Update: USA – Dra­stic sales and import ban expec­ted in the auto­mo­ti­ve sector

The U.S. Depart­ment of Commerce’s Bureau of Indus­try and Secu­ri­ty (BIS) recent­ly published a pro­po­sal for a regu­la­tion that would pro­hi­bit the sale and import of con­nec­ted vehic­les and rela­ted (soft­ware) com­pon­ents – in all U.S. sta­tes if they have a signi­fi­cant con­nec­tion to Rus­sia or Chi­na. With this trade rest­ric­tion, the Ame­ri­can govern­ment wants to com­pen­sa­te for the com­pe­ti­ti­ve dis­ad­van­ta­ges for the USA on the one hand, and pre­vent pos­si­ble data pro­tec­tion vio­la­ti­ons or even cyber-attacks on the other. It can be assu­med that the far-reaching rest­ric­tions will affect almost all com­pa­nies in the auto­mo­ti­ve industry.

Con­tent and objec­ti­ve of the trade restriction

The government’s goal is to include almost all new vehic­les from the 2027 model year onwards with regard to soft­ware, and from the 2030 model year with regard to hard­ware under the new regu­la­ti­on. The­r­e­fo­re, the term ‘con­nec­ted vehic­le’ is defi­ned inde­pendent­ly: it is not pri­ma­ri­ly important that vehic­les can com­mu­ni­ca­te with each other, but it is suf­fi­ci­ent that they are capa­ble of Blue­tooth, WiFi or satel­li­te recep­ti­on, for exam­p­le. A few excep­ti­ons are fore­seen, for exam­p­le, with regard to vehic­les that do not dri­ve on the road (agri­cul­tu­ral vehic­les or mining vehicles).

The ban is inten­ded to refer to soft­ware or hard­ware that pri­ma­ri­ly enables com­mu­ni­ca­ti­on to and from net­work­ed vehic­les and can also con­trol sub­or­di­na­te sys­tems in the vehic­le. This appli­es in par­ti­cu­lar to ‘VCS’ (‘vehic­le con­nec­ti­vi­ty sys­tems’) and ‘ADS’ (‘auto­ma­ted dri­ving sys­tems’), i.e., vehic­le net­wor­king sys­tems and auto­ma­ted dri­ving sys­tems. This is exact­ly whe­re the US govern­ment sees risks if peo­p­le (natu­ral or legal) from the two count­ries were ‘invol­ved’ in deve­lo­p­ment or pro­duc­tion – the terms have so far been defi­ned very broad­ly. It goes even fur­ther and includes in the defi­ni­ti­on, soft­ware that sup­ports the­se func­tions and soft­ware in which the­re is a for­eign pro­per­ty inte­rest of any kind. This means that vir­tual­ly any type of soft­ware that was not ful­ly deve­lo­ped by US com­pa­nies in the USA can be affec­ted by the regulation.

Spe­ci­fi­cal­ly, the (kno­wing) sale of con­nec­ted vehic­les con­tai­ning VCS hard­ware or other cover­ed soft­ware will be pro­hi­bi­ted in the USA in the future if the sel­ler is in any way con­nec­ted to Chi­na or Rus­sia, even if the vehic­le was manu­fac­tu­red or com­ple­ted in the USA. If such vehic­les are equip­ped with soft­ware that comes ‘from the pen’ of peo­p­le with ties to Rus­sia or Chi­na, the import of the­se vehic­les is also pro­hi­bi­ted. If VCS hard­ware has been desi­gned, deve­lo­ped, manu­fac­tu­red or sup­pli­ed by per­sons asso­cia­ted with Chi­na or Rus­sia, it may also not be impor­ted into the USA. It is important to note that the­se can also be sub­si­dia­ries of US com­pa­nies, pro­vi­ded that they are based in Rus­sia or Chi­na and are foun­ded and orga­nis­ed accor­ding to the law appli­ca­ble there.

Asso­cia­ted new com­pli­ance requirements

Importers of VCS hard­ware and vehic­le manu­fac­tu­r­ers will be obli­ged to sub­mit decla­ra­ti­ons of con­for­mi­ty for vehic­les that use VCS hard­ware or con­tain the affec­ted soft­ware. In par­ti­cu­lar, it must be assu­red that it has not been invol­ved in any pro­hi­bi­ted tran­sac­tion – as descri­bed abo­ve. Records rela­ted to the decla­ra­ti­on of con­for­mi­ty must be kept for ten years. In addi­ti­on, the records should be atta­ched to each rele­vant tran­sac­tion, as well as other sup­port­ing docu­ments (con­tracts, import docu­ments, sales invoices, etc.).

Out­look

Affec­ted com­pa­nies will have to tho­rough­ly review their sup­p­ly chains. In this con­text, it will be neces­sa­ry to chan­ge the pro­duct port­fo­lio and/or acqui­re new sup­pli­ers who have no con­nec­tion to Rus­sia or Chi­na. Howe­ver, also with a view to the focus on sup­p­ly chain respon­si­bi­li­ty, a due dili­gence review will pro­ba­b­ly have to be car­ri­ed out and a com­pli­ance manage­ment sys­tem for the sup­p­ly chain will need to be deve­lo­ped, which in turn will requi­re appro­pria­te cer­ti­fi­ca­ti­on. Curr­ent­ly, the first draft of the regu­la­ti­on is being revi­sed, one should look for­ward to the upco­ming publi­ca­ti­on on a revi­si­on, which will then be intro­du­ced into the legis­la­ti­ve pro­cess. We will report on this.

Con­clu­si­on

The Biden admi­nis­tra­ti­on’s pro­po­sal had recei­ved bipar­ti­san appr­oval; the­r­e­fo­re, it is not to be expec­ted that the ban will be over­tur­ned by the new govern­ment from Janu­ary, but rather, that the pro­po­sal will come into force with pos­si­ble slight amendments.

A detail­ed artic­le on the topic can be found on the web­site of our coope­ra­ti­on law firm Foley Lard­ner LLP.