Not made in America? California bullet train officials seek exemption to buy foreign parts

The California bullet train agency has begun a legal effort to import a significant amount of foreign equipment for its future Los Angeles-to-San Francisco system, a move that could prove politically controversial.

The Federal Railroad Administration disclosed last week that the state’s High-Speed Rail Authority was seeking exemptions from the Buy American Act on more than a dozen critical train parts — including motors, gearboxes, axles, wheels, brakes, derailment mitigation devices, undercarriages and even the entire aluminum car body shells.

The rail authority’s 2016 business plan estimated the trains would cost about $3.4 billion, making them one of the most expensive parts of the system.

While advanced bullet trains currently cannot be made in the U.S., the exemption could make it less likely that the country ever develops such an industry, according to academic experts and trade groups.

Scott Paul, president of the Alliance for American Manufacturing, said the train exemptions would fall into the same “dynamic” as California’s decision to use imported Chinese steel components for the Bay Bridge — a decision that caused engineering problems, delays and cost increases.

“If this waiver is granted, it virtually guarantees that there will be no chance for a domestic high-speed rail industry to take root in this country,” Paul said. “California could be a nationwide leader in this industry.”

According to the group, a collaboration of U.S. manufacturing companies and labor unions, the original intent of the federal government investing billions of dollars into the state’s high-speed rail program was to develop a domestic industry in the first place.

Importing something as important as the trains could further jeopardize any chance of additional federal funding, Paul said. “I find it hard to believe that the Trump administration would fund a project that would be made in China,” he said. “Why not make it here?”

In a Sept. 16 letter to Sarah Feinberg, chief of the Federal Railroad Administration, the rail authority said that the needed train equipment was not being manufactured in the U.S., that safety was at issue and trying to build the components here would increase the cost of each train.

The authority asked for a separate exemption for rail car bogies, the massive undercarriages that connect the wheels and axles to the car body. The request indicates that the rail authority plans eventually to assemble undercarriages in the U.S. with foreign-made parts. The exemption application for other parts does not make that explicit commitment.

“The authority has always stated that this high-speed rail project and the Buy America provision will make it worthwhile for high-speed train manufacturers to transfer knowledge and be located in the U.S., create jobs and deliver 21st century, state-of-the-art trainsets,” spokeswoman Lisa Marie Alley said in an email.

The exemption request for high-speed electric train parts was the second one to land at the agency, part of the U.S. Department of Transportation. Officials granted Amtrak a waiver last year to purchase equipment to be used on its Acela line along the East Coast. The California authority cited the Amtrak exemption as a basis for its request. Amtrak had claimed setting up a domestic factory for the components would add $2 million to the cost of each train it purchased.

The authority said a “review of potential risks and hazards associated with an imperfect transfer of technology” could result in errors, arguing that the work should be conducted at existing facilities of foreign vendors.

Matthew Lehner, a spokesman for the Federal Railroad Administration, said a panel of experts on safety, policy and legal matters would review the request. Even if the exemption were granted, the trains will still have to be assembled in the U.S., he said.

Lehner said the waiver “represents likely less than 20%” of the cost of each train.

The review includes a public comment period that closes Nov. 28, and federal officials could take months to reach a decision. That timing leaves it unclear whether the Obama administration will act on the request or leave it to the incoming Trump administration.

Richard Tolmach, president of the California Rail Foundation, said the 20% figure seemed low for the size of exemption request. He noted that the exemption granted to Amtrak, which was intended to hold down the cost of trains, “failed miserably, because they will be the most expensive passenger trains ever built.”

Siemens, a German conglomerate, has been seeking the California rail car business for years and said it would expand its existing plant in Sacramento. Tolmach said Siemens should be able to get close to complying with the Buy American Act.

The Bay Bridge often is held up as an example of a poor decision to use foreign suppliers for U.S. infrastructure projects.

Under a carefully crafted political deal, the bridge was divided into two separate projects — one under federal jurisdiction close to Oakland and a central span that the state would pay for. The move bypassed the Buy American Act for the central span and allowed the bridge sections to be outsourced to China. The attempt to save money backfired and contributed to a tripling of the cost to more than $6 billion.

Foreign nations often are more forceful in requiring U.S. companies to share their technology in exchange for supply contracts. Many experts say the U.S. should have even greater leverage, given the size of its economy.

A 2015 study led by Robert Pollin, a University of Massachusetts-Amherst economics professor, concluded that the Buy American Act could be a significant catalyst for strengthening U.S. manufacturing, including a rail car industry.

“Of course, we can build high-speed rail trains,” Pollin said. “We have massive manufacturing capacity.”

Obama administration officials have acknowledged that too many waivers had been granted in the past and that they intended to tighten the practice, Pollin said, adding he had found little documentation to show that that was happening. In general, state and local agencies want the waivers in order to get lowball bids on projects, he said.

“The law should be seen as an opportunity to advance U.S manufacturing,” he said.

[email protected]

Follow me on Twitter @rvartabedian