Why Volvo Can Keep Selling Cars in the U.S. and Polestar Can't

What the Connected Vehicle Rule covers

The rule was published by Commerce's Bureau of Industry and Security in January 2025 and took effect that March. Under it, a connected vehicle is a car, SUV, pickup truck or motorcycle with built-in hardware and software that let it communicate wirelessly with outside networks, through cellular, satellite, Wi-Fi or Bluetooth connections. In practice, that includes nearly every new passenger vehicle. Vehicles over 10,000 pounds, which covers most trucks and buses, are excluded for now, and BIS has said it intends to address commercial vehicles in a separate rule.

The rule focuses on two systems: the connectivity hardware and software that send and receive signals, and automated driving software. Software restrictions apply starting with model year 2027, and hardware restrictions with model year 2030.

News coverage often describes the rule as targeting technology with a "sufficient nexus" to China or Russia. That phrase comes from the Commerce Department's announcement. The regulation's own test asks whether a company or component is owned by, controlled by, or subject to the jurisdiction or direction of China or Russia. It sets no fixed ownership percentage; control can come through a majority or "dominant minority" stake, board seats, special shares, or contracts. One provision is especially important here: a carmaker that is itself owned or controlled by China may not sell connected vehicles in the U.S. at all, regardless of where its components come from.

How companies ask for permission

A company that would otherwise be prohibited can apply to BIS for a specific authorization. The application must describe the parties and their ownership, the hardware or software involved, and the controls the applicant will use to limit Chinese or Russian government access. BIS reviews each case individually, generally decides within 90 days, and allows denials to be appealed within 45 days. Decisions are not made public.

Documentation is a large part of compliance. Automakers must be able to identify the author, timestamp, component and supplier behind proprietary additions to covered software. As The Wall Street Journal has reported, confirming that a part didn't come from China is a different task from ensuring none of a car's data ends up there, and in some cases suppliers are being asked to reveal where their source code comes from. In June 2026, BIS added a Trusted Supplier program that lets suppliers seek approval directly, so automakers using their products don't need individual permission for each part.

Why Volvo and Polestar received different outcomes

Polestar was spun out of Volvo in 2017, and Volvo still holds a 20 percent stake. The Polestar 3 is built at Volvo's South Carolina plant on the same platform as the Volvo EX90, the Polestar 4 is built in South Korea, and Polestar no longer sells a Chinese-made vehicle in the U.S. Its China-built Polestar 2 had already been discontinued in the U.S. because of the 100 percent tariff on Chinese EVs.

Commerce declined to comment on the different outcomes. Polestar's U.S. head of government affairs, Peter Wexler, has said the company is still working to understand the basis for the denial.

Several explanations have been offered. Volvo CEO Håkan Samuelsson said U.S. authorities are focused on how connected cars handle data and that Volvo has demonstrated how it will secure it. Electrek pointed to Volvo's separate stock listing and larger U.S. footprint, and to Polestar's closer ties to Geely's platforms and software. Sweden's Minister for Foreign Trade, Benjamin Dousa, said his government worked closely with Volvo on the requirements.

Polestar did not ask Commerce to reconsider or take the matter to court, and is focusing on Europe. It has 32 U.S. dealers, most of whom also sell Volvo, and has recorded about $130 Million in negative adjustments related to the decision.

What happened with the Lincoln Nautilus

Ford's Lincoln Nautilus is built in China. Ford develops its software in the U.S. but installs it in the vehicle in China, which brought it within the rule, and in June Ford confirmed it had requested authorization. In August, a Ford spokesperson said that after discussions with Commerce, the Nautilus no longer needed an authorization. Ford also announced plans to move production of some Lincoln models to the U.S. starting in 2030, with CEO Jim Farley citing both the rule and the 52.5 percent tariff on the Nautilus, and tariffs as the main factor.

What Congress is considering

The Connected Vehicle Security Act, sponsored by Sen. Bernie Moreno (R-Ohio) and Sen. Elissa Slotkin (D-Mich.), would write the restrictions into law and extend them to Iran and North Korea. Unlike the rule, it would bar automakers with more than 15 percent Chinese ownership, a threshold that would include Mercedes-Benz, where BAIC Motor and Geely founder Li Shufu each hold nearly 10 percent. The bill stalled in the Senate on September 30 and is expected to return after the November elections. It would also phase out BIS's general authorizations, including the Trusted Supplier program, by 2032.

Parent company ownership is now a supply chain variable.

Where a vehicle or component is assembled is no longer the whole picture; who owns or controls the companies behind its connectivity hardware and software can determine whether it can be sold. Software provenance belongs alongside hardware provenance, because the rule asks who wrote code, where it was installed, and who maintains it, which is information many suppliers have not traditionally shared.

Timelines matter as well: software restrictions are already in effect for model year 2027, and hardware restrictions arrive with model year 2030, when physical components rather than code will need to change. Finally, because authorization decisions are not published, leaders should plan for outcomes they may not be able to predict from the outside and watch the pending legislation, which would replace case-by-case review with a fixed ownership threshold.