Key Legal Insights from 贵辞濒别测鈥檚 Automotive Team

Analysis by Julie Dautermann, Competitive Intelligence Analyst

麻豆直播 is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your 麻豆直播 relationship partner, or our Automotive Team to discuss and learn more. 

AUTOMOTIVE KEY DEVELOPMENTS

• Mobility Global, a spin-off of S&P Global Mobility, U.S. new light-vehicle sales will reach 15.8 million units in 2026 and 15.6 million units in 2027, with 鈥渁ffordability remaining a key determinant of consumer purchase timing and powertrain choice.鈥�
• GM up to $4.5 billion worth of critical parts through a deal with inventory management firm Procura Auto Parts. GM will pay Procura interest and certain fees in advance to buy components from suppliers, with payment for the parts due when they are needed, or no later than July 31, 2029. The automaker did not disclose which parts it will target.
• New light-vehicle inventory at the start of August was at 2.73 million units, representing a 75 days鈥� supply industrywide. This is similar to inventory levels at the same time last year.
• Automotive assembly jobs increased in the last year, amid an overall decline in auto parts manufacturing jobs, according to an analysis of the latest Bureau of Labor Statistics jobs report in .
• International Energy Agency shows global EV sales rose 35% in Q2 2026 from the prior quarter, supported by stronger demand in markets including Australia, Brazil, India, Korea, and Vietnam. With gasoline prices remaining elevated, the IEA expects EVs to account for 29% of global new-car sales in 2026, up from 25% last year. The report also highlights China鈥檚 accelerating role in global EV supply, with Chinese EV exports up 120% in the first half of 2026 compared to the same period last year.

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TRADE/TARIFFS

• 麻豆直播 & Lardner LLP partner Gregory Husisian shared insights with听听and the听听on the recent surge in tariff refund litigation, ongoing uncertainty surrounding timelines, and how companies are navigating the financial impact of tariff repayments.
• President Trump paused to impose 50% tariffs on certain Canadian imports ahead of the August 19 deadline, citing progress toward a trade deal that could on Canadian automobiles, steel, and aluminum.
• During recent U.S.-Mexico-Canada Agreement (USMCA) negotiations, the Mexican government proposed applying tariffs only to the value of vehicle components produced outside North America, according to unnamed sources in . This is reported to be a counterproposal to the Trump administration鈥檚 goal to require in vehicles.
• The U.S. Court of International Trade a Michigan-based automotive parts distributor, upholding the Trump administration鈥檚 elimination of the 鈥渄e minimis鈥� tariff exemption for low-value imports. The decision found that the International Emergency Economic Powers Act (IEEPA) authorized President Trump to revoke the duty-free exemption, even though the Supreme Court has ruled the act does not authorize the president to impose tariffs.
• U.S. Customs and Border Protection will implement enhanced enforcement procedures to verify the accuracy of importer of record information submitted on CBP Form 5106. According to 颁叠笔鈥檚 , importers of record and customs brokers must ensure that Form 5106 information is complete and accurate by September 18, 2026, or risk potential penalties and disruption of importing activity.
• The Trump administration is developing an AI-enabled 鈥淒etective Border鈥� tool to improve 颁叠笔鈥檚 ability to distinguish legitimate nearshoring and foreign investment from illegal pass-through trade, according to a focused on tariff evasion via transshipment. The administration has identified more than 40 trading partners 鈥� including Mexico, Canada, the European Union, India, Japan, and South Korea 鈥� 听as having elevated illegal transshipment risk.
• The Trump administration granted the Commerce Department听听to ban exports of recoverable critical minerals under the Defense Production Act. The Commerce Department subsequently that would require 100% of U.S. sales of black mass and scrap tungsten to be allocated to U.S. persons as of August 27, 2026, 鈥渦nless an adjustment or exception is obtained in advance.鈥� The agency defines 鈥渂lack mass鈥� as shredded lithium-ion battery scrap that contains cathode material (such as lithium, cobalt, nickel and manganese), anode material (graphite and silicon), or other residual battery cell materials.

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OEMs/SUPPLIERS  

• Ford to move production of certain Lincoln models from China to the U.S. beginning in 2030.
• Stellantis that the next-generation Jeep Cherokee SUV will be built on the automaker鈥檚 new STLA One platform at its Belvidere, Illinois, assembly plant.
• Honda has outsourced development of a new, multi-powertrain vehicle platform for undisclosed markets to India-headquartered Tata Technologies Ltd.
• Geely’s External Collaboration Research Institute offers turnkey vehicle development, technology licensing, and engineering services to customers that include major . Launched in 2021, it currently has in progress with a听dozen clients.
• Nexteer Automotive a new High Mount Direct Drive Steer-by-Wire Hand-Wheel Actuator (HMDD) intended to give automakers greater cockpit design freedom for software-defined vehicles.
• Daimler Truck North America plans to establish a new U.S. manufacturing facility that will begin production in 2029. DTNA is evaluating multiple sites, and it expects construction to start later this year.
• GM 听350 employees at two Lansing plants听as a part of a previously announced $1.25 billion investment for Cadillac sedan production.

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AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• The relatively short support cycles of smartphones and computers have raised questions about how software-dependent vehicles will age, according to a report by . Sam Fiorani, senior vice president of vehicle forecasting for AutoForecastSolutions, stated, 鈥淲e honestly don鈥檛 know how long these vehicles will last. We鈥檙e already seeing problems with hardware not being able to deal with new software.鈥�
• provided an update on the projected market growth of over-the-air (OTA) updates.
• provided an overview of automakers鈥� strategies to deploy artificial intelligence assistants in vehicles. Most recently, Ford announced it is its in-vehicle AI-powered assistant to eight million more eligible vehicles, following an initial launch that started earlier this year.
• Tokyo-headquartered autonomous-driving software developer Turing to establish a U.S. office within the next year that will initially focus on research and development.

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MARKET TRENDS AND REGULATORY

• Automakers have over 20 million vehicles due to faulty backup cameras since the U.S. mandated the safety system eight years ago. JD Power indicates that the camera systems have been among the top 10 most-problematic vehicle features every year since 2022. Most recently, Stellantis announced it nearly a million vehicles 鈥� mostly Chrysler, Dodge and Jeep models in the U.S. 鈥� due to potentially faulty rearview cameras.
• A federal judge warned that allowing the U.S. Environmental Protection Agency to submit California emissions waivers for congressional review more than a decade after they were granted could have far-reaching consequences for oversight of agency rulemaking, reported.
• The California Energy Commission new rules that will phase out the sale of replacement tires that do not meet certain energy efficiency standards beginning in 2029.
• Mexican production of heavy-duty commercial vehicles by more than 50% year-over-year in July, with truck and bus exports rising 67% YOY.

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HYBRID AND ELECTRIC VEHICLES

• Tesla exhausted its share of California’s MyFirstEV rebate program within five days. The offers $3,500 rebates to first-time buyers of new EVs, and it is funded equally by the state and automakers.
• LG Energy Solution provided an on plans to produce batteries for energy storage systems and EVs at a Lansing, Michigan factory that was once intended to be a joint venture with GM.
• Samsung SDI 骋惭鈥檚 49.99% stake in听a planned $3.5 billion EV battery joint venture plant in Indiana. 骋惭鈥檚 decision to sell its stake in the SynergyCells battery plant听follows similar actions by Ford and Stellantis to dissolve battery JVs in North America in response to market conditions.
• Ford its upcoming electric pickup, Fathom, will have a starting price of less than $30,000 and it will be available for preorders in early 2027. This will represent the first vehicle to be built using 贵辞谤诲鈥檚 鈥淯niversal Electric Vehicle鈥� platform.
• Specialty EV upfitter Grounded it closed a $5 million seed round听and opened a new 50,000-square-foot manufacturing facility in Detroit.
• Boston-headquartered Cabot Corp. to establish a $50 million battery materials plant in Wayne County, Michigan.听
• Customer satisfaction with DC fast chargers rose 12 points to 666 (on a 1,000-point scale), while satisfaction with public Level 2 chargers declined 12 points to 595 from the same period a year ago, according to the . The study also notes that 鈥渟atisfaction is highest among DC fast chargers located at hotels (692), gas stations/convenience stores (689) and restaurants (688), while chargers located at dealerships (570) and stand-alone parking lots/garages (606) are among the least satisfying experiences for owners.鈥�

In RGN-USF, LLC v. Megatron Workspaces of Michigan, LLC, No. 2:25-cv-10967 (E.D. Mich. May 29, 2026), a federal court鈥檚 ruling on a motion to dismiss largely sided with the Regus brand franchisor in a dispute over terminated co-working space franchises in Southeast Michigan.

