Biden Administration Aims to Address National Security Risks to the U.S. Auto Industry

At a Glance

• President Biden has ordered the U.S. Department of Commerce (“Commerce”) to investigate the national security risks posed by Chinese technology used in connected vehicles (CVs).
• Per an Advanced Notice of Proposed Rulemaking (ANPRM), Commerce is seeking public input on a wide variety of issues to inform the administration as it develops regulations to “secure and safeguard the Information and Communications Technology and Services (ICTS) supply chain” for CVs.
• The deadline for public comments is April 30, 2024.

On February 29, 2024, the U.S. Department of Commerce announced that it is launching an investigation into the national security risks posed by Chinese-manufactured technology embedded in connected vehicles (CVs). Such technology includes both software (e.g., systems used to communicate via short-range communication, cellular telecommunications connectivity, satellite communication or other wireless spectrum connectivity) and hardware (e.g., integrated components used in conjunction with safety applications designed to increase situational awareness and reduce traffic accidents through vehicle-to-vehicle (V2V), vehicle-to-infrastructure (V2I) and vehicle-to-everything (V2X) communications).

Per contemporaneous statements made by administration officials, the underlying concern behind such technology is that it could be used to disrupt U.S. critical infrastructure or facilitate the mass collection of information on U.S. persons via its connection, for example, to the driver’s smartphones or other nearby CVs.

As reflected in President Biden’s statement accompanying the announcement, such concern within the administration — and also among lawmakers on Capitol Hill — has become more acute given China’s growing market position in the electric vehicle sector.

Advanced Notice of Proposed Rulemaking

Per the ANPRM, Commerce is seeking information to support the Bureau of Industry and Security’s (BIS) potential regulation of ICTS that is “integral to CVs.” Specifically, Commerce is seeking feedback on the following issues, among others:

• the applicable definition of “connected vehicle” or “CV”
• the supply chain for CVs in the United States, and particularly its connection to China
• the categories of ICTS (e.g., software or hardware) that are “integral to CVs operating in the United States”
• the risks associated with CVs, including, but not limited to, risks associated with data collection and connectivity (e.g., via cloud-based services that provide onboard systems with external data streams such as geolocation, streaming service, assistance service and emergency notifications)
• the potential regulatory measures available to address identified risks
• the establishment of a process whereby the public may request approval to engage in an otherwise prohibited transaction by demonstrating that the risk to U.S. national security is sufficiently mitigated in the context of a particular transaction
• the potential economic impact to U.S. businesses if Commerce imposes new regulations on CV-related ICTS

Per the announcement, all public comments must be submitted on or before April 30, 2024.

Looking Ahead

Of note, the investigation marks the inaugural use of authority established by Executive Order (EO) 13873, “Securing the Information and Communications Technology and Services Supply Chain” (May 15, 2019), which delegates to the U.S. Secretary of Commerce the authority to prohibit or impose mitigation measures on any ICTS transaction subject to U.S. jurisdiction that poses “undue” or “unacceptable risk” to U.S. national security or the safety of U.S. persons.

Although the announcement did not result in any new trade barriers on Chinese-origin electric vehicles or CV technology, Biden administration officials have indicated that the investigation could result in U.S. trade restrictions down the road, including, for example, increased tariffs on Chinese-origin vehicles.

In Congress, some lawmakers have recently advocated for a more aggressive approach. For example, on February 28, 2024, Senator Josh Hawley (R-MO) introduced the “Protecting American Autoworkers From China Act,” a bill that would raise tariffs on vehicles imported from China to 125%. This would be executed, in part, by raising duties on Chinese-origin vehicles to 100%, which would then be added to the 25% tariffs currently imposed under Section 301 of the Trade Act of 1974. Although Senator Hawley’s bill, in its current form, is unlikely to see any movement in this Congress, it reflects a heightened focus on Capitol Hill with respect to China’s impact on the U.S. auto industry.

For More Information

If you wish to submit public comments in response to the February 29, 2024, ANPRM, or if you have any questions about these matters, please contact any member of the Faegre Drinker customs and international trade team for further details.