March 14, 2019

Today, a bipartisan group of Senators, including the chairman and ranking minority member of the committee with jurisdiction over mass transit issues, introduced a bill that would permanently ban U.S. transit agencies from buying rail cars or buses made by any company that is “owned or controlled by, is a subsidiary of, or is otherwise related legally or financially to a corporation” located in the People’s Republic of China.

The bill is called the Transit Infrastructure Vehicle Security Act, and the text of the bill is here.

The lead sponsor is Sen. John Cornyn (R-TX), who sponsored a successful amendment on the Senate floor last year that would have implemented a one-year ban on the use of federal funds to purchase such transit vehicles (that provision was dropped in House-Senate conference, even though it was very similar to a provision passed by the House as well). Cornyn said “China poses a clear and present danger to our national security and has already infiltrated our rail and bus manufacturing industries. The threat to our national security through the exploitation of our transportation and infrastructure sectors is one we should take seriously. This legislation will help safeguard against this threat, and I’m thankful for the support of my colleagues.”

The lead Democratic sponsor is Sen. Tammy Baldwin (D-WI), a noted proponent of stronger Buy America rules in general who pointedly questioned Elaine Chao on that topic curing Chao’s Senate confirmation hearing in January 2017. Baldwin said “China has made clear its intent to dismantle U.S. railcar manufacturing in its ‘Made in China 2025’ plan—our economic and national security demands that we address Chinese attempts to dominate industries that build our nation’s critical infrastructure. That’s why I’m joining my colleagues on both sides of the aisle to introduce legislation to hold China accountable because we need to do all we can to support American workers and American-made products.”

Of pivotal importance is that the legislation is cosponsored by the chairman and ranking minority member of the Senate Banking, Housing, and Urban Affairs Committee, which for historical reasons has jurisdiction over all federal mass transit policy. The fact that the legislation has the backing of chairman Mike Crapo (R-ID) and ranking member Sherrod Brown (D-OH) means that its approval by the Banking panel during during the next surface transportation reauthorization bill is all but assured – but if Cornyn et al decide to offer the bill as an amendment to other legislation that moves sooner than that – like, for example, any infrastructure legislation that might come down the pike – it has a good chance of passing there as well.

The legislation is broader than the version of the Cornyn amendment passed by the Senate last year. As an appropriations “rider,” the Cornyn amendment would only have been a condition attached to fiscal year 2019 funding. The new legislation is permanent and even applies to the local transit agency funding that does not come from the Federal Transit Administration.

(This whole debate will make more sense to those who have read the Eno Center’s September 2018 report on this issue, The Implications of the Federal Ban on Chinese Railcars.)

We decided to summarize the new bill in FAQ format.

What is being banned? The bill would ban “awarding a contract or subcontract to an entity on or after the date of enactment of this subsection for the procurement of rolling stock for use in public transportation if the manufacturer of the rolling stock – (A) is incorporated in or has manufacturing facilities in the United States; and (B) is owned or controlled by, is a subsidiary of, or is otherwise related legally or financially to a corporation based in” the People’s Republic of China. The bill then clarifies this to refer to majority ownership only: “the term ‘otherwise related legally or financially’ does not include a minority relationship or investment.”

Does this mean buses as well? The phrase “rolling stock” as used in the general ban on the use of federal mass transit funding, above, means buses as well as rail cars.

How is the ban enforced? Two ways. First, the bill provides that “financial assistance made available under” chapter 53 of title 49 U.S.C., a.k.a. all Federal Transit Administration funding, shall not be used in awarding such contracts. Like all other conditions attached by law to federal funds, the ultimate enforcement is the AntiDeficiency Act, which can send a federal employee to prison if they approve a use of federal funds that violates a condition of law.

However, the Massachusetts Bay Transportation Authority famously signed a contract for purchase of Chinese-made mass transit rail cars that did not use any federal dollars. The new bill would apply to these kinds of non-federal-aid purchases as well, through a roundabout way. The bill requires that “as a condition of financial assistance made available in a fiscal year under section 5337, a recipient that operates rail fixed guideway service shall certify in that fiscal year that the recipient will not award any contract or subcontract for the procurement of rail rolling stock for use in public transportation with a rail rolling stock manufacturer” described above.

So issuance of any new contract to buy rail rolling stock from a manufacturer owned by a Chinese company during a fiscal year – even if done solely with the agency’s non-federal dollars – would cause the transit agency to lose all of its federal state-of-good-repair mass transit dollars for that year under 49 U.S.C. §5337.*

The annual certification requirement banning contracts using completely non-federal funds only applies to rail cars, not buses, so it seems that transit agencies would be free to use their own dollars to buy Chinese-made buses without violating the new legislation.

Are current contracts and relationships grandfathered? Yes. Both the ban on the use of federal funds and the requirement that rail transit agencies certify that they will not use non-federal funds for such contracts are subject to a grandfather clause, which says that both provisions “shall not apply to the award of a contract or subcontract made by a public transportation agency with a rail rolling stock manufacturer [owned by a Chinese company] if the manufacturer and the public transportation agency have a contract for rail rolling stock that was executed before the date of enactment of this subsection.’’ So agencies like Chicago Transit Authority, L.A. Metro, and MBTA, which already have signed contracts to purchase Chinese rail cars, will be able to issue new contracts making subsequent purchases from the same manufacturer.

What else is in the bill? Much of the opposition to Chinese rail car manufacturers in Congress has been couched in terms of cybersecurity (including at a hearing last month before the House Homeland Security Committee). The new bill also requires every federal transit aid recipient that operates a rail fixed guideway system to certify to FTA that it “has established a process to develop, maintain, and execute a written plan for identifying and reducing cybersecurity risks” which must use NIST best practices, must identify the hardware and software that should undergo third-party testing and assessment for cybersecurity risks, and which should adhere to Homeland Security best practices and voluntary standards, if applicable.”

*An earlier version of this article indicated that a rail transit agency that did not certify would lose all its FTA appropriations, but the bill actually means that the agency would only lose its SOGR formula apportionment in the year in which it signed any contracts prohibited by the bill.