WASHINGTON – U.S. Senator Jerry Moran (R-Kan.), U.S. Senator Tammy Baldwin (D-Wis.) and a bipartisan group of 40 senators wrote to Treasury Secretary Jacob J. Lew this week to request an investigation into the pending transfer of American railcar manufacturer Vertex Railcar Corporation (Vertex) to the China Railroad Rolling Stock Corporation (CRRC). The letter calls for the Committee on Foreign Investment in the United States (CFIUS), which is chaired by the Treasury Secretary, to review the Vertex ownership transfer on the grounds that it is a potential threat to the U.S. economy and national security. 

“The Obama administration has a responsibility to review foreign investment transactions that could have national security repercussions – especially when related to critical infrastructure like railroads, public health systems and water systems,” Sen. Moran said. “This bipartisan effort pushes the Committee on Foreign Investment in the United States to go through the appropriate review and determination processes already codified in law. In this instance, given the Chinese government’s role and relationship with involved parties, it would be careless to allow the transaction to be completed without investigating the potential security implications.” 

“We know that Chinese corporations use their vast state-sponsored resources to force out homegrown competition and this buyout will mean that fewer American railcars will be built with made in America iron and steel and assembled by American workers who are paid decent wage,” said Sen. Baldwin. “As a matter of both national and economic security, we must ensure that our American manufacturers and workers have a level playing field on which they can fairly compete and succeed.”

CFIUS may review transactions that would result in the control of critical U.S. infrastructure by any foreign person that raises national security concerns. Freight rail is designated as “critical infrastructure” by the Department of Homeland Security, one of the sixteen agencies that make up CFIUS.

The Chinese government uses CRRC, a state-owned enterprise (SOE), as a tool to promote its international trade agenda and enter foreign markets to the detriment of domestic manufactures. CRRC has already successfully underbid competitors for critical railcar manufacturing contracts in Boston and Chicago. 

With CRRC’s entrance into the American railcar industry, domestic railcar manufacturers and associated industries such as iron and steel will be forced to compete with all the resources of the Chinese government. CRRC's attempt to secure majority ownership of Vertex is the company's next and most dangerous foray into the American railcar manufacturing industry. Furthermore, Chinese control of a key element of the freight rail supply chain would provide more access to trade secrets and intellectual property—which China has previously pursed through brazen hacking of American companies.

The senators wrote, “The state-owned CRRC is the largest railcar manufacturer in the world—four times larger than the entire U.S. rail manufacturing sector. The Chinese government has used CRRC as a tool in its international trade agenda to enter foreign markets to the detriment of domestic manufacturers in Australia, Pakistan, the United Kingdom, and other countries. CRRC has already begun to underbid domestic competitors for railcar contracts in Boston and Chicago. In effect, American railcar manufacturers and their associated industries, such as steel, must now compete against all the resources of the Chinese government.”

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