White House Endorses Ban on Chinese Bus and Rail Procurements

Yesterday, the White House issued an official endorsement of a version of language banning mass transit rolling stock procurements from Chinese manufacturers that includes buses as well as railcars, in a blow to electric bus manufacturer BYD.

The Acting Director of the Office of Management and Budget sent a letter to Capitol Hill dated September 4 that expresses the Trump Administration’s position on a wide variety of items in disagreement between the House and Senate versions of the National Defense Authorization Act for fiscal year 2020. The House has passed H.R. 2500 and the Senate has passed S. 1790, and both bills contain very similar provisions prohibiting the use of federal mass transit funds for the purchase of transit rolling stock from manufacturers owned, or subsidized by, the Chinese government, and discouraging transit agencies from using non-federal funding for such purchases.

The language is mainly targeted at Chinese state-owned rail manufacturer CRRC, which has won several major rail car procurements (Boston, Chicago, Los Angeles) with ultra-low bids in the last few years. But there is one key difference between the provisions – the House provision (section 896 of H.R. 2500) applies only to “rail rolling stock procurements” while the Senate language (section 6015 of S. 1790) applies to all rolling stock procurements, which means that the Senate language also applies to procurement of buses while the House language does not. BYD, while not owned by the Chinese government, does receive some subsidies from them, which would make them subject to the ban.

The pertinent section of the OMB letter reads:

Limitation on Certain Rolling Stock Procurements (Section 6015). The Administration supports section 6015, which would prevent financial assistance, specifically Federal transit dollars, from being used to award a contract or subcontract for the procurement of any rolling stock transit vehicles to priority enterprises owned, controlled, or subsidized by certain foreign states. Section 896 of the House NDAA includes similar language, but would only apply to passenger railcars. It is critical that such prohibitions cover procurement of all rolling stock transit vehicles to ensure the Nation’s economic and national security and to prevent the use of Federal dollars to support foreign state-controlled enterprises.

Once Congress reconvenes next week, the NDAA bill will be sent to a formal House-Senate conference committee to resolve all the differences. There is a strong norm in Congress, backed by rules of each chamber, that if both the House and Senate versions of a bill contain identical provisions, that provision must be left intact in the final conference agreement. This usually means that if the House and Senate bills both have provisions that are not quite identical, but are very very very similar, then the conference is supposed to end with some sort of difference-splitting germane modification of the provisions.

On this issue in particular, not only did the chairmen of the House and Senate Armed Services Committees consent to include the provision in their bill, but it was drafted by the bipartisan leaders of the Senate authorizing committee with mass transit jurisdiction (Banking). And the House provision has the support of that authorizing chairman, Transportation and Infrastructure’s Peter DeFazio (D-OR). The easiest way to derail a provision in conference is by some other committee asserting jurisdiction and killing it, but since the committees of jurisdiction don’t seem likely to do that, enactment of some version of the ban seems certain.

The White House weighing in in favor of the ban that applies to both buses and rail cars would seem to tip the scales even further towards the Senate version of the provision, but what makes this even more interesting is that the chief Congressional advocate for exempting buses from the ban is one of President Trump’s top allies in Congress, House Republican Leader Kevin McCarthy (R-CA), in whose district BYD’s 450,000-square-foot bus assembly facility is located.

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