Will the Biden Administration Deliver on Federal Regulation for Autonomous Vehicles?

Morgan Lewis
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Morgan LewisAs the dust settles on the 2020 presidential election, autonomous and self-driving vehicles could receive a long-awaited federal regulatory framework under President-elect Joe Biden and Vice President–elect Kamala Harris’s administration. In 2017, the US House of Representatives passed the SELF DRIVE Act, the federal government’s first attempt at regulating the development and performance of autonomous and self-driving vehicles and attendant safety concerns, with sweeping bipartisan support. Yet, it never received any traction in the US Senate. Can President-elect Biden’s history with Senator Mitch McConnell help lay the groundwork for a common and national strategy in the rapidly evolving autonomous and self-driving vehicle space?

The US automotive sector is at a fork in the road with respect to autonomous and self-driving vehicles (together, autonomous vehicles). As the industry accelerates toward the reality of autonomous vehicles on US roadways, original equipment manufacturers (OEMs), vehicle developers, and other industry stakeholders could benefit from a national strategy that will focus on innovation and passenger safety while ensuring that the United States remains a global leader for emerging technologies. Many of the leading automakers, as well as new entrants, have made considerable investments and advancements in autonomous vehicle technology. Similarly, automotive parts suppliers and technology companies have made significant investments in the development and enhancement of autonomous vehicle technology.

As discussed herein, the Biden administration will have the opportunity to set the course for current and future American innovation in the autonomous vehicle sector by delivering a federal framework that will modernize outdated vehicle regulations dating back to the 1970s, pave the way for an automotive revolution, and address the challenges presented by individual state-driven law and regulations.

AUTONOMOUS VEHICLE GUIDANCE IN THE OBAMA ADMINISTRATION

Under the Obama administration, the National Highway Traffic Safety Administration (NHTSA), which has broad enforcement authority to regulate existing and new automotive technologies and equipment, issued a policy on autonomous vehicles in September 2016 (the AV Policy). This voluntary policy, which aimed to integrate autonomous vehicles onto US roadways, formally adopted the definitions for levels of automation established by the Society of Automotive Engineers (SAE). The six levels of driver assistance technology are as follows:

  • Level 0 – No Automation. Zero autonomy; the driver performs all driving tasks.
  • Level 1 – Driver Assistance. The vehicle is controlled by the driver, but some driving assist features may be included in the vehicle design.
  • Level 2 – Partial Automation. The vehicle has combined automated functions, like acceleration and steering, but the driver must remain engaged with the driving task and monitor the environment at all times.
  • Level 3 – Conditional Automation. The driver is a necessity, but is not required to monitor the environment. The driver must be ready to take control of the vehicle at all times with notice.
  • Level 4 – High Automation. The vehicle is capable of performing all driving functions under certain conditions. The driver may have the option to control the vehicle.
  • Level 5 – Full Automation. The vehicle is capable of performing all driving functions under all conditions. The driver may have the option to control the vehicle.

In Levels 0 through 2, the human driver monitors the driving environment, including any automated driver aids. By contrast, in Levels 3 through 5, the autonomous driving system, not the human driver, monitors the driving environment.

In addition to providing guidance relating to the performance, testing, and deployment of autonomous vehicles, the AV Policy offered a model state-level policy for state governments to follow. Notably, the AV Policy explicitly addressed the role of state governments with respect to regulation of autonomous vehicles:

DOT strongly encourages States to allow DOT alone to regulate the performance of HAV [highly automated vehicle] technology and vehicles. If a State does pursue HAV performance-related regulations, that State should consult with NHTSA and base its efforts on the Vehicle Performance Guidance provided in this Policy.

While the AV Policy was viewed as a solid first step to establishing federal regulation of autonomous vehicles, many states expressed the need for more robust and comprehensive guidance.

AUTONOMOUS VEHICLE GUIDANCE IN THE TRUMP ADMINISTRATION

In late 2017, the NHTSA issued an updated AV policy on autonomous vehicle technologies known as AV Policy 2.0. This was the first policy issued under the Trump administration and was widely regarded as a continuation of the existing guidance. In October 2018, the NHTSA supplemented AV Policy 2.0 with a new policy, AV Policy 3.0, which built on the previous voluntary guidance. While AV Policy 3.0 expanded the scope of autonomous vehicles to include all surface on-road transportation systems, many in the public and private sector criticized the new policy as yet another preservation of the “voluntary” status quo.

The Trump administration’s approach has allowed this budding technology to develop free of federal regulation and paved the way for states to regulate autonomous vehicles for safety at the state level. As a result, 32 states have current legislation related to autonomous vehicle operation or testing, including Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Nebraska, New Hampshire, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wisconsin, as well as Washington, DC. While states have often turned to autonomous vehicle manufacturers, parts suppliers, and technology companies, among other stakeholders, for assistance with drafting their laws, the resulting laws, as might be anticipated, create something of a “patchwork” for compliance and implementation purposes.[1]

While the public-private collaborations have, for the most part, been effective in enabling the development and advancement of autonomous vehicle technology, certain state regulators and industry members have criticized the Trump administration’s approach, claiming the rapid developments in autonomous vehicle technology must be driven at the national level.

