The Biden administration proposed on Monday a ban on the sale of connected and autonomous vehicles in the U.S. that are equipped with Chinese and Russian software and hardware, with the stated goal of protecting national security and American drivers.
The measure is proactive but critical, the U.S. Commerce Department said, given that all the bells and whistles in cars, like microphones, cameras, GPS tracking and Bluetooth technology, could make Americans more vulnerable to bad actors and potentially expose personal information, from the home address of drivers, to where their children go to school.
In extreme situations, a foreign adversary could shut down or take simultaneous control of multiple vehicles operating in the United States, causing crashes and blocking roads, U.S. Secretary of Commerce Gina Raimondo told reporters on a call Sunday.
"This is not about trade or economic advantage,” Raimondo said. "This is a strictly national security action. The good news is right now, we don’t have many Chinese or Russian cars on our road."
But Raimondo said Europe and other regions in the world where Chinese vehicles have become commonplace very quickly should serve as "a cautionary tale” for the U.S.
Security concerns around the extensive software-driven functions in Chinese vehicles have arisen in Europe, where Chinese electric cars have rapidly gained market share.
"Who controls these data flows and software updates is a far from trivial question, the answers to which encroach on matters of national security, cybersecurity, and individual privacy,” Janka Oertel, director of the Asia program at the European Council on Foreign Relations, wrote on the council’s website.
Vehicles are now "mobility platforms” that monitor driver and passenger behavior and track their surroundings.
A senior administration official said that it is clear from the terms of service contracts included with the technology that data from vehicles ends up in China.
The rules, if confirmed, would mark the latest escalation of a simmering trade row between the U.S. and China.
Shortly after the announcement, China warned the U.S. not to take "discriminatory actions" against its firms.
China urged "the U.S. to respect market principles and provide an open, fair, transparent, and non-discriminatory business environment for Chinese enterprises," Foreign Ministry spokesperson Lin Jian said.
"China opposes the U.S.'s broadening of the concept of national security and the discriminatory actions taken against Chinese companies and products," Lin said.
"China will resolutely safeguard its legitimate rights and interests," he added.
Raimondo said that the U.S. won't wait until its roads are populated with Chinese or Russian cars.
"We're issuing a proposed rule to address these new national security threats before suppliers, automakers and car components linked to China or Russia become commonplace and widespread in the U.S. automotive sector,” Raimondo said.
It is difficult to know when China could reach that level of saturation, a senior administration official said, but the Commerce Department says China hopes to enter the U.S. market, and several Chinese companies have already announced plans to enter the automotive software space.
The Commerce Department added Russia to the regulations since the country is trying to "breathe new life into its auto industry,” senior administration officials said on the call.
The proposed rule would prohibit the import and sale of vehicles with Russia and China-manufactured software and hardware that would allow the vehicle to communicate externally through Bluetooth, cellular, satellite, or Wi-Fi modules.
It would also prohibit the sale or import of software components made in Russia or the People's Republic of China that collectively allow a highly autonomous vehicle to operate without a driver behind the wheel. The ban would include vehicles made in the U.S. using Chinese and Russian technology.
The proposed rule would apply to all vehicles, but would exclude those not used on public roads, such as agricultural or mining vehicles.
Commerce officials met with all the major auto companies around the world while it drafted the proposed rule to better understand supply chain networks, according to senior administration officials, and also met with a variety of industry associations.
While there is minimal Chinese and Russian software deployed in the U.S, the issue is more complicated for hardware. That's why Commerce officials said the prohibitions on the software would take effect for the 2027 model year and the prohibitions on hardware would take effect for the model year of 2030, or Jan. 1, 2029, for units without a model year.
The Commerce Department is inviting public comments, which are due 30 days after publication of a rule before it's finalized. That should happen by the end of the Biden administration.
The new rule follows steps taken by the Biden administration to crack down on cheap products sold out of China, including electric vehicles, expanding a push to reduce U.S. dependence on Beijing and bolster homegrown industry.
In May, Washington unveiled steep tariff hikes on Chinese imports like electric vehicles and semiconductors.
The tariff hikes hit $18 billion worth of Chinese imports, targeting strategic sectors like EVs, batteries, critical minerals and medical products.
The tariff rate on EVs is set to quadruple to 100% this year, while the tariff for semiconductors will surge from 25% to 50% by next year.
Those plans were finalized this month, ahead of November's presidential election, where both Democrats and Republicans are seeking to show a tough stance on China as competition between both countries intensifies.
The tariff hikes on the $18 billion worth of goods were taken after a review of levies imposed under then-president Donald Trump, which impacted some $300 billion in goods from China.
Apart from tariff increases, including those on solar cells, the U.S. Trade Representative's office confirmed that a 50% duty on semiconductors – a sharp rise from before – would start in 2025.
Biden has accused Beijing of "cheating" rather than competing on trade.
