*

South Korean President Lee promotes $150 billion US

shipbuilding

investment

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Hanwha plans $5 billion expansion at Philly Shipyard

*

Legal hurdles to foreign involvement in US shipbuilding

remain

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Shipbuilding key to South Korean investment promises to

limit US

tariffs

(Adds South Korea president and Pennsylania governor remarks,

paragraphs 4, 8, 9)

By David Shepardson and Joyce Lee

PHILADELPHIA/SEOUL, Aug 26 (Reuters) - South Korean

President Lee Jae Myung leaned on promises to "Make American

Shipbuilding Great Again" during his first official U.S. trip,

as the two allies wrangle over other details of their trade and

security agreements.

On Tuesday, Lee visited a shipyard owned by South Korea's

Hanwha Group to highlight investment plans, a day after he met

with U.S. President Donald Trump for their summit.

Under a South Korean pledge to inject $350 billion into U.S.

projects, shipbuilding has emerged as one of the most concrete

areas of investment, with $150 billion earmarked for the sector.

"The project I proposed to President Trump to Make American

Shipbuilding Great Again is not just a vision to build huge

warships and state-of-the-art ships," Lee said in a speech at

the shipyard. "It is a grand vision to restore a dream that has

disappeared."

Trump says he wants to revitalise shipbuilding to keep up

with China, the world's biggest shipbuilder and operator of the

world's largest maritime fighting force.

The potential - and pitfalls - of that project were on

display during Lee's visit to the shipyard, one of the largest

in the United States.

Hanwha, which acquired the facility last year, plans to

spend $5 billion and install two additional docks and three

quays to take its output from less than two vessels a year to up

to 20, it said on Tuesday.

Pennsylvania's Democratic Governor Josh Shapiro told

reporters after the shipyard tour that the Republican

president's tariff policies were making it harder for South

Korean companies and raising prices for American consumers.

"Understand, we didn't have to have this tariff fight.

Donald Trump pushed that button, put the tariffs in place. He

drove up consumer costs," Shapiro said, adding "We want to grow

our economy and attract more investment from Korea across all

industries."

Monday's U.S.-South Korea summit did little to settle

ongoing details of the two countries' tariff deal, but Lee

agreed to increase South Korea's own defence expenditures and

play a bigger role in responding to the changing political

situation in the region, his office said, without elaborating.

South Korea's industry ministry said 11 non-binding

agreements were signed between U.S. and South Korean companies

during Lee's visit, in shipbuilding, nuclear energy, aerospace,

gas and critical minerals.

In shipbuilding, HD Hyundai agreed with

state-run Korea Development Bank and Cerberus Capital to create

a multibillion-dollar joint investment fund aimed at

strengthening the maritime capabilities of the U.S. and its

allies, including shipbuilding, marine logistics infrastructure,

and advanced marine technology.

Samsung Heavy Industries agreed with Vigor

Marine Group to partner in fields such as maintenance and repair

of U.S. Navy vessels, shipyard modernisation and joint ship

construction.

A top South Korean official said on Monday the two countries

had decided to establish a non-binding agreement to define the

operation and structure of $350 billion in investment funds

agreed as part of their July tariff deal.

LEGAL, MANUFACTURING HURDLES

During tariff talks in July, South Korea offered a package

dubbed "Make American Shipbuilding Great Again" partly to help

modernise U.S. shipyards, which officials in Seoul touted as

instrumental in reaching their unwritten trade deal.

U.S. shipyards, which had the world's highest production

capacity during World War II, saw their market share fall to

0.04% by 2024. China and South Korea are responsible for 83% of

global commercial shipbuilding, according to UN Trade and

Development data.

"We're going to go back into the shipbuilding business

again," Trump said during his Oval Office meeting with Lee.

Experts, industry sources and South Korean officials say

there will be a lot of work required to get there.

"I think the U.S. shipbuilding industry hasn't had to

compete very much. Facilities are old, and there's a shortage of

technicians," Steve SK Jeong, head of the Naval Ship Global

Business at Hanwha Ocean, previously told Reuters.

Training local workers could take four to five years, and it

is hard to find people willing to do difficult shipyard work,

South Korean industry sources told Reuters.

Jeong said Hanwha is working to modernise facilities, train

and equip workers, and transplant its manufacturing process that

can build ships much faster.

Issues obtaining parts like steel plates may also hinder

rapid progress.

Trump said on Monday some U.S. ships would still be built in

South Korea for now.

"We're going to be buying ships from South Korea," he said.

"But we're also going to have them make ships here with our

people."

South Korean officials said that unless some U.S.

protectionist policies are eased, construction of full ships or

modules to be delivered to U.S. shipyards may be limited.

The 1920 Jones Act requires goods moved between U.S. ports

to be carried by ships built domestically.

Similarly, the Byrnes-Tollefson Amendment prohibits the

construction of U.S. Navy vessels in foreign shipyards, although

the president retains the authority to waive its provisions for

national security. Some U.S. lawmakers have proposed changes

that would open the door for U.S. allies to participate more.