What happened. RGN-USF (the U.S. sublicensor of the Regus brand) entered a multi-unit development agreement and four separate franchise agreements with entities controlled by a individual named John Schmidt to open and operate Regus co-working offices in the Detroit area. When the franchisees allegedly failed to meet various obligations 鈥� including obtaining operating certificates, remitting fees, and engaging in competitive conduct 鈥� RGN sent default notices in October 2024 and terminated the agreements in November 2024. The defendants continued using the Regus brand. RGN then sued for breach of contract, trademark infringement, specific performance, and unjust enrichment.

Motion to Dismiss. The former franchisee defendants moved to dismiss on five grounds. The Court rejected four of them and granted only one:

• Mediation condition precedent: The Court found that the development agreement鈥檚 mediation requirement was a precondition to arbitration, to not filing suit in federal court. Because neither party was seeking arbitration, there was no obligation to mediate.
• Notice: The Court held the complaint gave each defendant fair notice of the claims against it, despite incorporating prior allegations into each count.
• Improper termination: This was the heart of the dispute 鈥� and where Michigan franchise law plays a central role. Under Mich. Comp. Laws 搂 445.1527(c), a franchisor cannot terminate a franchise before its term expires without 鈥済ood cause.鈥� The statute defines good cause to include a franchisee鈥檚 failure to comply with any lawful provision of the franchise agreement, provided the franchisor gives written notice and a 鈥渞easonable opportunity鈥� to cure 鈥� which 鈥渋n no event need be more than 30 days.鈥� In other words, the statute sets a ceiling, not a floor: franchisors must give at least some reasonable cure period, but 30 days is always enough.

The Court found that each franchise agreement provided independent grounds for termination 鈥� some allowing immediate termination (such as competitive conduct or dishonest behavior), others requiring only 7 days鈥� cure period (payment defaults) or 60 days (failure to obtain an operating certificate). RGN provided at least 30 days to cure in every instance, which satisfied 搂 445.1527(c). The defendants鈥� argument that they deserved 60 days to cure failed because it conflated all four franchisees into one and ignored the multiple, severable termination grounds 鈥� each of which independently justified termination on a shorter timeline.

• Trademark infringement: Because the Court found that termination was adequately pled, the defendants鈥� defense that they were still franchisees collapsed.
• Unjust enrichment (dismissed): The Court dismissed this claim because both sides acknowledged the existence of the underlying contracts, which forecloses equitable relief under Michigan law.

Bottom line. This case reinforces that franchisors who carefully document multiple, independent grounds for termination and provide notice exceeding statutory minimums put themselves in a strong position to prosecute enforcement actions 鈥� even at the earliest stages of litigation.

Key Legal Insights from 贵辞濒别测鈥檚 Automotive Team

Analysis by Julie Dautermann, Competitive Intelligence Analyst

麻豆直播 is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your 麻豆直播 relationship partner, or our Automotive Team to discuss and learn more. 

AUTOMOTIVE KEY DEVELOPMENTS

• Mobility Global, formerly S&P Global Mobility, 2026 U.S. auto sales will reach 15.82 million units, representing a decline of approximately 3% year-over-year from 2025. The analysis also predicts new light-vehicle sales in July 鈥�will maintain pace with the previous three months,鈥漬oting that 鈥渢he market is settling rather than growing.鈥�
• provided preliminary estimates for July 2026 new light-vehicle sales.
• Ford followed in 2026 full-year guidance, amid expectations for continued sales of higher-priced pickups and SUVs. 贵辞谤诲鈥檚 fell nearly 10% YOY amid recovery from a supplier fire, while EV-related charges drove a $1.3 billion net loss.
• Toyota its annual earnings guidance after reporting a 76% YOY increase in net profit for the three months ended June 30, 2026.

• Stellantis second-quarter 2026 earnings that missed analyst projections, despite posting a profit in North America for the second consecutive quarter. The automaker maintained its 2026 financial guidance.
• Nissan a quarterly net profit of 楼3.8 billion (US$24M) for the three months ended June 30, 2026. The automaker maintained its annual earnings guidance for the fiscal year ending March 2027.
• Chinese brands accounted for 17% of new vehicle sales in Mexico during the first half of 2026, up from 14% a year earlier, according to data from the Mexican Association of Automobile Distributors cited by . Sales rose to 137,525 in H1 2026 compared to 107,712 during the same period last year.

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TRADE/TARIFFS

• 麻豆直播 & Lardner partner Gregory Husisian garnered media coverage across multiple sources for his analysis of the Trump administration鈥檚 announcement of a 50% tariff on Canadian imports.
• The U.S. Department of Commerce will request public comments regarding a proposal to include an additional 14 types of derivative products in its Section 232 tariffs on steel, aluminum and copper, according to a that is scheduled to post on August 6, 2026.
• According to a from the听U.S. Department of Commerce, eligible domestic manufacturers of engines for automobiles and medium- and heavy-duty vehicles (MHDVs) can apply to receive tariff offsets for sectoral duties on imported parts starting July 29, 2026. This follows that established offsets for domestic automobile and MHDV manufacturers for certain imported parts.
• Truck bed covers produced by certain Chinese manufacturers may be subject to triple-digit tariffs due to a in the Commerce Department鈥檚 countervailing duty (CVD) investigation. The Commerce Department expects to make its final CVD determination 鈥渙n or around October 13, 2026.鈥� The agency is also conducting antidumping duty investigations of truck bed covers from China.
• In a July 28 to its 鈥渃overed list,鈥� the Federal Communications Commission banned imports of 鈥渁dvanced robotic devices鈥� – defined as mobile robots, such as humanoids and quadrupeds – as well as connected power inverters, citing concerns for national security.

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OEMs/SUPPLIERS  

• Chinese tooling and casting manufacturer听Huatai Mould $30 million to establish a new plant in Aguascalientes, Mexico. This will be the company鈥檚 first manufacturing facility in the Americas.
• During a recent employee town hall, Ford CEO Jim Farley that Chinese automakers could enter the U.S. market within five to ten years, despite tariffs and trade barriers currently blocking them.
• BMW to eliminate up to 8,000 white-collar jobs in Germany by the end of 2027 through a voluntary severance program, due in part to sales losses to Chinese competitors. This follows 痴辞濒办蝉飞补驳别苍鈥檚 that it may cut up to 100,000 jobs across its brands by 2030.
• reported on the opportunities and challenges Ford and GM face as they pursue expansion in defense and grid-scale battery storage markets.

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AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• Certain AI-powered systems are to accelerate aging in automotive sensors and other electronic components, leading to vehicle security and operational risks. Unlike traditional automotive electronics which operate intermittently, AI is 鈥渁lways on,鈥� contributing to the 鈥済radual decline of hardware within automotive systems.鈥� 听
• Zoox from the National Highway Traffic Safety Administration to deploy up to 2,500 commercial robotaxis annually over the next two years. Amazon-owned Zoox has been offering free rides in parts of Las Vegas and San Francisco in a purpose-built autonomous vehicle that does not have pedals or a steering wheel.
• Paccar鈥檚 CEO said the parent company of Kenworth and Peterbilt to remove human drivers from the autonomous trucks it is developing with partners.

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MARKET TRENDS AND REGULATORY

• Concerns are rising over diesel supplies and prices amid instability in the Middle East and the approach of the high-demand autumn season, according to a report in . The nationwide was $5.36 as of August 3, compared with $3.73 one year ago.
• AI-powered recommendation algorithms are expected to in how consumers choose their next vehicle.

