Lidar Trade And Security

Introduction

Strategic trade tools, advanced technologies, and de-risking continue to feature prominently in evolving economic and national security agendas. The nexus of trade policy and national security has been particularly dynamic in the United States, which maintains one of the world’s most advanced trade tool kits for national security. Questions have emerged, however, about whether the use of these trade tools serves primarily as a national security instrument or whether their use is motivated primarily by a bid to protect domestic industry. As technology grows in foreign policy importance, the line between what is critical to national security versus what is critical to economic security is increasingly blurred. One technology increasingly under the security spotlight is lidar.

Defining Lidar

Light detection and ranging, or lidar technology, is a dual-use technology, which means it has both civilian and military uses. Lidar uses laser pulses to hit objects and reflect back, calculating the position, size, and velocity of surrounding objects. These laser pulses occur at rates of millions of beams per second, creating a highly accurate and real-time 3D image of the environment.

Lidar is widely used in commercial and scientific applications. In 2018, archeologists used lidar to scan the jungle along the border of Guatemala and Mexico, digitally removing the dense tree layer to reveal swaths of Mayan ruins. In “smart city” infrastructure programs, lidar collects data to improve road safety and support traffic management. Lidar is also critical in driverless cars. All major autonomous vehicle producers (with the exception of Tesla) use lidar as “3D eyes.”

Lidar and U.S. National Security

Lidar also has myriad military applications. The integration of lidar into aerial vehicles like drones can enhance their autonomous capabilities, such as navigation and collision avoidance, improving their ability to navigate complex environments. Lidar can also map battlefields and gather reconnaissance, scouting for potential danger without risking soldiers’ lives to map the places satellites cannot see. Lidar can also assess buildings for structural damage, locate sea mines using bathymetric lidar (which passes through water), and estimate the effectiveness of weapons by evaluating atmospheric conditions. The U.S. Army is currently developing its own autonomous vehicles through a $49.9 million project with autonomous truck company Kodiak Robotics, which uses only U.S.-produced lidar for military purposes.

Data Concerns

One national security element of lidar that has garnered attention among U.S. policymakers is its potential to generate large swaths of data about urban environments and critical infrastructure. A 2016 Intel study revealed that autonomous vehicles could produce 4,000 gigabytes of data each day, underscoring the tremendous amounts of data they hoover up from surrounding environments. Lidar is used in almost all commercial autonomous vehicles currently tested and sold in the United States. Transmitting data to China could also lead to its access to perfect renderings of critical U.S. infrastructure.

Fears about data generation and gathering are likely exaggerated. Hesai, a major Chinese producer of lidar, has publicly stated that their products are closed systems, do not connect to the internet, and therefore cannot physically transfer data. Hesai has also stated that their lidar is not suitable for military use and is not sold to U.S. military end-users. A recent House Select Committee report on the need to “reset” U.S.-China economic relations has asked the Department of Commerce to investigate whether lidar produced by a foreign adversary poses a national security risk.

Chinese Lidar

In 2020, several Chinese ministries, including the Ministry of Science and Technology (MOST), identified lidar as a “strategic emerging industry.” This designation jumpstarted growth in state investment in the industry and was accompanied by additional support for sectors that use lidar, such as autonomous vehicles and smart city programs. Chinese companies have also been accused of stealing foreign intellectual property, resulting in patent infringement lawsuits from several U.S. companies. China also pursued “leapfrogging,” an effort to ensure that Chinese companies could jump to produce the most advanced technology and avoid having to fight for space in which foreign countries already dominate. A Chinese expert on intelligent vehicles suggested applying this agenda to lidar by focusing on solid-state lidar instead of the typical 360-degree lidar produced by U.S. companies.

Possible Military Connections

Hesai is the largest Chinese lidar company by sales, capturing over 47 percent of global market share and 67 percent of the autonomous vehicle market. Hesai is reportedly tied to the Chinese military through the China Electronics Technology Group Corporation (CETC), a state-owned dual-use electronics manufacturer that produces technology for the People’s Liberation Army (PLA). Hesai has denied these allegations. The House Select Committee letter to the executive branch also accuses Robosense, another major Chinese lidar manufacturer, of ties to the Harbin Institute of Technology, a military university. Huawei, long accused of having ties to the Chinese government, has also recently entered the lidar market. However, linkages between private companies and the Chinese government can be murky, and unsubstantiated conjecture can increase tensions without bolstering U.S. national security.

Economic Security Considerations

Lidar technology was originally developed in the United States, but the growth of Chinese firms has imperiled the long-term viability of the U.S. lidar sector. The United States maintains robust and well-utilized national security instruments to combat nonmarket economic practices that result in injury of U.S. firms. These include Section 301 of the Trade Act of 1974; Section 232 of the Trade Expansion Act of 1962; and antidumping, countervailing, and Section 337 investigations under the Tariff Act of 1930.

