The United States has begun looking for overseas shipyards for its navy to use as concerns rise over the expansion of China's fleet and potential conflicts in the Taiwan Strait.

Under current protocols, war-damaged American ships must return to facilities in US territory for repairs.

The US government has long considered localising repair operations to shipyards closer to conflict zones as it could significantly hasten the vessels' return to active duty.

US Navy Secretary Carlos Del Toro this year visited shipyards in Washington's key Asian security allies South Korea and Japan, saying the United States should look to use them more.

"If we should have to go to war, we will then have full knowledge of which shipyards and what countries we could actually send these ships to be able to do the damage repair that's going to be necessary," he said.

South Korean shipbuilder Hanwha Ocean said Tuesday it would overhaul a 40,000-ton US Navy dry cargo and ammunition ship, a task that can only be undertaken by companies holding a Master Ship Repair Agreement (MSRA), a certification needed to meet US requirements.

The company said it was "a pivotal moment" which could transform the maintenance, repair, and overhaul (MRO) market for US naval ships.

In June, Hanwha Systems and Hanwha Ocean announced their joint investment of $100 million to acquire Philly Shipyard, a U.S. shipbuilder responsible for about "half of the large U.S. Jones Act commercial ships delivered since 2000", according to a statement.

The Jones Act restricts shipments between US ports to US-owned and operated cargo ships.

"This contract to overhaul a US Navy ship is a stepping stone into the global ship MRO market, expected to exceed $60 billion annually," said a Hanwha Ocean official.

"Thanks to thorough preparation, we can provide timely and high-quality overhaul services, building trust with the US Navy."