By David Shepardson

WASHINGTON (Reuters) -General Motors and Ford Motor would need to stop importing vehicles to the U.S. from China under a proposed rule cracking down on Chinese software and hardware, a U.S. Commerce Department official told Reuters Monday.

The rule would also affect other automakers selling or building vehicles in the U.S., such as Volvo Cars and BYD.

GM sells the Buick Envision and Ford sells the Lincoln Nautilus — both assembled in China — in the U.S. market. Ford did not comment. In the first six months of 2024, GM sold about 22,000 Envisions and Ford sold 17,500 Nautilus SUVs in the U.S.

“We anticipate at this point that any vehicle that is manufactured in China and sold in the U.S. would fall within the prohibitions,” said Liz Cannon, who heads the Commerce Department’s information and communications technology office.

GM and Ford are aware, she added, that “going forward” that production in China for the U.S. market “would need to be shut down in China and moved elsewhere.”

GM did not address if it thought it would have to halt sales of the Envision but added the “government has an important role to set clear policies” on security issues.

Commerce said it would allow companies to seek a “specific authorization” to continue sales of vehicles or components.

China’s BYD North America, a unit of BYD, which builds electric buses in Lancaster, California could be impacted. The company did not immediately comment.

“We will have to work with them to better understand their supply chain,” Cannon said. “They will have to come in for a specific authorization.”

For example, software would likely be prohibited if it were developed by a team of Chinese employees in that country for a Chinese automaker. But software would likely be allowed if it were developed by Chinese employees working in another country for a non-Chinese company.

Reuters reported in May four Chinese vehicle models are sold in the U.S. including the Polestar 2 and Volvo’s S90 sedans. Polestar and Volvo are affiliates of Chinese automaker Geely.

Cannon said she expects companies like Volvo will meet with Commerce “to work with us to talk about ways that they could mitigate the risk and we are open to that” and the agency could grant them an authorization.

Volvo Cars said “We are reviewing the proposal from the U.S. Commerce Department and are analyzing any potential impact it might have on us and the auto industry in the U.S.”

(Reporting by David Shepardson; Editing by David Gregorio)