The application of these statutes to specific cases is contingent upon a lengthy litigation and investigation process, in which identifying injury by a foreign government can be difficult. While lidar was originally developed and dominated by U.S. firms, the proliferation of lidar in domestic Chinese markets has brought costs down and created a more competitive market overall. There are obvious parallels to the electric vehicle market, in which China’s electric vehicle market has shrunk from 300 companies in 2021 to 50 firms today, far outpacing the number of U.S. peer competitors. The potentially bleak consequences of Chinese electric vehicles on European and U.S. firms are likely to result in enhanced protective measures and have already resulted in a European Commission anti-subsidy investigation. A similar dynamic is playing out in the lidar sector.

The growth of foreign lidar companies, even if driven by good faith competition, could potentially imperil the longevity of U.S. firms. Foreign domination of a U.S. sector potentially creates a “weaponized interdependence” scenario in which a foreign government can exercise chokepoints and cut off supplies. This risk is not theoretical. Lidar was added to a draft Chinese government export control list in December 2022, with an official announcement that certain types of lidar — specifically laser range finders — would be restricted on July 31, 2023, as part of a larger swath of controls on drones and drone equipment.

U.S. Trade and Investment Instruments

The United States maintains what is arguably the world’s most advanced trade and investment tool kit at the nexus of national security. Exercising some of these instruments to a fuller extent could better protect the U.S. lidar sector.

Commerce Department Instruments

The Bureau of Industry and Security’s (BIS) Entity List identifies and lists organizations believed to be acting against the national security or foreign policy interests of the United States. The entities listed face presumptions of denial for export licenses for all items subject to export regulations, restricting access to sensitive U.S. technologies for national security and foreign policy reasons. Huawei, which now produces lidar products, is listed, as are CETC and the Harbin Institute, which are reported to have ties to Hesai and Robosense. No other Chinese lidar firms are included on the Entity List.

Members of Congress have recently accused BIS of underutilizing its full authorities by permitting the outflow of certain technologies to China. Representative Michael McCaul (R-TX), who chairs the House Foreign Affairs Committee, has accused the agency in a major 90-day review report of enabling “a virtually unrestricted flow of American technology to CCP-controlled companies, facilitating China’s rapid rise as a technological, economic, and military superpower.” BIS, on the other hand, maintains that permitting the outflow of technologies to China provides badly needed export revenue for U.S. firms, allowing them to redouble research and development efforts, thus enabling them to retain a competitive edge.

In November 2023, the House Select Committee addressed a letter to Secretaries Raimondo, Yellen, and Austin calling for additional scrutiny over foreign lidar. The letter urged BIS to implement narrow controls on Field Programmable Gate Array chips, which are necessary for lidar and overwhelmingly produced by Xilinx Inc. and Altera Corporation in the United States. Current controls cover some of these chips but not those used in lidar.

Treasury Department Instruments

The Department of the Treasury’s Non-SDN Chinese-Military Industrial Complex (NS-CMIC) List identifies entities that the U.S. government has determined are involved in the development or production of military equipment or materials for the PLA. The list is designed to prevent U.S. persons and entities from investing in or supporting companies that could contribute to advancing PLA military capabilities. The NS-CMIC List undergoes regular updates to reflect changes in China’s military industry. The overarching goal of the NS-CMIC is to impede China’s military-civil fusion strategy and overall modernization of the PLA. The list has also identified Chinese companies involved in the development of other advanced technologies, such as artificial intelligence, advanced semiconductors, and hypersonic weapons. Huawei and CETC are included on this list.

Defense Department Instruments

The Department of Defense’s (DOD) Chinese Military Companies List, also known as the Section 1260H list, is a list of Chinese military companies that are “operating directly or indirectly in the United States.” The DOD began publishing this list in 2021 as required by an amendment to the 2021 National Defense Authorization Act (NDAA). It was intended to replace a previous list published by the DOD that identified communist Chinese military companies as instructed by Section 1237 of the 1999 NDAA. A major difference between the two lists is that 1260H list redefined what constituted military ties to capture companies that were a part of civil-military fusion, reflect the modern Chinese military chain of command, and narrow the scope of companies to identify risks more effectively. Under Executive Orders (EO) 13959 and 13974, then president Trump blocked U.S. persons from owning securities from companies on the Section 1237 list, a decision that was continued through President Biden’s own EO. Huawei and CETC were included in the earliest tranche of the 1260H list published in 2021.

