US to tighten restrictions on China

WASHINGTON — The U.S. Commerce Department is expected to propose a ban on Chinese software and hardware for connected and autonomous vehicles on U.S. roads on Monday due to national security concerns, two sources told Reuters.

The Biden administration has raised serious concerns about Chinese companies collecting data on American drivers and infrastructure, as well as potential foreign manipulation of connected vehicles and navigation systems.

The proposed regulation would ban the import and sale of vehicles from China equipped with key communication or autonomous driving systems or software, according to two sources who spoke on condition of anonymity because the decision has not been publicly disclosed.

The move is a significant tightening of ongoing restrictions on Chinese vehicles, software and components in the United States. Last week, the Biden administration rolled back drastic tariff increases on Chinese imports, including a 100% tariff on electric vehicles, as well as new increases on EV batteries and key minerals.

Commerce Secretary Gina Raimondo said in May that the risks of Chinese software and hardware in U.S. connected vehicles are significant.

“Theoretically, you could imagine the most catastrophic consequences if there were a few million cars on the road and the software was disabled,” she said.

In February, President Joe Biden ordered an investigation into whether Chinese vehicle imports pose a national security risk related to connected car technology — and whether such software and hardware should be banned from all vehicles on U.S. roads.

“China’s policies could flood our market with their vehicles, creating a threat to our national security,” Biden said earlier. “I will not allow that to happen under my watch.”

The Commerce Department plans to give the public 30 days to comment before the rules are finalized, sources said.

Almost all newer vehicles on the road in the U.S. are considered “connected.” These vehicles have on-board networking equipment that allows them to access the Internet, allowing them to share data with devices both inside and outside the vehicle.

The department also plans to propose software bans starting in the 2027 model year, while a hardware ban would go into effect in January 2029 or the 2030 model year.

The bans would apply to vehicles equipped with some Bluetooth, satellite and wireless capabilities, as well as highly autonomous vehicles that could operate without a driver at the steering wheel.

A bipartisan group of U.S. lawmakers in November expressed concern that Chinese auto and technology companies were collecting and handling sensitive data while testing autonomous vehicles in the United States.

The bans would be extended to other foreign adversaries of the U.S., including Russia, the sources said.

The trade group representing major automakers including General Motors, Toyota Motor, Volkswagen, Hyundai and others warned that the hardware and software transition would take time.

Automakers noted that their systems “go through extensive pre-production engineering, testing and validation processes and generally cannot be easily interchanged with systems or components from another supplier.”

The Commerce Department declined to comment Saturday. Reuters first reported details in early August of the plan, which would block Chinese automakers from testing autonomous vehicles on U.S. roads. Relatively few light-duty vehicles made in China are imported into the United States.

The White House on Thursday signed off on the final proposal, according to a government website. The rule is intended to ensure supply chain security for U.S. connected vehicles. It would apply to all vehicles on U.S. roads, but not agricultural or mining vehicles, the sources said.

Biden noted that most cars are connected like smartphones on wheels — connected to phones, navigation systems, critical infrastructure and the companies that made them.