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A peek behind the curtains at how law gets made — and how a few SFLers influenced it.
House Bastiat, SFL’s select and talented cohort of policy wonks, kept its momentum rolling after a busy, successful summer (which you can read about HERE.) In the fall — October 28, 2024, to be exact, the Bastiat House for Politics, Policy, and Law filed its first-ever regulatory comment — a form of public input on proposed regulations.
The regulatory comment to the U.S. Department of Commerce (DOC) analyzed and critiqued a proposed new rule that would ban the import of Chinese automobile components that connect cars to devices and the Internet. According to the Bureau of Industry and Security (BIS), the rule is intended to mitigate the “unacceptable risk” of sabotage to U.S. communications infrastructure posed by Chinese car components. There is concern that vehicle connectivity systems (VCS) could serve as a Trojan horse to access citizens’ data, or even remotely control their vehicles. This is, of course, driven by the dubious notion that the Chinese Communist Party (CCP) has such strategic ambitions and that nothing less than a sweeping ban can address that ambition.
In the U.S., regulatory agencies must follow a multi-step process to create new rules, which include allowing the public to file commentary. Federal agencies are required to read, consider, and in certain instances respond to these comments.
Because the rule is overly broad and improperly tailored to address national security concerns, students in SFL’s Bastiat House decided to take action. You can read the comment we filed for yourself.
Unfortunately, the BIS’s recently released final ruling consists of ambiguous language that lumps our response in with all the other groups that submitted comments. Worse, the ban was implemented. But there is some good news.
Below are the three main arguments we made and our summaries of the BIS responses, with what we believe are the most important phrases in italics. I’ll leave it to you to assess whether the BIS is sincere; with government agencies, it’s hard to tell. However, it’s clear to me that the action we took had at least some effect.
The rule is sweeping in scope, making its likely impact on the American automotive supply chain — and consequently on economic growth — dramatic. The regulation targets practically every electronic system within a vehicle that connects to external devices or the Internet, from speakers and dash-cams to infotainment systems.
Given China’s significant share in semiconductor production (8% currently, projected to be 25% by 2030), a sudden shift in sourcing would be disastrous for domestic production, prices, and employment. A case-by-case exemption for evaluating imports could help prevent such a collapse.
BIS Response: BIS has revised the exemption process to be more transparent and flexible. The final rule includes a more detailed exemption application procedure, allowing stakeholders to request exemptions for specific components or software that do not pose a significant risk to national security.
American systems have already been hacked — sometimes even by labs in China. Numerous VCS components are vulnerable to hackers, often at a cost of under $1,000. If common criminals can do this, why wouldn’t a state-level actor be able to do the same?
They wouldn’t need to embed complex hardware backdoors if vulnerabilities in existing software ecosystems are already there to exploit. The regulation, as proposed, risks diverting attention and resources away from addressing real security threats, and toward a convoluted, bureaucratic framework. Free-market mechanisms, with firms allocating resources based on their proximity to problems, are more effective. Take Tesla’s “bug bounty” program, for instance, which uncovered more than 800 vulnerabilities before they could be exploited.
BIS Response: BIS emphasizes that while the rule targets components from specific foreign adversaries, it is part of a broader strategy to enhance the cybersecurity of connected vehicles. The Department is collaborating with other agencies and industry stakeholders to develop comprehensive cybersecurity standards that address both supply chain risks and systemic vulnerabilities.
Consider this: If Chinese components truly represent an “unacceptable risk,” why delay the ban until model years 2027 for software and 2030 for hardware? The regulators justified this delay by citing a need to minimize supply chain disruptions, yet their argument rests on the assumption that these components are an imminent threat.
Additionally, the risks remain hypothetical and have only been demonstrated in a commercial, not military, context. References to Chinese phone manufacturers illicitly collecting user data relate to commercial use — namely, selling data for profit — not espionage or attacks.
The proposed regulatory process itself imposes substantial costs. Analyzing multiple component manufacturers — and the parts within those components — will necessitate a drawn-out review process. These increased costs will undoubtedly trickle down to consumers. With additional funding allocated to the Bureau of Industry and Security, taxpayers will also be responsible for higher administrative costs.
BIS Response: BIS has extended the compliance timelines to allow manufacturers sufficient time to adjust their supply chains and minimize costs. The final rule also includes provisions for case-by-case exemptions, which can help mitigate potential economic impacts.
Like I said, I’ll leave it to you to decide whether our impact was big, small, or somewhere in between. (I’m biased, of course, but I’m happy with our effort and proud to say I helped lead this initiative.) And I hope you’ve learned something from this behind-the-curtains look at the world of policy and law. Because, as nitty-gritty as it seems, this is the kind of work we in House Bastiat live for.
This comment was the product of a dedicated group of House Bastiat members, directly working to influence meaningful policy change and bring rational scrutiny to yet another overreaching regulation. Learn more about them below.
Mohammad Bisher Alshehab
Born and raised in Damascus, Syria, Bisher Alshehab is currently pursuing a Bachelor’s degree in Political Science and Economics at Berea College in Kentucky. He is a writer and advocate for free-market economics, libertarian principles, and liberal interpretations of Islam.
Donald Hall
Donald Hall is a law student at George Mason University. He is interested in Administrative and Constitutional Law, as well as current issues surrounding property rights and economic liberty. A graduate of Vanderbilt University with a B.A. in Political Science and minors in History and Russian Studies, he has been involved with SFL since 2020.
Mitchell Thornton
A Quantitative Economics major at the University of Missouri–Columbia, Mitchell recently interned at the Competitive Enterprise Institute, a leading free-market think tank in Washington, D.C. He also published two articles on the CEI blog about national security and the GOP’s shift away from free trade.
Marcos Batista
An Economics and Mathematics major at Georgia St. University, Marcos interned at the American Institute for Economic Research, an historic think tank in Great Barrington, Massachusetts. During his internship at AIER, he wrote a research paper studying antitrust intervention’s impact on innovation within interconnected markets.
Cameron Westbrook
A second-year student (at the time of publication) at the University of Denver Sturm College of Law, Cameron began his career organizing libertarian students in the American Northeast, followed by a community organizing and lobbying position at Americans for Prosperity-Louisiana. Cameron has a passion for property and economic rights and constitutional limits on government power.
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