DJI Wins Partial Victory in US Ban Appeal, Classified Evidence to be Examined
A US appeals court has ordered a fresh review of DJI's 'Chinese military company' designation, allowing the drone maker to stay on the Pentagon's list while a judge examines classified evidence.
The US Court of Appeals for the D.C. Circuit has partially reversed a ruling that kept DJI on the Pentagon's Section 1260H list of "Chinese military companies". The designation now hinges on classified evidence, which a district judge had not examined.
The appeals court found that the district judge had upheld the government's central claim - that DJI contributes to China's defense industrial base - without reading the classified evidence behind it. The court noted that the Pentagon's December 2024 designation report contains a section titled "DJI Contributes to the Chinese Defense Industrial Base", but everything below the heading is redacted in the unclassified record.
The appeals court also rejected DJI's other arguments, meaning that the company stays on the list while the case returns to the lower court. However, the court's decision is a significant step towards correcting an unjustified designation, according to DJI.
The Pentagon's designation of DJI as a "Chinese military company" has been a contentious issue, with the company arguing that it does not contribute to China's defense industrial base. The appeals court has now ordered a fresh review of the evidence, which will include classified information.
The case has been ongoing for several months, with the Pentagon publishing a new 1260H list in early June with fresh justifications for DJI's inclusion. The judges in this appeal noted that the new rationales raised the question of whether DJI's challenge to the January 2025 designation is moot, but let the case proceed on the current record.
The designation of DJI as a "Chinese military company" has significant implications for the company's business operations in the US. The Pentagon's list includes tariffs of up to 100% on foreign-made drones, and the FCC's ban on new foreign-made drones, which DJI is separately fighting in the Ninth Circuit.
### Classified Evidence to be Examined
The appeals court has ordered a district judge to examine the classified evidence behind the Pentagon's designation of DJI as a "Chinese military company". This is the first time that a judge will have access to the classified information, which has been a key point of contention in the case.
### DJI's Market Position
The appeals court also noted that DJI's market position has counted against it in the case. The company holds 90% of the global consumer drone market and nearly 70% of the drone sector overall. The court ruled that lost contracts and state-level bans "fall well short" of the bar that DJI needed to meet to win its due process claim.
### New Rationales for DJI's Inclusion
The Pentagon published a new 1260H list in early June with fresh justifications for DJI's inclusion. The new rationales include a "Single Champion" designation and claimed affiliations with China's Ministry of Industry and Information Technology and the People's Armed Police. The judges in this appeal noted that the new rationales raised the question of whether DJI's challenge to the January 2025 designation is moot, but let the case proceed on the current record.
### Implications for DJI's Business Operations
The designation of DJI as a "Chinese military company" has significant implications for the company's business operations in the US. The Pentagon's list includes tariffs of up to 100% on foreign-made drones, and the FCC's ban on new foreign-made drones, which DJI is separately fighting in the Ninth Circuit. The outcome of this case will have a significant impact on DJI's ability to do business in the US.