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HYBRID AND ELECTRIC VEHICLES

• According to from the California New Car Dealers Association, hybrid EVs reached a record 22.1% market share in the state, with 191,000 registrations in the first half of 2026. Battery EVs achieved a 15.9% market share, with slightly over 137,000 units sold in H1 2026. Total new vehicle sales in California declined 7.7% YOY, with 864,848 new light vehicles registered in the first six months of 2026 compared with 936,543 during the same period in 2025.
• provided an update on the recent actions of big-box retailers in building out EV charging infrastructure across the U.S.
• Rivian its full-year 2026 sales guidance to between 65,000 and 70,000 EVs.

Key Legal Insights from 贵辞濒别测鈥檚 Automotive Team

Analysis by Julie Dautermann, Competitive Intelligence Analyst

麻豆直播 is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your 麻豆直播 relationship partner, or our Automotive Team to discuss and learn more. 

AUTOMOTIVE KEY DEVELOPMENTS

• The most recent article in 麻豆直播 & Lardner鈥檚 2026 AI in Manufacturing & Supply Chain Series is AI Bills of Materials (AI-BOMs) and Model Provenance: Contracting for Cybersecurity in AI-Enabled Manufacturing Supply Chains. Subscribe to get updates about new articles in this series.
• U.S. new light-vehicle sales in July 2026 are projected to reach a SAAR of 16.9 million units, representing an increase of 1.4% year-over-year, according to a from JD Power and GlobalData.
• released its 2026 list of the top 100 global parts suppliers.
• The U.S. Senate Commerce Committee to send the Connected Vehicle Security Act of 2026 () to the full Senate for consideration. Expanding on Commerce Department that restrict the sales of connected vehicles with software or hardware linked to China, the Senate proposal would prohibit the U.S. sale of connected vehicles by companies that are more than 15% owned by Chinese entities, such as . A remains under consideration in the House.

• On July 24, 2026, the National Highway Traffic Safety Administration (NHTSA) issued a granting a petition to begin the rulemaking process for potential new car door safety requirements. If finalized, the requirements would mandate a 鈥渞obust and obvious door egress system in all motor vehicles.鈥�
• Stellantis a supplier reward program that shares certain cost savings.

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TRADE/TARIFFS

• 麻豆直播 & Lardner provided updates for multinationals regarding the escalation of customs and tariff enforcement by the Department of Justice and the ramifications of President Trump鈥檚 Executive Order strengthening Customs enforcement.
• 麻豆直播 & Lardner provided overviews of compliance best practices for tariff mitigation, and dubious tariff-saving 鈥渙pportunities鈥� for importers to avoid.
• 麻豆直播 & Lardner assessed the key implications of the U.S. Customs and Border Protection鈥檚 .
• On July 23, 2026, the Trump administration implemented tariffs of 10% to 12.5% under Section 301 of the Trade Act of 1974 on 鈥� including Canada, China, the European Union, and Mexico 鈥� for their 鈥渇ailure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor.鈥� This follows the on July 24, 2026 of temporary global 10% tariffs imposed by President Trump under Section 122 of the Trade Act of 1974 after the U.S. Supreme Court invalidated IEEPA-based tariffs. Two small businesses filed a lawsuit with the Court of International Trade to challenge the legality of the forced labor tariffs.
• President Trump utilized Section 338 of the 1930 Tariff Act to impose 50% tariffs on certain Canadian imports effective August 19, 2026, citing Canada鈥檚 discriminatory treatment of and other U.S. goods. The July 20 proclamation stated that counter-tariffs by Canada reduced U.S. auto exports to the nation by 22%, worth $5.6 billion, from April 2025 to March 2026. Prime Minister Mark Carney the need to accelerate trade negotiations with the U.S., while noting that Canada may pursue retaliatory levies if President Trump鈥檚 new tariffs are imposed in August.
• During last week鈥檚 bilateral negotiations in Mexico City on the United States-Mexico-Canada Agreement (USMCA), the U.S. urged Mexico to consider imposing national security-related duties on certain Chinese-made goods, including steel and aluminum, according to unnamed sources cited by . U.S. Trade Representative (USTR) Jamieson Greer a fourth bilateral negotiating round with Mexico is planned for September 2026 in Washington, D.C.
• USTR Jamieson Greer that he hopes to provide USMCA 鈥渙ptions鈥� by the end of 2026 to President Trump, while noting that certain issues such as rules of origin may take longer to resolve. Some of the USTR鈥檚 other priorities reducing the U.S. trade deficit with Mexico and measures to 鈥渋ncentivize supply chains to relocate鈥� to the U.S.
• reports that 惭别虫颈肠辞鈥檚 expanding fleet of Chinese-made heavy trucks is heightening U.S. trade officials鈥� concerns about the impact on North American supply chains, and this topic could be addressed during bilateral USMCA-related negotiations. Nearly two dozen Chinese truck companies are estimated to be operating in Mexico.
• , U.S. Customs and Border Protection will require importers of certain copper articles from non-U.S. countries of origin to report the primary country of smelt and cast. This guidance also states, 鈥淚f the primary or secondary countries of smelt or cast are unknown, importers may report 鈥極TH,鈥� or other.鈥�
• President Trump an incentive program under which companies that build, expand, or refurbish plants in the U.S. to produce primary aluminum would receive a reduced tariff rate for the metal they ship into the country from abroad. Companies with approved plans must commit to beginning construction by January 20, 2029, and submit reports to the Department of Commerce to 鈥渆nsure compliance with domestic manufacturing requirements.鈥�
• The outcome of Section 301 manufacturing overcapacity investigations could have a significant impact on tariff rate increases, according to from S&P Global Market Intelligence. In a July 16 interview, USTR Jamieson Greer the administration鈥檚 Section 301 investigations into 鈥� including China, the EU, Korea, Vietnam, Taiwan, and Mexico 鈥� over manufacturing overcapacity are expected to conclude in the coming weeks. Greer did not provide a specific deadline.
• The Trump administration is launching a new Section 301 investigation to apply additional tariffs to goods from the EU in response to the bloc鈥檚 fines on U.S. tech firms.

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OEMs/SUPPLIERS  

• GM its 2026 full-year guidance for earnings before interest and taxes (EBIT) to as much as $16 billion, from a previous maximum of $15.5 billion, lower tariff costs and stronger margins on large vehicles. The automaker lowered net income to a maximum of $9.8 billion, from a previous target of $11.4 billion, due to EV-related charges.
• Honda is plans to establish an eighth assembly plant in the U.S. The automaker鈥檚 key are in Ohio, Indiana and Alabama.
• Ford was a Defense Department contract to develop three truck prototypes based on the F-Series super-duty pickups.
• Daimler Truck a $40 million engineering hub in Portland, OR that will support the development of new generations of commercial trucks.
• GM of a Magna plant in the proximity of its Orion Assembly factory in Oakland County, Michigan.
• Honda its GAC Group joint venture in China through 2038, underscoring its commitment to compete with Chinese brands despite sales falling more than 50% from a 2020 peak of over 1.6 million units.
• Unifor members a new three-year contract with Ford in Canada, securing 3% annual wage increases and a planned $500M investment in the Essex Engine Plant in Windsor, Ontario. Unifor to begin contract negotiations with GM on August 10, 2026.

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AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• NHTSA plans to establish new safety standards for the operation of autonomous vehicles on U.S. roads before President Trump鈥檚 current term ends, according to in a recent interview. NHTSA intends to seek public comment from industry stakeholders to identify 鈥渂ehavioral competencies鈥� for听AVs, with tests to measure performance.
• Aurora Innovation plans to deploy its second generation Class 8 autonomous truck across its commercial network, which includes 10 throughout portions of Texas and Arizona.
• China issuing robotaxi permits following a suspension in April 2026 due to a system outage that impacted over 100 self-driving vehicles in Wuhan.

