BYD subsidiaries sue U.S. Defense Department over new lobbying restriction

Two California-based subsidiaries of China’s BYD Group have taken legal action against the U.S. Defense Department, asserting that a recently enacted prohibition on contracting with entities that employ lobbyists for “Chinese military companies” infringes on their First Amendment rights. The complaint, filed in Los Angeles federal court, contends that the law, which took effect on June 30, bars the Pentagon from doing business with contractors whose lobbying firms also represent companies the department has labeled as Chinese military companies (CMCs).

In June, the Defense Department designated BYD Group as a CMC, citing its affiliation with China’s Ministry of Industry and Information Technology and its inclusion in a green-vehicle tax-incentive registry. BYD, which runs an electric-bus factory in Lancaster employing more than 1,000 Americans and sells batteries and solar products across North America, maintains it is not a military entity. The company says the rule prevents it from lobbying on matters such as proposed bans on Chinese-owned automakers, restrictions on federal transit purchases of its buses, and supply-chain regulations. Represented by O’Melveny & Myers LLP, BYD seeks a court ruling that the statute is unconstitutional both on its face and as applied.