Investment Instruments

In August 2023, the Biden administration issued an EO establishing an outbound investment notification regime covering chips, artificial intelligence, and quantum investments. The EO directs the Department of Treasury to require notification of certain transactions, while prohibiting certain higher-risk transactions. Senators John Cornyn (R-TX) and Bob Casey (D-PA) had included networked lasered scanning systems, a type of lidar, in the amendment to the 2024 NDAA via the Outbound Investment Transparency Act, although lidar was not included in the EO.

The Committee on Foreign Investment in the United States (CFIUS) examines national security risks of foreign investment. A September 2022 EO expanded CFIUS’ ability to protect U.S. technology and more directly tied CFIUS objectives to preserving U.S. technological leadership and enhancing U.S. supply chain resilience in line with overall security objectives. Prior to the EO, CFIUS had approved Chinese acquisitions, reverse mergers, and investments in U.S. lidar companies but will likely face growing pressure to approach those transactions more critically. CFIUS is simultaneously facing calls to maintain openness where possible, particularly since it has reviewed a record number of filings, despite slowing foreign direct investment.

Tariff Remedies

Section 301 of the 1974 Trade Act grants the Office of the U.S. Trade Representative (USTR) the power to conduct investigations and measures to uphold U.S. rights under trade agreements, as well as to address specific foreign trade practices, including intellectual property violations, discriminatory taxation, unfair subsidies, currency manipulation, and illegal sourcing. Under presidential guidance, Section 301 authorizes the USTR to investigate and effectively counteract unfair trade practices.

On August 14, 2017, then president Trump called on the USTR to investigate China’s technology transfer, intellectual property, and innovation practices under Section 301. This investigation identified four Chinese practices related to technology as unreasonable or discriminatory, specifically their technology transfer requirements, licensing restrictions, outbound investment regime, and theft of intellectual property. In March 2018, the USTR announced tariffs of 10 or 25 percent on a variety of Chinese products. One of the covered products was lidar, under HTS code 9015.80.20, which was then subject to a 25 percent tariff.

Policy Recommendations

Even if certain hard security aspects of lidar remain murky, it is critical that the U.S. government bolster efforts to support the domestic lidar industry and pursue preventive measures where possible. Policymakers should consider the following measures to support the U.S. lidar sector:

1. Ensure that the United States maintains a domestic supply of lidar. Ensuring domestic supplies reduces the likelihood of a foreign actor weaponizing dependance on lidar. It also “de-risks” lidar use in military applications by ensuring that the provider is not an entity with foreign military ties.

2. Initiate additional investigations into foreign lidar to determine data leakage risks. Questions abound about the hard security risks of lidar, spanning data flows and 3D mapping of critical infrastructure. The Department of Commerce, in partnership with the End-User Review Committee, should conduct a review that would provide resources to more definitively identify data flow risks.

3. Use export restrictions lightly. Unlike other critical technologies, it is difficult to claim that the United States maintains chokepoints over lidar since some Chinese products are superior in both quality and price. U.S. export controls could thus have a limited effect on certain Chinese lidar capabilities, while narrowing the market for U.S. companies.

4. Invest in talent strategies and technology capabilities. It is critical that the U.S. government pursue “promote” policies in addition to “protect” policies. Relaxing immigration requirements to encourage more advanced STEM professionals to work in the United States should be a key priority, particularly as workforce woes become increasingly acute. Moreover, future talent gaps could ultimately decide the winners of the tech race.

5. Consider the application of emerging instruments to the lidar sector. The U.S. Congress demonstrated some enthusiasm for covering lidar under an outbound investment regime. Upon concluding an investigation, if it is determined that lidar does pose a national security threat, the United States should consider expanding the scope of an outbound investment regime to include lidar technologies.

Conclusion

Advanced technologies are driving a new era of economic security in which national security and domestic economic interests are increasingly intertwined. The U.S. government should explore the full toolkit at its disposal to evaluate the possible risks of an overdependence on foreign lidar. Lidar will enable significant leaps forward in both civilian and military applications, underscoring the necessity of maintaining a U.S. supply that cannot be weaponized by a foreign actor, but protective trade measures are only part of the equation. Efforts to “run faster” will better enable the United States to map the geostrategic future.

Catharine Mouradian is a program manager and research associate with the Project on Trade and Technology at the Center for Strategic and International Studies (CSIS). Her work has focused on the European Union and technology ecosystem in the transatlantic context, including the geopolitics of semiconductor supply chains.

Emily Benson is director of Project on Trade and Technology, and senior fellow of Scholl Chair in International Business at CSIS, where she focuses on trade, investment, and technology issues primarily in the transatlantic context.

Gloria Sicilia is an intern with the Project on Trade and Technology at CSIS.