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MARKET TRENDS AND REGULATORY

• Penske Automotive Group, Inc. (NYSE: PAG) it received and will review an unsolicited, preliminary and non-binding听take private proposal from Penske Corporation and Mitsui & Co., Ltd.
• Automotive dealership M&A could , due to high franchise values for in-demand brands, as well as dealers motivated to sell because of market risks that include higher gas prices and vehicle affordability.
• A Department of Justice investigation of UAW President Shawn Fain over could lead to an extension of federal oversight into the union beyond the January 2027 expiration date.

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HYBRID AND ELECTRIC VEHICLES

• Honda its only EV model in the U.S., the Prologue SUV, after the 2026 model year.
• Foxconn plans to launch its Model C electric crossover in the U.S. market in partnership with an unnamed automaker.
• Apple Maps will be integrated in 贵辞谤诲鈥檚 Universal Electric Vehicle platform .
• Ford and China鈥檚 Geely Automobile Holdings to co-develop and produce electrified models from both brands at 贵辞谤诲鈥檚 plant in Valencia, Spain.

The Consumer Product Safety Commission鈥檚 (CPSC) Acting Chairman Peter Feldman鈥檚 of the updated National Electronic Injury Surveillance System (NEISS-R) reflects a Beginning in early 2027, this expanded system will automatically scan patients鈥� electronic health records to identify real-time reports of potential consumer product safety issues. According to the CPSC, the system will expand from approximately 400,000 records annually to roughly 2 million, while also increasing hospital participation from hospitals across 36 states to 100 hospitals across all 50 states. This, along with the and targeting means that the CPSC is monitoring product performance in the field more closely than ever.

For industry stakeholders, the practical takeaway is straightforward: potential product hazards may be identified much earlier, giving the agency greater ability to issue safety warnings, open investigations, and pursue corrective actions or recalls more quickly than in the past. Manufacturers, importers, distributors, and retailers must remain vigilant with respect to Section 15 reporting obligations and promptly provide complete, accurate responses to CPSC information requests. As the agency’s visibility into injury trends improves, companies should expect increased scrutiny of incident patterns and post-market performance. One challenge with these new efforts is that the information in the underlying records is often unverified and may be inaccurate. The updated system may place the burden on companies to identify and correct those errors when their products are involved.

The CPSC鈥檚 expanded data set may also have implications beyond regulatory enforcement. Injury data and related agency records can become relevant in product liability litigation, and enhanced surveillance may make it easier for litigants, insurers, and other stakeholders to identify emerging product-risk trends and areas where additional scrutiny is warranted. Robust record keeping and internal compliance policies are as important as ever.

As the CPSC gains access to broader and more comprehensive injury information in real time, companies should revisit their complaint-handling processes, incident investigations, reporting protocols, and internal escalation procedures to ensure potential safety signals are identified and addressed promptly. The modernization of NEISS-R is a major step forward for consumer product safety regulation enforcement 鈥� and one that the consumer products industry should be watching closely.

Recall fraud[1] is a growing and increasingly sophisticated problem that occurs when bad actors exploit online recall processes to obtain remedies to which they are not entitled. This illicit activity increases compliance costs for companies, undermines the effectiveness of legitimate recall programs, and results in heightened requirements to submit a legitimate request for a recall remedy.

On April 15, 2026, the U.S. Consumer Product Safety Commission (CPSC) issued a (RFI) on recall fraud and its impact, seeking information from manufacturers, importers, distributors, retailers, recall administrators, consumer advocates, and the public. The CPSC鈥檚 RFI sought input on the following four issues: 1) observed recall fraud; 2) impacts of recall fraud; 3) fraud mitigation measures, and 4) potential Commission actions. The RFI specifically calls out Artificial intelligence (AI)-generated fake submissions and coordinated redemption schemes as key concerns. The CPSC also invited feedback on existing fraud detection tools and technologies used to address evolving organized fraud schemes, including AI capabilities.

During the RFI comment period, which ended on June 15, 2026, the CPSC received from manufacturers, industry organizations, private individuals, and recall administration and logistics companies that provide support to recalling companies. A few central themes emerged in these comments, including: 1) concerns over AI-fueled fraud and the shift to authenticated capture, 2) product return as the safest and most effective way to prevent recall fraud, and 3) the costs of recall fraud.

1. AI-Fueled Fraud and the Shift to Authenticated Capture

Generative AI emerged as the most frequently referenced topic among recall administrators and technology vendors involved in recall logistics. Generative AI has fundamentally transformed the recall fraud landscape by making it easier to fabricate images, receipts, photographs, serial numbers, and identity documents. More troubling, industry participants noted that generative AI has increased both the sophistication and scale of recall fraud, with trends suggesting that fraud now operates on an organized, systemic level rather than as isolated consumer opportunism.

For example:

• , an industry leader in product recall management, noted that the rise in AI-generated fabricated images has rendered photo-based verification unreliable. Sedgwick emphasized the need for fraud mitigation during the 鈥渆ntire recall lifecycle鈥� and the use of appropriate technology and controls that balance 鈥渃onvenience with security.鈥�
• , a software platform that enables consumers to verify product authenticity through real-time photo capture, stressed the importance of taking a live photo, as opposed to uploading a previously taken photo, described as 鈥渓ive capture鈥� functionality to guard against AI-generated images.
• ., a consumer engagement platform that 鈥渙perates a QR-code-based product registration and post-purchase engagement platform for consumer product brands,鈥� similarly addressed AI-fueled fraud, noting that uploaded receipt photos can no longer reliably authenticate purchases given how easily consumers can generate fabricated images.
• reported similar findings, observing that AI-generated images now feature 鈥渃onvincing faulty material, handwritten markings, and hyper-company-specific product errors.鈥� NAM further urges the CPSC to implement advanced image verification technologies to detect AI-generated photos, 鈥減hoto of photo鈥� submissions, and duplicated or manipulated photos.

It seems that most industry participants agree on a shift toward fraud detection at the point of capture, assessing authenticity based on a photograph taken in real time along with its metadata (such as geolocation and image characteristics) instead of post-submission verification of eligibility for the recall. These comments reflect a broader understanding that traditional recall verification methods are no longer sufficient in an AI-enabled environment, and that proactive, risk-based detection must become standard practice.

2. Returning the Product as the Safest and Most Effective Way to Prevent Recall Fraud

Although technology and software exist to authenticate and verify recalled products from consumers鈥� homes, several commenters emphasized that physically returning the product to the recalling company is still the safest and most effective way to prevent recall fraud.

, a recall management partner, emphasized this point, stating that 鈥淸t]he number one way to prevent recall fraud and abuse has historically been, and will continue to be, the actual return of the recalled product to the recalling company or to their recall administrator for destruction.鈥� An reiterated that recalling companies should physically obtain the recalled product鈥攅ither by mail or in-person drop-off facilities鈥攁s this will not only prevent fraud but bolster consumer safety. maintained this position in their comment as well, stating that the most effective way to prevent recall fraud is to require the return of the product or the smallest critical component to the recalling company. commented similarly, recommending 鈥減hysical returns where feasible.鈥� Product return also reduces the risk that a recalled product will be re-sold by the consumer, even after receiving a refund鈥攁n issue that the CPSC is particularly concerned about. 

However, this does not come without burden to consumers, . If consumers are required to return products to receive a remedy, consumers must do more than simply fill out a form. Additionally, consumers may lose further confidence in the brand when they feel they must do more work to solve a recall issue they never asked for. This additional burden is also likely to reduce consumer participation in recalls, potentially resulting in the continued use of recalled products.

