Chinese carmaker sues US Defense Department over lobbying rule

The company said it was wrongly designated as a Chinese military company last June, prompting lobbying firms to drop its business.LOS ANGELES (CN) — Two U.S. subsidiaries of China’s BYD Group, the world’s largest maker of electric vehicles, sued the U.S. Defense Department Monday to challenge the constitutionality of a federal law aimed at stopping lobbyists from working for any company the department designates as a “Chinese military company," or “CMC.”BYD Motors LLC and BYD America LLC, both based in Pasadena, California, said in a complaint filed in Los Angeles federal court that the statute, “Prohibition on Contracting with Covered Entities that Contract with Lobbyists for Chinese Military Companies,” which went into effect June 30, violates their First Amendment rights, because it makes it impossible for lobbyists to advocate for their interests in Washington.The law bars the Defense Department from doing business with contractors who use a lobbying firm that also represents designated Chinese military companies.In June, the Defense Department designated BYD Group as such a company, citing among other factors its affiliation with China’s Ministry of Industry and Information Technology.“Like countless companies whose interests are affected by legislative and regulatory developments, BYD has, for years, retained lobbyists to advocate for its interests in the political arena,” BYD argues in the complaint. “Those lobbyists have now informed BYD they can no longer represent it due to § 4663.”The statute, the company contests, violates its constitutional right to advocate against the administrative decision that has silenced it.The law, according to BYD, likewise hampers the company from advocating its position on other policy matters of public concern, including pending legislation to ban U.S.-based automakers with Chinese parent companies, bars on the use of federal transit funds to purchase its American-built buses, and agency rule-making affecting its technological supply chain.BYD, through its local subsidiaries, operates an electric-bus plant in Lancaster, California, which employs more than a 1000 American workers, and it sells batteries, solar panels, and energy storage systems to customers across North America.“BYD Group is not a military company and has no relationship with any country’s security sector,” the company says in the complaint. “DoD’s memo designating it as a CMC does not contend otherwise. Instead, the department designated BYD Group a CMC based on routine commercial activities and incidental contacts with Chinese regulators— conduct typical of virtually every prominent company that does business in China.”One of the Defense Department’s grounds for designating BYD Group, according to the complaint, is that it became affiliated with a Chinese regulator that included BYD cars in a green-vehicle, tax-incentive registry.The same registry, however, also listed cars manufactured by Volkswagen, Mercedes-Benz, BMW, Toyota, Tesla, and Honda, according to the company. Such censorship criteria that could sweep in much of the global auto industry does not correspond to any government interest in military secrecy, BYD claims.A Pentagon spokesperson said the department doesn’t comment on pending litigation.The two BDY subsidiaries are asking the court to rule that the federal prohibition on contracting with covered entities that contract with lobbyists for Chinese military companies violates the First Amendment of the U.S. Constitution both facially and as applied.They are represented by attorneys with O’Melveny & Myers LLP in Los Angeles.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads