Mogami design offers greater missile capacity and potential benefits in integrating American weapons.
Neither option eliminates the engineering challenge. CNA noted that both classes use their own combat-management systems. Adapting weapons, sharing targeting data and arranging long-term maintenance could affect the time and expense required to bring either design into U.S. service.
Korean shipbuilders are already building relationships that could support the administration’s preferred model.
HD Hyundai Heavy Industries and HII have agreed to collaborate on distributed shipbuilding and pursue auxiliary and commercial vessel opportunities. The arrangement connects Korean production expertise with an established American military shipbuilder.
HD Hyundai is also working with U.S. engineering and construction company Kiewit on a proposed American shipyard. The partners plan to begin construction in 2027 and start operations in 2029, potentially adding capacity for commercial vessels and military support ships.
Hanwha has taken a separate route through its acquisition of Philadelphia’s Philly Shipyard in December 2024.
Hanwha Defense USA signed a $269 million contract with TOTE Services on Oct. 29 to build a medium landing ship for the Navy at the Philadelphia facility, with options for three additional vessels. TOTE, which manages construction under the Navy’s program, announced the selection on Oct. 30.
The award demonstrates a route for foreign-owned companies to participate in American naval construction through U.S. facilities. It is separate from the proposed competition for surface combatants built initially overseas.
Legal authority and congressional funding remain central to the broader proposal.
Federal law generally prohibits construction of U.S. military vessels in foreign shipyards, but it provides a national-security exception. Trump’s memorandum invokes that mechanism and requires congressional notification, followed by a 30-day waiting period before a qualifying contract can be signed.
Congress can still shape the program through legislation, funding decisions and oversight. The House passed its fiscal 2027 defense authorization bill on July 22, while the final legislative framework remains unresolved.
The political setting is also changing. Democrats won control of both chambers in the Nov. 3 elections and will take their majorities into the new Congress in January 2027, potentially increasing scrutiny of the administration’s plans.
For shipbuilders, the commercial opportunity will depend on the procurement rules that emerge: how much construction can begin overseas, how quickly production must move to American yards and whether the Navy can adopt an existing design without modifications that erode its cost and delivery advantages.