3. The Costs of Recall Fraud

Recall fraud has a financial impact on all participants in the process but is most acutely felt by the recalling company who is already paying a considerable price. , a product recall has direct and indirect costs, the reported numbers for which represent 鈥渓ess than half the total amount spent.鈥� As reported, 鈥淸d]irect recall operations account for approximately 35% of costs鈥攁round $10 million鈥攚hile indirect costs from business interruption and rehabilitation drive final costs into the $30-50 million range.鈥�

Recall fraud only adds cost and complication. cited an example of 鈥�20,000 suspected fraudulent claims, representing a potential multimillion dollar financial exposure鈥� that would historically have been paid and included in regulatory reporting of corrections, 鈥減otentially misrepresenting true consumer engagement.鈥� Efforts to mitigate and prevent fraud are also expensive. As noted, there are many compliance and operational costs, including manual claims review and investigation when automated systems flag suspicious submissions, resources to identify fraudulent trends, increased customer service volume, returns processing for non-recalled or junk items, and legal and compliance support costs. Scammers are also filing complaints with the CPSC and other agencies in an effort 鈥渢o pressure companies into paying questionable claims,鈥� placing 鈥渁 significant burden on internal resources, requiring time and coordination across customer service, legal, and compliance teams.鈥�

Key Takeaways

Fraudsters are using generative AI to fabricate serial numbers, receipts, and images to obtain refunds or replacements for products they never bought, often as part of broader coordinated schemes.  At present, authenticated capture is the most effective method to combat these efforts.

While old school fraud prevention methods like physical product returns are the most effective at preventing fraud and removing recalled products from the field, they also require the most effort by the consumer, causing further loss of brand confidence and reducing recall participation. 

Fraud increases costs for everyone involved in a recall, but recalling companies are most directly impacted. Ultimately, stakeholders must work together to find a solution to this evolving problem.

Thank you to Summer Associate Christina Hanssen for her contributions to this article.

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[1] Recall fraud happens when bad actors trick companies out of refunds, replacements, or repairs for recalled products. These scammers use fake receipts, alter photos of products, or use artificial intelligence to generate fake images of destroyed goods to collect money they do not deserve. See also Consumer Product Safety Commission, Request for Information: Consumer Product Recall Fraud, Regulations.gov (Apr. 15, 2026), (鈥渢he term 鈥榬ecall fraud鈥� refers to fraudulent or abusive conduct associated with the redemption of recall remedies, including the submission of false or misleading information, fraudulent redemptions, or other schemes to abuse recall programs鈥�).

Key Takeaways

• Artificial Intelligence (AI)-BOMs and model provenance are emerging as cybersecurity diligence tools for manufacturers that buy or deploy systems. An AI bill of materials identifies the models, datasets, software components, APIs, and other dependencies that may create cyber exposure inside an AI system, while model provenance documents where those components came from, how they were trained or modified, and how they change over time.
• For manufacturers and supply chain operators, these records can determine whether an organization can trace a corrupted dataset, identify a vulnerable open-source component, evaluate whether a vendor model update introduced new cyber risk, and preserve evidence when an AI-enabled production, quality, logistics, or maintenance system fails.
• Vendor contracts should require both an initial AI bill of materials and ongoing model provenance obligations tied to cybersecurity accountability. Without clear disclosure, update, representation, audit, flow-down, and evidence-preservation terms, manufacturers may lack the information needed to determine whether an AI-related failure resulted from ordinary model performance, cyber compromise, or an undisclosed supply chain dependency.

Why AI Cybersecurity Needs Its Own Transparency Framework

A manufacturer deploys an AI-powered inspection tool on a production line. After a vendor model update, the system begins missing defects. The cybersecurity question is immediate: did the failure result from ordinary model drift, corrupted training data, a compromised model artifact, a vulnerable open-source component, an insecure model serialization format, or an undisclosed third-party API? If the contract and documentation do not identify the model, datasets, software dependencies, and update history, the manufacturer may not be able to answer that question when production is disrupted, sensitive operational data is exposed, or a customer demands an explanation.

That problem builds directly on two prior pieces. Our 麻豆直播 colleague鈥檚 recent article on 5 Strategies for Reinforcing Supply Chain Cybersecurity addressed foundational cybersecurity practices such as vendor oversight, incident response planning, and security-by-design. Our earlier series article on Contract Strategies for AI Predictive Maintenance in Manufacturing and Supply Chains explained why AI vendor agreements often fail to reflect manufacturing realities. This article addresses one area of overlap between these topics in more detail. For AI-enabled manufacturing systems, the next cybersecurity contracting challenge is whether the manufacturer can see enough of the AI supply chain to identify, verify, and preserve evidence of the system鈥檚 components, data lineage, and model history.

An AI-BOM adapts a familiar manufacturing and cybersecurity concept to AI systems. Manufacturers already understand a bill of materials as a list of parts that go into a product, and cybersecurity teams increasingly use software bills of materials (SBOMs) to identify the software components and dependencies inside digital products. In 2026, CISA and its G7 partners issued guidance applying similar supply-chain transparency principles to AI systems. Under that approach, an AI-BOM documents the key components and dependencies that influence how an AI system functions, including models and model versions, training and fine-tuning datasets and their provenance, software and infrastructure dependencies, APIs and external services, and other elements relevant to cybersecurity, risk management, and supply-chain transparency. Model provenance is the companion concept. In plain terms, it is the chain-of-custody record for the model and its data: where they came from, who modified them, what validation or security testing was performed, and how changes were tracked over time. Together, these records turn an opaque AI tool into something procurement, legal, cybersecurity, and operations teams can evaluate before and after a cyber incident.

Why These Records Matter for Cybersecurity

AI cybersecurity risk does not stop at the vendor鈥檚 network perimeter. A production-facing AI system may include a vendor application, a pre-trained model, open-source libraries, cloud-hosted inference, customer-provided operational data, and periodic vendor retraining. Each layer can introduce a different cyber exposure, including vulnerable code, insecure integrations, opaque data flows, or dependencies controlled by subcontractors or other third parties.

A traditional vendor questionnaire may describe the vendor鈥檚 security program, but it may not reveal the open-source model, image-labeling service, third-party dataset, external API, or cloud inference layer embedded in the AI product. Without that component-level visibility of an AI bill of material, manufacturers may not know which dependencies to monitor, which vulnerabilities require remediation, or which supplier relationship created the risk.

Model provenance addresses the related integrity problem. NIST鈥檚 adversarial machine learning taxonomy (NIST AI 100-2, January 2024) recognizes that attackers may target training data, model parameters, or code during the learning process, and may also attack deployed models through evasion, privacy, or other techniques. Emerging supply chain vectors, including model poisoning through fine-tuning pipelines, insecure model serialization formats, and prompt injection targeting downstream integrations, further expand the attack surface that provenance records must help address. In other words, bad actors can now compromise AI systems not just by attacking the model directly, but also by tampering with the tools, data pipelines, and third-party services that feed into the model鈥檚 development and deployment. If a model begins missing defects, misclassifying inventory, generating abnormal maintenance recommendations, or exposing sensitive operational data, provenance records help determine whether the problem came from corrupted training data, a compromised model artifact, a changed version, or ordinary model drift. Without those records, causation becomes conjecture and responsibility becomes harder to allocate.

Contracting for Cybersecurity Through AI-BOMs and Model Provenance

Manufacturers and supply chain managers should address AI cybersecurity transparency expressly in vendor agreements rather than relying on general security language. The following provisions may be particularly helpful:

1. Define the Required AI Bill of Materials. Contracts should specify the minimum contents of the AI bill of materials, including models, software dependencies, datasets or dataset categories, APIs, cloud services, update mechanisms, and security-relevant dependencies. Unlike traditional SBOMs, for which mature and widely adopted formats such as SPDX and Cyclone DX exists, AI-BOM standards remain nascent and are still evolving. If the vendor cannot disclose certain details directly, the contract should require an alternative such as escrow, third-party security review, or tiered disclosure under enhanced confidentiality protections.

2. Require a Cybersecurity-Focused Model Provenance Package. The vendor should document the model鈥檚 origin, training and fine-tuning history, data provenance, validation approach, security testing, and known limitations. The agreement should also include representations regarding data rights, licensing, and controls used to protect model and data artifacts from tampering.

3. Make Transparency a Living Cybersecurity Obligation. AI-BOMs and provenance records should be updated when the vendor retrains the model, changes material datasets, switches components, or modifies update pipelines. The contract should require notice of material changes before they affect production systems, especially where changes may affect cybersecurity monitoring, data exposure, vulnerability management, or incident response.

