Buy America: What Comes Next for American Transportation Technology

January 31, 2019

In April 2017, President Trump said, “We’re going to do everything in our power to make sure more products are stamped with those wonderful words ‘Made in the USA’.” One of those acts was an August 2018 executive order that strengthened the Buy America regulations.

This policy affects cities considering expanding and/or upgrading their public transit. It also affects American technology manufacturing companies. Ideally, the administration’s policy seeks to reinvest money into America and build a competent public mass transit network like those in France, Japan and Germany.

Where did Buy America come from?

Buy America for transportation originated with the 1982 Surface Transportation Assistance Act. This Reagan-era legislation stipulated that Federal transit funds must be used toward products made in the United States, such as steel, iron and other manufactured goods. It required 60% of individual components to come from US sources. However, in 2018, Trump bolstered Buy America by moving the goalposts to 70%. Both in the 1980s and now, there is little room for exceptions to this law.

The creators of this legislation have two goals: protect American economic interests and encourage transit industry manufacturing to create a mass transit network in the United States. The first is attempted by growing a market for US goods such as steel, creating jobs and adding wealth to manufacturing towns. This is a direct response to the substantial market power held by state-run Chinese rail car company CRRC.

The second goal is a product of the first: if manufacturing companies step up to the demand, then there could be a manufacturing base for mass transit within the US. The administration expects that this availability will make these projects easier; therefore, local and state government leaders are more likely to plan and implement transportation upgrades successfully. Supporters hope to combat future incidences of failed mass transit projects, such as the Florida 2011 high speed rail proposal, that are, among other issues, too costly due to bulky supply chains.

What does Buy America affect?

With the growing expansion of US cities and urban spaces — as well as the increased pressure to provide public transportation to reduce carbon emissions — the Federal Department of Transportation sees transit infrastructure projects becoming a priority for many state and city governments. Transit projects include bus, rail initiatives of all categories and accompanying infrastructure-related endeavors. In 2018 alone, the new Buy America regulations affected Boston (MBTA), Los Angeles (LA Metro and Bus), Chicago (CTA) and Philadelphia (SEPTA). Smaller cities were also affected, such as Oxford, MS.

Specific items regulated by this legislation may be whole forms, such as buses and train cars, or individual parts. If 70% of a project’s components are American made, then the project can use Federal dollars. In the case of the CRRC railcar monopoly, these whole forms meet the regulations by being manufactured in US-based plants of the Chinese company using American labor as well by constructing the cars with some American supplies.

Due to the current price disparity between “buying American” and buying the same technology from other countries with established rail-or-other-transit networks, some in power have investigated ways to lessen the regulatory burden. One route of pursuit has been investigating redefining what qualifies for the policy, allowing cities to define their operations outside the bounds of the legislation. This transit redefinition involves classifying what tier of Federal involvement there is, as well as how much of the project is sponsored by private interests. However harmful these redefinitions could be, these channels are in the early stages and unlikely to substantially affect the policy. Ultimately, cities stymied by the American prices do have the option to decline Federal funds, if possible.

Buy American Transportation Technology

However, in the age of intelligent technology — especially automated, autonomous vehicles or remotely monitored vehicles — these new regulations also affect American technology companies. Rail cars are no longer steel crates and wheels. They involve complex computing systems, IoT networking, cloud server operation, electromagnetic power systems, and comfort-related high-tech passenger systems and amenities. Besides steel companies, hardware and software firms stand to benefit the most from these new policies.

Currently, some of the biggest issues facing Chinese-made transit components are related to quality, durability and reliability. Products made in America are backed by policies that guarantee high standards, safety and fair skilled labor. Consequently, with this reputation power behind them, American technology companies have an opportunity to break the industry door open.

It’s true that countries with lower standards and burdens of quality assurance can make their products or individual parts faster and more affordably. Moreover, this speed and cost advantage further undercuts competition with state-sponsored companies receiving subsidies and unfair wage or labor laws reducing overhead even more. However, in order to qualify for Buy America or to streamline their supply chain, these companies must open plants in the US, like the Kawasaki plant in Lincoln, NE. This drives up their costs.

American technology companies do have an advantage over foreign designers and manufacturers. Often US companies have the most advanced supplies available that interface with pre-existing US systems, from operating systems to wall plugins. What they don’t already have, they can easily and rapidly make with an intuitive method by some of the best educated minds in the world. Technology companies abroad absolutely try to compete for this advantage, and do well, but this field supports US tech interests.

However, Buy America allows technology companies a little breathing room to leverage their product and cultural advantages to serve American transit projects. As, hopefully, Buy America builds up the mass transit economy and networks in the US, American tech firms can even competitively price their digital or computing goods. Ideally, the new supply chain would make the 70% so affordable that transit designers wouldn’t mind the price tag on American-made steel cars.

Sealevel: Made in America

Sealevel Systems, Inc is committed to being a “World Class, American Made” company. We serve clients from the Carolina lowcountry to the Australian coast with products designed and assembled in our Liberty, SC plant. If you’re a public transportation leader or a mass transit designer, check out our transportation page and see how we can help you.