A bipartisan law passed by Congress in 2019 intended to stop taxpayer dollars from being granted to transit makers with ties to China’s government.
The Alliance for American Manufacturing team spent much of the past week at the United Steelworkers Rapid Response conference in Washington, D.C., so we weren’t able to immediately share this piece of good news from Capitol Hill: Legislation to finally close a loophole that’s allowed a Chinese state-owned company with ties to China’s military to keep accessing federal taxpayer dollars to build rail cars passed the House.
Two-thirds of House members voted on May 21 to pass the Rolling Stock Protection Act, which was introduced by Congressional Steel Caucus Chairman Rick Crawford (R-Ark.). The bill now heads to the Senate.
Congress passed the Transit Infrastructure Vehicle Security Act (TIVSA) back in 2019 to prohibit federal tax dollars to be used to purchase rail cars or buses built by Chinese state-owned or controlled companies. But when implementing the law, the Federal Transit Administration (FTA) issued a lifetime exemption to state-owned companies that secured contracts before December 2019.
Effectively, that means that the China Railway Rolling Stock Corporation (CRRC) is able to continue to make rail cars indefinitely for transit systems including Boston, Philadelphia, Los Angeles and Chicago. Crawford and others argued that goes against the intent of the TIVSA law, which aimed to stop China’s government-owned or controlled companies from infiltrating U.S. transit systems via taxpayer-funded infrastructure contracts.
“Despite our efforts, the Chinese Communist Party has still maintained a foothold in the rail market through contracts that have been grandfathered in. Taxpayer dollars should never go to countries that continue to lie, steal, and cheat in an attempt to push the U.S. out of the global market,” said Crawford, who also chairs the House Transportation and Infrastructure Subcommittee on Highways and Transit. “We need to keep our critical infrastructure safe from the hands of the CCP.”
Should the current loophole remain in place, CRRC will be banned from bidding on new federally funded government contracts to build passenger rail cars. However, it will still be allowed to make new rail cars for those systems where it already has contracts, allowing it to maintain a major foothold in the U.S. transit infrastructure market.
And that’s raised major economic and national security concerns. The Defense Department has named CRRC to its entity list, identifying it as a company with ties to China’s military. CRRC also maintains close ties to China’s government, according to a 2019 report, receiving massive government subsidies as part of China’s quest to dominate the global transit market.
Indeed, those subsidies meant CRRC was able to severely underbid competitors to win contracts in the U.S. to build rail cars. When Philadelphia’s SEPTA system awarded CRRC a contract back in 2017, a spokesperson from competitor Hyundai Rotem remarked: “I cannot grasp how they are able to do it at that cost.”
As it turns out, CRRC couldn’t. The company went $50 million over budget and was four years behind schedule to build rail cars for SEPTA; the agency announced in April it was officially canceling the contract.
CRRC continues to build rail cars for federal taxpayer-funded projects in Chicago, Los Angeles, and Boston. Those projects haven’t been without problems, either — the situation in Boston is particularly bad, with the local transit agency announcing last month it will pay an additional $148 million to CRRC to finally complete its long-delayed contract — but nevertheless, CRRC remains in business in major U.S. cities, thanks to FTA’s misguided interpretation of the law.
Crawford is right to lead the effort to close this loophole, and we encourage the Senate to quickly move to pass this bipartisan, commonsense legislation.