4. Tie Disclosures to Cybersecurity Accountability. Vendors should represent that AI bill of materials and provenance records are materially accurate and complete. They should also notify the manufacturer of compromised components, unsupported dependencies, data integrity problems, or vulnerabilities affecting AI components, with audit and cooperation rights if inaccurate documentation contributes to a failure.

5. Flow Down AI Transparency Requirements. Many AI vendors rely on subcontractors, cloud providers, labeling vendors, foundation model providers, or open-source components. The contract should require flow-down obligations so the vendor can obtain the component, data, and model information needed to maintain the AI bill of materials and provenance package.

6. Use Documentation for Cyber Governance and Defensibility. AI-BOMs and provenance packages should feed into procurement review, IT/OT risk assessments, incident analysis, vulnerability management, regulatory readiness, and AI governance programs, including those aligned with ISO/IEC 42001. For manufacturers, this documentation increasingly forms part of the record used to demonstrate reasonable security practices, supplier oversight, cyber incident response readiness, and root-cause analysis capabilities. However, the evidentiary value of these records depends on contractual requirements governing accuracy, update cadence, retention, and independent verification. Vendor self-attestation alone may not provide an independently verifiable record sufficient for high-stakes litigation, regulatory examinations, or forensic investigations.

Looking Ahead

Manufacturers that ask only whether an AI vendor is 鈥渟ecure鈥� may miss the more important cybersecurity question: can we identify, verify, and prove what is inside the AI system and how it got there? As CISA, NIST, ISO/IEC 42001, the EU AU Act鈥檚 transparency requirements, and international regulators move toward greater AI supply chain transparency, manufacturers and supply chain managers that build AI bill of materials and model provenance obligations into vendor relationships will be better positioned to detect cyber risk, evaluate vendor performance, preserve incident evidence, and allocate responsibility when AI systems fail.

贵辞濒别测鈥檚 Manufacturing, Supply Chain, Cybersecurity, and AI teams are available to help manufacturers and supply chain managers structure AI vendor diligence, AI bill of materials requirements, model provenance obligations, and cybersecurity-focused contract protections tailored to production and supply chain environments.

Key Legal Insights from 贵辞濒别测鈥檚 Automotive Team

Analysis by Julie Dautermann, Competitive Intelligence Analyst

麻豆直播 is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your 麻豆直播 relationship partner, or our Automotive Team to discuss and learn more. 

AUTOMOTIVE KEY DEVELOPMENTS

• 麻豆直播 & Lardner announced the launch of its 2026 AI in Manufacturing & Supply Chain Series, a new initiative to help industry participants identify and manage the legal risks and business strategies arising from the profound shifts and innovations reshaping manufacturing and supply chain operations. The most recent article in the series is Compliance and Enforcement in Global AI Regulation: EU AI Act Risks and International Regulatory Challenges. Subscribe to get updates about new articles in this series.
• First-half 2026 U.S. new vehicle sales fell 2.8% year-over-year and reflect a SAAR of 15.9 million units, according to from the National Automobile Dealers Association. The analysis notes that direct comparisons to first-half 2025 are challenging due to 鈥渟ignificant pull-ahead volume鈥� as consumers purchased vehicles before tariffs were imposed.
• Edmunds new vehicle affordability pressure reached new highs in Q2: a record 24% of borrowers selected auto loans of 84 months or longer, the average new-vehicle payment reached an all-time high of $777, and 20% of buyers paid $1,000 or more per month.
• reported on 骋惭鈥檚 rollout of a 鈥渇颈谤蝉迟-辞蹿-颈迟蝉-办颈苍诲鈥� manufacturing automation initiative for suppliers.
• The U.S. Senate Commerce Committee is in the coming days on the , which would ban from the U.S market the 鈥渋mportation, integration, manufacture, sale, and resale of connected vehicles, software, and hardware linked to China or other foreign adversaries.鈥� The bill鈥檚 sponsors, Sens. Bernie Moreno (R-Ohio) and Elissa Slotkin (D鈥慚ich), referenced the importance of codifying related from the Commerce Department into law. A is pending in the House.
• provided an update on recent UAW efforts to secure significant wage gains from automotive suppliers.
• New vehicle sales within China by 20.2% year-over-year in the first half of 2026, amid reduced EV subsidies, consumer hesitancy, and market saturation in certain areas.

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TRADE/TARIFFS

• 麻豆直播 & Lardner partner Nicholas Ellis shared insights in the Law360 article, 鈥�,鈥� discussing the status of the United States-Mexico-Canada Agreement (USMCA) and the implications for cross-border trade. This follows the U.S. decision to not automatically renew the USMCA in its current form for another 16 years. While the USMCA remains in force until 2036, this that include prolonged negotiations, annual reviews, or separate bilateral trade agreements within North America. Any nation in the trilateral agreement may invoke to provide six months鈥� notice to exit the USMCA.
• reported on the next phase of U.S. 鈥� Mexico negotiations over the USMCA. The U.S. and Mexico are to meet the week of July 20 in Mexico City. In a July 2 , Economy Minister Marcelo Ebrard indicated that 惭别虫颈肠辞鈥檚 main goals in upcoming bilateral talks include reducing Section 232 tariffs on steel, aluminum and vehicles.
• Canada-U.S. Trade Minister Dominic LeBlanc that Canada is prepared to have discussions for bilaterial trade deals. Lowering U.S. tariffs on steel, aluminum and autos remains a key priority for Canada. Formal bilateral negotiating rounds between Canada and the U.S. have not yet been scheduled.
• Ford was one of more than 1,500 companies that before last week鈥檚 with the U.S. Trade Representative seeking product exemptions from proposed levies tied to Section 301 investigations into forced labor and unfair trading practices by dozens of trading partners.
• Confirmed traffic through the Strait of Hormuz over the weekend , following the of an interim U.S. 鈥� Iran peace deal.
• The Gordie Howe International Bridge over the Detroit River is to open July 27, 2026, with the 鈥渟upport of the United States Government.鈥� Canada鈥檚 Auto Parts Manufacturers鈥� Association (APMA) has that US$29 billion worth of American-made auto parts enters Canada in a typical year, the majority of it through Windsor.

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OEMs/SUPPLIERS  

• Toyota plans to move production of its Tacoma midsize truck from a plant in Mexico to San Antonio as part of a $3.6 billion investment that will double the size of the Texas facility by 2030. The decision comes as certain automakers with operations in Mexico are expected to in the nation, amid growing uncertainty over U.S.-Mexico trade听policies.
• Chinese EV maker Leapmotor the B10 compact SUV in Mexico through 厂迟别濒濒补苍迟颈蝉鈥� local dealership network. Stellantis has an approximately in the startup.
• Bosch was up to $225 million in incentives from the Department of Commerce’s CHIPS Program Office to support the up to $2 billion the company is investing to transform its Roseville, California site for the production of silicon carbide (SiC) semiconductors.
• Micron Technology signed to provide Ford and GM with automotive memory chips. This comes as semiconductor manufacturers increasingly prioritize AI data center demand, causing for other applications.
• Continental its ContiTech industrial unit to an affiliate of private equity firm Lone Star Funds for $4.6 billion. The deal reflects Continental鈥檚 pivot to become a pure-play tire manufacturer.
• Volkswagen announced to cut its model lineup by up to 50% to further reduce production capacity and costs. Germany鈥檚 automotive lobby, VDA, swift action to strengthen the European auto industry鈥檚 competitiveness amid its 鈥渙ngoing crisis,鈥� including opening domestic plant capacity to foreign manufacturers to help protect jobs.
• Mitsubishi with startup Highlanders Inc. to develop humanoid robots, with production scheduled to begin in Japan in 2027. Manufacturers of humanoid robots are expected to receive increased attention on safety measures to prevent harm to humans as the machines enter more workplaces, according to a report in .

