The Mexican government expressed its concern over a new regulation being prepared by the U.S. government on connected vehicles.
In a letter sent to the U.S. Department of Commerce, the Mexican Ministry of Economy expressed that this new regulation could impact the assembly process and significantly affect Mexico‘s automotive industry.
The U.S. Department of Commerce, through the Bureau of Industry and Security (BIS), published on September 25, 2024 a regulatory proposal regarding connected vehicles.
This proposal aims to limit transactions related to Vehicle Connectivity Systems (VCS) and Automated Driving Systems (ADS) by restricting the importation of auto parts and components originating in China and Russia.
Connected Vehicles
In its letter, the Mexican government expresses concern about the possible adoption of this regulation. From its perspective, the U.S. government plans to implement this measure under the argument of national security. However, Mexico considers that the regulation could be incompatible with the U.S. obligations in the USMCA. In addition, there could also be negative effects on bilateral trade flows in the automotive sector.
The proposed rule is intended to limit transactions related to Vehicle Connectivity Systems (VCS) and Automated Driving Systems (ADS). This would apply when these systems are designed, developed, manufactured or supplied by entities in certain foreign countries.
The proposal includes restrictions on the importation of vehicle connectivity hardware from China and Russia. It also limits the sale of connected vehicles containing VCS or ADS software or hardware from these countries.
USMCA violations
According to Aptiv, the “Connected” megatrend encompasses technologies designed to seamlessly integrate today’s complex vehicles into the electronic operating environment. Thus, it enables drivers to be connected to the global information network. In addition, technology content in vehicles continues to increase as consumers seek more safety, personalization, infotainment, productivity and driving convenience. This generates greater demand for electric architecture as the basis for these functionalities.
On the other hand, the Ministry of Economy argued that the obligations of Article XI of GATT 1994 do not allow restrictions to be applied to hardware imports or to the commercialization of vehicles. This position goes against the proposed regulation that the United States intends to implement.