China's CRRC should be sanctioned by U.S., lobby groups say

WASHINGTON (Reuters) - U.S. rail, steel and manufacturing groups are calling on the Trump administration to use its most powerful sanctioning tool against China’s CRRC after the Pentagon announced the world’s largest maker of passenger trains was backed by the Chinese military.

FILE PHOTO: A CRRC's logo is seen at an exhibition during the World Intelligence Congress in Tianjin, China May 16, 2019. REUTERS/Jason Lee

In a letter sent on Tuesday, the Rail Security Alliance, the United Steelworkers and others urged U.S. Treasury Secretary Steve Mnuchin to invoke the International Emergency Economic Powers Act (IEEPA) against the company, which has clinched key passenger rail contracts in Boston, Philadelphia, Chicago and Los Angeles by underbidding rivals.

The law allows the administration to kick a company out of the U.S. banking system, bar American firms or citizens from trading or conducting financial transactions with the sanctioned party, and freezes assets held in the United States.

“We write to encourage the imposition of immediate, meaningful, and permanent sanctions on CRRC for the continued protection of the economic and national security of the United States,” said the letter, which was also signed by the American Foundry Society, the American Iron and Steel Institute and the Alliance for American Manufacturing.

The letter comes amid rising tensions between Beijing and Washington over the deadly coronavirus pandemic and China’s move to curb freedoms in Hong Kong.

The U.S. Defense Department last month released a list of 20 companies, including CRRC, allegedly owned or controlled by the Chinese military, or People’s Liberation Army. The list was mandated by a 1999 law that gives the president the option of imposing IEEPA penalties against listed firms.

“Now is the time for the Administration to take immediate action against CRRC, which has been declared to be under the control of the PLA and which has demonstrated itself to be working against our national interests,” the groups said.

CRRC representatives and the Treasury Department did not respond to requests for comment.

The Rail Security Alliance, a freight lobbying group made up of manufacturers, suppliers, and steel workers, was formed 4-1/2 years ago to oppose CRRC’s rapid expansion in the U.S. passenger rail market.

While there are no U.S. passenger-car builders, CRRC’s success has fueled a backlash by American freight companies, which fear the company will encroach on the country’s far bigger freight car market.

A law passed last year bars federal funds from going to Chinese state-owned companies such as CRRC.

Reporting by Alexandra Alper; Editing by Tom Brown