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AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• The National Highway Traffic Safety Administration (NHTSA) called on to improve robotaxis鈥� ability to interact with first responders and emergency vehicles on roadways.
• NHTSA is considering ending the requirement for fully autonomous vehicles to have traditional steering wheels, according to comments made during a interview. The comments follow NHTSA鈥檚 last month to revise the Federal Motor Vehicle Safety Standards (FMVSS) to remove manual braking control requirements for vehicles built only for driverless operation.
• Forvia Hella subsidiary Ignite with Oxford Semantic Technologies to develop Hella Ignite.Drive, which utilizes 鈥渒nowledge-based AI鈥� to translate traffic laws into machine-readable rule sets for autonomous driving capabilities.
• Xpeng recently X-Mind, a framework that embeds predictive world model capabilities to autonomous driving systems, enabling vehicles to simulate near-term changes before acting.
• GM-backed Momenta raised $751 million in its , valuing the autonomous driving company at approximately $9 billion. However, a muted trading debut this month may signal investor caution about market competition, as well as the timetable for autonomous driving companies to sustain profitability.

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MARKET TRENDS AND REGULATORY

• The U.S. Environmental Protection Agency (EPA) a federal court to dismiss California鈥檚 over the Trump administration’s efforts to have Congress invalidate the state鈥檚 Clean Air Act waivers.
• The U.S. Department of Justice in another lawsuit pertaining to California’s emission rules for heavy-duty trucks, asserting that the Clean Air Act prohibits states from enforcing or adopting their own emissions standards for new vehicles.
• The EPA a proposal to change pollution rules for heavy trucks that includes the elimination of Diesel Exhaust Fluid (DEF) deratements, which the agency said will restore lost productivity and save up to $6,000 on each new vehicle purchase.
• reported on NHTSA鈥檚 challenges in eliminating supplies of banned counterfeit and faulty air-bag components that may be installed during post-crash vehicle repairs. At least 10 U.S. fatalities have been linked to defective inflaters since 2023.

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HYBRID AND ELECTRIC VEHICLES

• Second-quarter 2026 new EV sales declined by 20.5% YOY and accounted for 5.8% of total U.S. new vehicle sales, according to . Full-year 2026 new EV sales are forecast to drop 2.2% YOY.
• First-half 2026 conventional hybrid vehicle sales 19.4% YOY and represented 15.4% of total U.S. new vehicle sales.
• EV startup Lucid Group it hired restructuring consultancy AlixPartners to assist with improving execution and strengthening operations.
• Electric big rig startup Windrose Technology is over claims of unpaid wages and discrepancies in the production locations within trucks鈥� Vehicle Identification Numbers.
• Former Canoo Inc. executives reached a $20 million settlement to the bankrupt EV startup misled investors.

Since the U.S. Supreme Court invalidated IEEPA tariffs in Learning Resources, Inc. v. Trump in February 2026, plaintiffs鈥� firms have filed more than 100 putative consumer class actions against businesses nationwide that have sought refunds of tariffs paid as a result of these now invalidated charges. These suits target companies across a range of industries, alleging that companies passed tariff costs on to consumers and now stand to collect an improper 鈥渄ouble recovery鈥� through government refunds. No court has yet ruled on the merits of these claims, and defendants have raised a number of significant threshold, procedural, and substantive defenses. This article summarizes the litigation landscape, principal claims, available defenses 鈥� including those our team has identified and deployed in active matters for clients currently facing these types of class actions 鈥� and practical steps companies should consider to assess and mitigate their exposure.

I. The Learning Resources Decision

On February 20, 2026, the U.S. Supreme Court decided Learning Resources, Inc. v. Trump, holding that the International Emergency Economic Powers Act (鈥淚EEPA鈥�) does not authorize the President to impose tariffs. The Court concluded that the power to impose tariffs is a component of Congress鈥檚 taxing authority and that IEEPA鈥檚 authorization to 鈥渞egulate 鈥� importation鈥� did not provide sufficiently clear statutory text to vest that authority in the executive branch.

Following the decision, the Court of International Trade issued a nationwide 鈥淩efund Order鈥� directing U.S. Customs and Border Protection to refund all IEEPA tariffs to importers of record. That order is currently on appeal before the Federal Circuit. Critically, only importers of record 鈥� not distributors, retailers, or consumers 鈥� have any right to recover tariff payments from the government.

II. The Surge in Consumer Class Actions

In the wake of the Learning Resources decision, more than 100 putative consumer class actions have been filed across 30-plus federal judicial districts, spanning over 20 states. Plaintiffs have filed class actions against companies across varying industries and points in the supply chain from food manufacturers to logistics providers. The specific allegations in each case differ, but the primary legal theory is the same: companies cannot pass tariff costs to consumers and retain government refunds for the same tariffs.

Retailers, Consumer Brands, and Manufacturers. In cases involving claims against retailers, consumer brands, and manufacturers, Plaintiffs assert a price pass through theory. In these cases, the Plaintiffs allege that the defendant raised prices and publicly attributed those increases to tariffs.  Plaintiffs argue that once tariffs were invalidated, defendants are unjustly enriched by retaining the price premium.

Shipping and Logistics Companies. In cases filed against shipping and logistics companies, Plaintiffs assert a direct surcharge theory based on itemized charges identified as 鈥渢ariff surcharges,鈥� 鈥渄uty charges鈥� or similar fees that were assessed at the time of shipment. Plaintiffs contend these charges were unlawful from inception (based on shipping contracts, tariffs, or terms of service) and must be refunded.

III. Claims Asserted

Across these cases, plaintiffs are asserting a variety of legal theories, including:

• Unjust enrichment
• Breach of contract / breach of implied covenant of good faith and fair dealing
• Money had and received
• State consumer protection and unfair business practices statutes (e.g., California鈥檚 UCL)
• Declaratory judgment
• False advertising
• Contract unconscionability / mutual mistake
• Constructive trust / breach of fiduciary duty

IV. Available Defenses

Despite the breadth of these filings, defendants have substantial defenses available. Based on our analysis of cases filed to date and our work on behalf of our clients 鈥� we have identified numerous defense strategies. No courts have ruled on the merits of these claims (or defenses), but a sampling of defenses available is provided below.

A. Lack of Direct Causal Link Between Tariffs and Consumer Prices

In many industries, consumer prices are determined by a complex interplay of factors 鈥� including global commodity markets, refining or manufacturing margins, seasonal demand fluctuations, state and local taxes, and competitive dynamics 鈥� making it extremely difficult for plaintiffs to isolate the incremental price impact attributable to IEEPA tariffs. This causation gap is particularly acute in the pass-through theory cases.

B. Insufficiency of 鈥淚nformation and Belief鈥� Allegations

Many complaints fail to identify specific price increases, quantify the tariff-attributable portion of any increase, or cite actual pricing data linking retail prices to tariff expenditures. Instead, plaintiffs allege pass-through 鈥渙n information and belief鈥� without the specificity required to survive a motion to dismiss under Twombly and Iqbal.

C. Speculative 鈥淒ouble Recovery鈥� Theory and Ripeness/Standing Challenges

Many of these cases were filed before defendants received any tariff refunds 鈥� and whether and when refunds will be received remains uncertain given the pending Federal Circuit appeal. The speculative nature of plaintiffs鈥� 鈥渄ouble recovery鈥� theory presents significant Article III standing and ripeness challenges.

D. No Legal Duty to Refund or Pass Savings to Consumers

No statute, regulation, or contractual provision requires defendants to pass tariff refunds through to retail consumers. Businesses retain broad discretion in setting prices, and there is no cognizable legal obligation to share cost savings with downstream purchasers. The fact that some companies have voluntarily chosen to pass refunds to consumers does not establish a legal standard of care binding on others.

E. UCL 鈥淔raudulent鈥� Prong Hurdles

Claims under the 鈥渇raudulent鈥� prong of California鈥檚 Unfair Competition Law (and analogous state statutes) require a showing of representations or omissions 鈥渓ikely to deceive鈥� reasonable consumers. In the tariff cases, plaintiffs have generally failed to identify specific affirmative misrepresentations. The alleged 鈥渇raud鈥� amounts to an omission 鈥� failure to disclose litigation strategy regarding tariff refunds 鈥� which defendants have no duty to disclose.

F. No Unjust Enrichment Where Contract Governs

Defendants routinely obtain dismissal of standalone unjust enrichment claims at the pleading stage, particularly where the parties鈥� relationship is governed by an express or implied contract. This defense is particularly strong in certain direct surcharge theory cases.

