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Foreign Investment Panel Reviewing Vertex Railcar Deal, At Vertex's Own Request

By Cece Nunn, posted Sep 29, 2016
A day after more than 40 more members of Congress requested an investigation of Chinese investment in Wilmington-based Vertex Railcar Corp., a company official said Vertex has requested its own review by the Committee on Foreign Investment in the United States (CFIUS).

“Our goal remains very much the same: to create jobs and economic opportunity for Wilmington and the state of North Carolina," said Foster Sayers, Vertex's general counsel and government liaison who is also in charge of the company's public relations, in an email Thursday. "As such, Vertex has proactively reached out to CFIUS to formally file for a review. We just received confirmation yesterday from CFIUS that they received our request, and that their review is officially underway. We will receive word from the committee within 30-75 days. Upon completion of the review, we will be certain to provide updates.”

A letter dated Sept. 28 to U.S. Treasury Secretary Jacob Lew from 42 Senators asks CFIUS to "investigate, in consultation with the Department of Homeland Security, the pending stock transfer that will give the China Railroad Rolling Stock Corporation (CRRC) majority ownership of American railcar manufacturer Vertex Railcar Corporation." 

The latest call for an investigation is similar to a letter to Lew dated July 15 that was signed by 55 bipartisan members of Congress, including Rep. Walter B. Jones, R-N.C.

The latest letter, along with a news release from two of the Senators who signed, U.S. Senator Jerry Moran, R-Kan., and U.S. Senator Tammy Baldwin, D-Wis., describes some of the same concerns. North Carolina's U.S. Senators, Thom Tillis and Richard Burr, both Republicans, were not among those who signed.  

“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 in the release. “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.”
 
Baldwin said in the release, “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. 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, according to the Senators' news release.

"Freight rail is designated as 'critical infrastructure' by the Department of Homeland Security, one of the 16 agencies that make up CFIUS," the release said. "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 manufacturers. CRRC has already successfully underbid competitors for critical railcar manufacturing contracts in Boston and Chicago."

In response to the July letter, Sayers had said that it was "very misguided and we are obviously disappointed that instead of helping put people to work, Washington is at work trying to slow job growth. We believe this is a direct result of railcar lobbyists of our competitors attempting to manipulate the system to stifle competition."

In a Greater Wilmington Business story in June, company officials had said a joint venture agreement entered into by Vertex last year created a new partnership, with Vertex Rail Technologies owning 33 percent of Vertex Railcar Corp., China Southern Railway owning 22 percent and Majestic Legend Holdings Ltd. having a 45-percent stake. Majestic’s initial investment was $6 million, while China Southern Railway was contributing engineers and technical manufacturing know-how. In exchange, China Southern Railway would eventually own half of Vertex Railcar Corp., Sayers said in an interview last year, before China Southern Railway merged with China Northern Railway to become CRRC.
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