Congress

NDAA provision targets Chinese rail cars and electric buses

Defense bill bars spending federal dollars on vehicles made by state-owned or controlled companies

While other transit systems have two years to implement the spending provision, Washington’s Metro system would have to abide by it immediately.  (Photo By Bill Clark/CQ Roll Call)

Tucked in the conference report of the NDAA is a provision aimed at blocking Chinese companies from building rail cars or buses used in U.S. transit. 

The final version of the conference report for the National Defense Authorization Act released Monday night would bar federal dollars from being used to purchase passenger rail cars or buses from state-owned or state-controlled enterprises, such as those from China.

[Final defense authorization authorizes epic spending, puts guardrails on Trump]

By including the provision in the bill, lawmakers sought to thwart China’s growing presence in the U.S. passenger railcar and electric bus markets.

Critics of the Chinese companies say they have successfully infiltrated the U.S. market by underbidding competition drastically. In Boston, the Chinese Railway Rolling Stock Corp., known as CRRC, underbid the next lower bid for a subway car contract by 22 percent, according to Erik Olson of the Rail Security Alliance, which pushed for the provision.

“By moving forward with this legislation, Congress is defending our transportation infrastructure against deeply subsidized Chinese companies that threaten to disrupt our manufacturing capabilities and displace tens of thousands of American jobs throughout our supply chain of parts and components,” said Alliance for American Manufacturing President Scott Paul.

The final language also includes a two-year delay on implementation, meaning that transit companies will not see the ban for two years. The one exception: the Washington Metropolitan Area Transit Authority, which must implement the language immediately after it becomes law.

D.C. Delegate Eleanor Holmes Norton had been a key critic of the use of Chinese rail cars in U.S. transit.

Major contracts

CRRC has won contracts to produce subway cars and commuter train cars in Boston, Philadelphia, Chicago and Los Angeles. In a June 2019 report, Oxford Economics valued CRRC rail contracts in U.S. cities at $2.7 billion.

Marina Popovic, Human Resources Director and Chief Legal Counsel for CRRC Sifang America Inc., one of the companies affected by the provision, said the company was heartened to see the two-year delay in implementation.

“The current version of the NDAA ensures public transit agencies will continue to benefit from competition in the passenger railcar industry for at least two years after the NDAA is enacted,” she said.

She said though the company is “concerned” about the provisions, “CRRC is confident that, during this interim period, it will demonstrate to all transportation stakeholders that CRRC’s railcars are safe, secure, and reliable.”

A Chinese electric bus manufacturer, Build Your Dreams, or BYD, meanwhile, has delivered 350 buses in the U.S. since 2014 to cities such as Indianapolis; Columbia, Mo.; and Wenatchee, Wash.

Big subsidies

BYD is a privately held company, but its critics say it has managed to find a foothold in the industry by benefiting from substantial Chinese subsidies, allowing the company to “double-dip” by using Chinese subsidies to build vehicles and U.S. subsidies to allow cities to buy their buses.

A spokesman for BYD could not immediately respond to a request for comment Tuesday. 

Marina Popovic, Human Resources Director and Chief Legal Counsel for CRRC Sifang America Inc., one of the companies affected by the provision, said the company was heartened to see the two-year delay in implementation.

“The current version of the NDAA ensures public transit agencies will continue to benefit from competition in the passenger railcar industry for at least two years after the NDAA is enacted,” she said.

She said though the company is “concerned” about the provisions, “CRRC is confident that, during this interim period, it will demonstrate to all transportation stakeholders that CRRC’s railcars are safe, secure, and reliable.”

House and Senate negotiators had originally fought over whether to include a provision banning money for buses, or whether to focus solely on rail, with the House version of the bill omitting a mention of buses. But the White House had pushed for both buses and rail to be included in the final version of the bill.

EV industry

Robbie Diamond, president and CEO of Securing America’s Future Energy, a nonpartisan nonprofit that advocates for reducing U.S. oil dependence, said the provision demonstrated that Congress was aware of the threat of China dominating the electric vehicle industry.

“China is working to erode U.S. authority on the global stage by dominating the emerging electric vehicle industry and this provision is meaningful in starting to counter these ambitions, by stopping them from using their dominant market position to undermine America’s domestic manufacturers,” Diamond said.

He said China has provided subsidies to the companies that then turned and used federal funds made available to local U.S. transit agencies.

“In effect, they are using American taxpayer money to undermine our domestic industry and cement their leadership position,” Diamond said. “The only better step would be for the provision to be effective immediately.”