G. Class Certification Challenges

Proving that tariff costs were passed through to each class member requires highly individualized, transaction-specific evidence. Consumer prices vary by region, location, product grade, date of purchase, and numerous other variables beyond tariffs. These individualized issues defeat the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) and present a significant barrier to class certification.

H. Additional Defenses and Considerations

Depending on the specific facts and industry, defendants may also assert:

• Voluntary Payment Doctrine: Consumers who voluntarily paid prices without protest or duress may be barred from recovery.
• Contractual Defenses: Mandatory arbitration clauses and class action waivers in customer agreements may preclude or substantially limit putative class claims.
• FAAA Preemption: For claims involving shipping surcharges, the Federal Aviation Administration Authorization Act may preempt state-law claims that relate to carrier rates, routes, or services.
• Charges Lawful When Collected: Where surcharges were imposed pursuant to tariffs that were lawful at the time of collection, defendants may argue that retroactive application of the Court鈥檚 ruling is inequitable.

V.  Risk Mitigation and Strategy

Companies that may be exposed to these claims should consider the following actions:

1. Assess Potential Exposure. Evaluate whether your company imposed direct tariff surcharges or publicly attributed price increases to IEEPA tariffs, and identify the universe of affected customers.
2. Review Public Statements. Audit press releases, earnings call transcripts, SEC filings, and customer-facing communications for references to tariffs or tariff-driven pricing increases.
3. Review Customer Agreements. Identify whether customer contracts contain mandatory arbitration clauses, class action waivers, tariff pass-through provisions, or pricing adjustment mechanisms.
4. Coordinate Refund and Litigation Strategy. Develop a coordinated strategy regarding tariff refund recovery from U.S. Customs and Border Protection and potential downstream obligations, if any.
5. Exercise Caution in Future Communications. Take care in how pricing decisions and tariff refunds are characterized in public and customer communications going forward.

If you have questions about the issues discussed in this article or would like assistance evaluating your company鈥檚 exposure to IEEPA tariff-related consumer class actions, please contact the authors.

Key Takeaways:

• The EU AI Act is the world鈥檚 first comprehensive AI regulation. It classifies AI systems by risk level and imposes compliance obligations on companies that develop or deploy AI. Although anticipated legislative changes would extend key deadlines to late 2027 and 2028, foundational requirements are already in force. Manufacturers should use the additional time to build compliance infrastructure now.
• Global AI regulation is fragmented and evolving rapidly. The EU mandates conformity assessments with penalties up to 7% of global revenue. The U.S. relies primarily on voluntary frameworks. China imposes algorithm registration and content labeling rules. No single compliance approach satisfies all regimes simultaneously.
• Regulatory compliance for AI is a contractual and governance priority, not merely a technology problem. Vendor agreements and internal oversight structures must be designed to satisfy the most demanding applicable regime.

Governments worldwide are moving to regulate artificial intelligence (AI), and manufacturers are directly affected. The EU AI Act, which entered into force in August 2024, establishes binding obligations on companies that develop or deploy AI systems in European markets. The United States, China, and other major economies are advancing their own approaches, often with conflicting requirements. For manufacturers operating across borders, the practical consequences are immediate: the same AI system may be classified differently in each jurisdiction, triggering different compliance obligations and enforcement risks.

1. Compliance Obligations under the EU AI Act for High-Risk Systems

The EU AI Act classifies AI systems into four risk tiers: unacceptable (prohibited), high-risk (strictly regulated), limited risk (transparency obligations), and minimal risk (no specific obligations). For manufacturers, the high-risk classification triggers significant compliance requirements. AI used as a safety component in machinery, AI integrated into products requiring CE marking, and AI in critical infrastructure typically qualify as high-risk.

Importantly, most industrial AI applications, including production optimization, anomaly detection, and predictive maintenance, fall into the minimal-risk category if they do not perform direct safety functions and a human remains the final decision-maker. This 鈥渉uman-in-the-loop鈥� distinction is one of the most important factors determining a manufacturer鈥檚 regulatory burden under the EU framework.

The Act also distinguishes between Providers (developers of AI) and Deployers (companies using AI from vendors). Providers must implement risk management systems, maintain technical documentation, and conduct conformity assessments. Deployers, which includes most manufacturers purchasing AI software, must ensure the AI is used as intended, maintain qualified oversight personnel, and monitor operations. Manufacturers should contractually require vendors to provide conformity documentation. See our prior article regarding other tips and strategies for manufacturers negotiating AI vendor contracts.

A May 2026 legislative agreement (the Digital Omnibus) proposes to extend key compliance deadlines: high-risk standalone systems to December 2027, and AI embedded in regulated products to August 2028. For machinery manufacturers specifically, the agreement proposes to exempt the EU Machinery Regulation from direct AI Act applicability; AI requirements will instead be layered into existing machinery safety rules. However, AI literacy requirements and prohibited practices have been in force since February 2025 and remain in effect.

2. Navigating Global AI Regulations for Manufacturing and Supply Chain

Beyond the EU, manufacturers face a fragmented global landscape. The United States has no comprehensive federal AI law. The current administration favors a pro-innovation approach and has sought to preempt state-level AI regulations, but 48 state laws currently create a patchwork of obligations. The National Institute for Standards and Technology (NIST) AI Risk Management Framework (AI RMF) remains the primary voluntary governance standard for U.S. companies.

China takes a different approach: mandatory AI content labeling, national security standards, and sector-specific rules affecting automotive supply chains. The UK pursues a lighter-touch, sector-based approach without comprehensive legislation.

For multinational manufacturers, ISO/IEC 42001, the first international standard for AI management systems, provides a useful operational framework that can bridge divergent national requirements. The NIST AI RMF serves as a complementary technical resource. These voluntary frameworks help structure internal governance and vendor management, though they do not eliminate the obligation to comply with each jurisdiction鈥檚 specific rules.

3. Enforcement Trends and Penalties in International AI Regulation

The EU AI Act鈥檚 penalties exceed the General Data Protection Regulation鈥檚 already significant 4% maximum. Violations of prohibited practices face fines of 鈧�35 million or 7% of global annual turnover (whichever is higher) under the EU AI Act. Other high-risk violations carry penalties of 鈧�15 million or 3% of turnover. For a manufacturer with 鈧�10 billion in annual revenue, a single prohibited-practice violation could mean up to a 鈧�700 million fine.

In the U.S., enforcement operates through existing regulatory powers: the FTC may pursue unfair or deceptive AI practices, while state laws create additional liability channels. China鈥檚 enforcement leverages cybersecurity and data security laws with consequences including fines, service suspension, or even criminal referral.

For manufacturers, a single AI vendor failure could trigger regulatory exposure in multiple jurisdictions simultaneously. Technology may explain why a decision was made, but it will not excuse the consequences.

4. Managing Compliance Risks in Manufacturing and Supply Chain AI Applications

Manufacturers should take the following steps to address compliance risks:

1. Conduct an AI inventory. Map every AI system by purpose, data access, autonomy level, and applicable jurisdictions.
2. Demand vendor compliance documentation. Require technical documentation, conformity declarations, and contractual representations about risk classification from AI vendors.
3. Design governance for the most demanding regime. If you operate in the EU, build to EU AI Act standards. Use ISO/IEC 42001 as an operational framework. See our prior article for additional information regarding building a scalable AI Governance Program.
4. Negotiate contracts that allocate regulatory risk. AI vendor agreements should address conformity assessment obligations, documentation maintenance, incident reporting, and indemnification for regulatory penalties.
5. Build human oversight into system design. The human-in-the-loop distinction is the most important factor determining whether manufacturing AI falls into high-risk or minimal-risk categories under the EU framework. Design processes that preserve meaningful human authority over safety-critical decisions.

麻豆直播 & Lardner鈥檚 Manufacturing, Supply Chain, and Artificial Intelligence teams regularly advise manufacturers navigating the intersection of AI technology and global regulatory compliance. For more information, please contact the authors or your 麻豆直播 relationship partner.