A view of the electric vehicle (EV) factory of China Evergrande New Energy Vehicle Group in Tianjin, China, Oct. 20, 2021. Reuters-Yonhap

The U.S. Department of Commerce on Monday proposed a rule to prohibit the import or sale of connected vehicles integrating certain software and hardware with a "nexus" to China or Russia, citing national security concerns.

The department's Bureau of Industry and Security (BIS) published a notice of the proposed rule amid concerns that those cars with cameras, sensors, software and other components — manufactured in China — could be used to glean sensitive data about drivers and passengers, as well as U.S. infrastructure.

The rule is expected to lead Korean automakers to readjust their supply chains if they have used prohibited software and components from China. But the measure would make it difficult for their potential Chinese competitors to enter the U.S. market, observers said.

The prohibitions on software would take effect for the 2027 model year, and those on hardware would go into force for the 2030 model year, or Jan. 1, 2029, for units without a model year, the department said.

The rule focuses on hardware and software integrated into the Vehicle Connectivity System (VCS) and software integrated into the Automated Driving System (ADS).

The VCS refers to the set of systems that allow the vehicle to communicate externally, including telematics control units, Bluetooth, cellular, satellite and Wi-Fi modules, according to the department. The ADS includes the components that collectively allow a highly autonomous vehicle to operate without a driver behind the wheel.

The department called the proposed rule a "proactive" measure designed to protect national security, saying it has found that certain technologies originating from China or Russia present an "undue" risk to U.S. critical infrastructure and those who use connected vehicles.

"Cars today have cameras, microphones, GPS tracking and other technologies connected to the internet. It doesn't take much imagination to understand how a foreign adversary with access to this information could pose a serious risk to both our national security and the privacy of U.S. citizens," Commerce Secretary Gina Raimondo was quoted as saying in a press release.

"To address these national security concerns, the Commerce Department is taking targeted, proactive steps to keep PRC and Russian-manufactured technologies off American roads," she added, referring to China by its official name, the People's Republic of China.

National Security Advisor Jake Sullivan cast the rule as "strong action" to protect American people, U.S. critical infrastructure and automotive supply chains from national security risks associated with connected vehicles.

"While connected vehicles yield many benefits, the data security and cybersecurity risks posed by software and hardware components sourced from the PRC and other countries of concern are equally clear, and we will continue to take necessary steps to mitigate these risks and get out ahead of the problem," he said.

The proposed rule would apply to all wheeled on-road vehicles, such as cars, trucks and buses, but would exclude vehicles not used on public roads, like agricultural or mining vehicles, the department said.

It would also prohibit manufacturers with a connection to China or Russia from selling connected vehicles that incorporate VCS hardware or software, or ADS software in the United States, even if the vehicle was made in the U.S.

The rule is to be finalized after a public comment period.

In a statement, John Bozzella, president and CEO of Alliance for Automotive Innovation (AAI), noted that there is "very little" technology in today's connected vehicle supply chain that enters the U.S. from China, but the proposed rule will require auto manufacturers in some cases to find alternate suppliers.

"I've said this in other contexts, but it applies here too: you can't just flip a switch and change the world's most complex supply chain overnight. It takes time," Bozzella said.

"The lead time included in the proposed rule will allow some auto manufacturers to make the required transition but may be too short for others."

AAI also includes Korean firms like Hyundai Motor Co.

In late April, Seoul raised the Korean automotive industry's concerns over the U.S.' envisioned rule on connected vehicles. It expressed expectation that the U.S. will provide a "precise" definition of the scope of connected vehicles, as it pointed out that the current U.S. definition of the cars in question is "excessively broad." (Yonhap)