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Federal Register / Vol. 86, No. 213 / Monday, November 8, 2021 / Notices
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these reasons, the Secretary determines that the United States cannot rely on the presence of foreign-owned manufacturers in the United States to help meet U.S. defense requirements.
As set forth in this report, imports of automobiles and certain automobile parts are impairing the strength of American-owned firms in the automotive sectorin terms of both production and revenue needed for R&D
investmentsand improving the conditions for such firms is necessary to enable the development of technologies needed for our national security requirements. In conducting this investigation, the Secretary has made the following findings:
1. A Healthy U.S. Automobile and Automobile Parts Manufacturing Industry Is Necessary for U.S. Defense and National Security The rapid application of commercial breakthroughs in automobile and automobile parts technologies is key to gaining competitive military advantages and meeting defense requirements.
From new engine and powertrain technology, to lightweighting and advanced connectivity, the DOD is actively working to incorporate technologies that have been the subject of years of effort and billions of dollars of R&D by the U.S. commercial automotive industry.8
While the U.S. defense industrial base is dependent on the American-owned automotive sector for the development of high-tech products and capabilities, the U.S. commercial automotive industry is unable to survive solely by supplying the DOD. To this point, in 2017, 17.1 million automobiles were sold in the United States versus TEXT
REDACTED wheeled armored vehicles.
According to the DOD, it is commercial sales that generate the production volumes needed for manufacturing efficiency, the revenues needed for R&D, and the profits needed to sustain domestic automotive businesses.9
Armored vehicles require highly sophisticated automobile parts, and it is commercial scale that allows the DOD to benefit from reduced unit costs for production of armored vehicles and cost effective access to new technology. In other words, a strong presence of American-owned companies in the United States industry allows for the development and production of highly technologically-advanced products that 8 Appendix ALetter from Secretary of Defense James Mattis to Secretary of Commerce Wilbur Ross.
9 Consultations between Department of Commerce and Department of Defense in August 2018.

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are essential to modern military applications for U.S. national defense.
2. Imports of Automobiles and Automobile Parts Are Impairing the Ability of the Domestic Industry To Meet National Defense Requirements Production of automobiles in the United States has significantly weakened over the past several decades as domestic production has been replaced by an influx of low-priced imports from countries where automotive markets are protected from foreign competition. These conditions enable foreign producers to expand production in their home markets, achieve significant economies of scale and reduce prices, produce in excess of the needs of their domestic demand, export that excess production to the United States, and capture a dominant and growing share of the U.S. market.
Further, the imports of the types of automobile parts that are critical to U.S.
defense needsnamely engines and engine parts, transmissions and powertrain parts, and electrical componentshave significantly displaced parts manufactured in the United States and have weakened the domestic manufacturing base, including American-owned automobile parts producers, such that the automotive industry in the United States has become increasingly reliant on imported parts.
The contraction of the Americanowned automotive industry, if continued, will significantly impede the United States ability to develop technologically advanced products that are essential to our ability to maintain technological superiority to meet defense requirements and cost effective global power projection, as well as provide the necessary R&D and manufacturing base in the event of a national emergency.
3. Decline in U.S. R&D for Important Automotive Technologies Threatens To Impair U.S. National Security This report establishes that a strong and robust American-owned R&D and manufacturing base for automobiles and automobile parts is vital to national security. However, the increase in imports of automobiles and automobile parts over three decades has put American-owned producers at a competitive disadvantage vis-a-vis their foreign-owned competitors in R&D
expenditures. In 2017, R&D by American-owned manufacturers amounted to only 20 percent of global R&D spending in automobile production and only 7 percent of global R&D
spending in automobile parts, lagging
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behind European Union EU and Japanese competitors, which together controlled 70 percent of global R&D
spending in vehicle production and nearly 90 percent in automobile parts R&D. Additionally, the Asia Pacific region is now emerging as a favored destination for R&D investments.
Protected foreign markets, which discriminate heavily against imports, have precluded American-owned manufacturers from offsetting their decline in the U.S. market, and thereby building R&D revenue by expanding sales through exports abroad.
Because R&D expenditures are integral to promoting long-term technological advancements in automation, electrification, and connectivity that enable cost effective power projection and maintain technological superiority for U.S.
national defense, the lag in R&D
expenditures by American-owned manufacturers is weakening U.S.
innovation and, accordingly, the capacity of the United States to meet national security requirements. Indeed, as the U.S. military relies heavily on and adopts innovations from the commercial automotive industry, a significant decline in American-owned automotive industry investment and development also jeopardizes U.S.
military leadership and its ability to fulfill Americas defense requirements.
Domestic conditions of competition must be improved by reducing imports so that American-owned producers are able to increase R&D expenditures and investment to assure the growth necessary to meet national defense requirements, particularly in a time of national emergency.
Conclusion and Recommendations Based on the findings in this report, the Secretary concludes that the present quantities and circumstances of imports of automobiles and certain automobile parts, specifically engines and engine parts, transmissions and powertrain parts, and electrical components as defined in Section VIII, are weakening our internal economy and threaten to impair national security as set forth in Section 232.
As discussed throughout this report, the negative impact of imports and the resulting displacement of production for the American-owned automobile and automobile parts manufacturers are significant, and are increasing given that the U.S. automobile market is experiencing a decline in demand and contracting due to excessive imports.
Defense purchases alone are not sufficient to support a robust military vehicle supply chain and R&D in key
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