In January 2020, US Department of Transportation (USDOT) Secretary Elaine L. Chao introduced Ensuring American Leadership in Automated Vehicle Technologies: Automated Vehicles 4.0 (AV Policy 4.0), the latest and most comprehensive guidance on developing autonomous vehicle technology. AV Policy 4.0 was a joint effort between the USDOT and the White House chief technology officer. This was the first time that senior-level White House officials became involved in developing regulatory guidance for autonomous vehicles in order to coordinate efforts governing self-driving vehicles and artificial intelligence across 38 federal agencies and commissions. This development suggests that autonomous vehicle technology may finally be at a point in which the establishment of a federal regulatory framework is within reach.

AV Policy 4.0’s voluntary guidelines expanded on three previous versions of the framework and placed a stronger emphasis on passenger safety, modernization, and remaining technology neutral. AV Policy 4.0 also updated the guidance on privacy, cybersecurity, patents, and accessibility of vehicles. Secretary Chao explained, “Such innovation requires appropriate government oversight to ensure safety, open markets, strategic allocation of public resources, and protection of the public interest. It should not be the role of the federal government to pick winners and losers.”

In order to incentivize autonomous vehicle research and development, AV Policy 4.0 provides that autonomous vehicle companies are eligible for a federal income tax credit of up to 20% of the eligible spending for research and developmental activities. Moreover, AV Policy 4.0 explains that the US Department of the Treasury and Internal Revenue Service (IRS) allow for the immediate expense of the following:

  • Research and developmental activities that are experimental in nature with the purpose of eliminating uncertainty when developing or improving a product.
  • The costs of qualified business property purchased after September 27, 2017 and before January 1, 2023.
  • The cost of purchasing new or used manufacturing equipment, the AVs they operate or lease, and computer hardware and software.
  • Startup and organizational costs of up to $5,000 (for each category) in the year the business begins operations. The $5,000 deduction is reduced by the amount of the startup or organizational costs that exceed $50,000; the remainder of the costs may be deducted over a 180-month period.

Since autonomous vehicle manufacturers, particularly new market entrants, may have more operating expenses than revenues in their early years of business, the tax code allows the carryover of net operating losses to offset 80% of taxable income generated in future years.

THE SELF DRIVE ACT

As the Trump administration adopted a voluntary approach through USDOT and the NHTSA, members of the US House of Representatives pressed forward with federal safety legislation for autonomous vehicles. In September 2017, the US House of Representatives passed the Safely Ensuring Lives Future Deployment and Research in Vehicle Evolution Act (SELF DRIVE Act) with sweeping bipartisan support. The SELF DRIVE Act, which aimed to create clear rules of the road for the safe testing and deployment of self-driving cars in the United States, specifically sought to do the following:

  • Improve the NHTSA’s access to safety data for future updates and development of safety standards and provide greater transparency for disclosures for the public.
  • Require the submission of safety assessment certifications by manufacturers of self-driving cars.
  • Strengthen the NHTSA’s ability to update 1970s era regulation.
  • Maintain the NHTSA’s broad recall authority to remove self-driving cars that it deems unsafe from our roadways.
  • Clarify the state and federal roles with respect to self-driving cars.
    • States will continue to control vehicle registration, licensing, driving education and training, insurance, law enforcement, crash investigations, safety and emissions inspections, congestion management, and traffic laws.
    • The NHTSA will continue to be the agency responsible for regulating the safety of the design, construction, and performance of self-driving cars to avoid requirements that would prohibit or limit interstate commerce and travel.

The SELF DRIVE Act was approved unanimously 54–0 out of the Energy and Commerce Committee and passed the US House of Representatives by voice vote. However, the SELF DRIVE Act was not acted upon by the US Senate.

THE ROAD AHEAD

As autonomous vehicles and related technology continue to gain momentum in terms of development and implementation, OEMs and vehicle developers alike will be looking to the incoming Biden administration for a federal roadmap to navigate this regulatory landscape that is largely driven by differing state standards.

President-elect Biden is expected to take a proactive approach to autonomous vehicle regulation in line with the spirit of the original AV Policy, which the NHTSA released during his tenure as vice president to the Obama administration. In addition to his promise to create 1 million new jobs in the American automotive industry, President-elect Biden has pledged to fund a yearly $1 billion grant program to help cities adapt and transition to autonomous vehicle technology, in line with his vow to “position American auto workers and manufacturers to win the 21st century.”

Given the state of the economy and the overwhelming impact of the coronavirus (COVID-19) pandemic, autonomous vehicle regulation is not likely to be at the top of President-elect Biden’s agenda as he looks toward inauguration on January 20, 2021. However, the president-elect will likely have a need to address the topic early in his administration as House lawmakers have stated their intention to renew efforts to pass an autonomous vehicle bill come January.

 

[1] For more information on US state regulation of autonomous vehicles, please refer to Morgan Lewis’spresentation, Autonomous Vehicles Regulation and State Developments, Sept. 23, 2020.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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