In October 2023, drone manufacturer DJI filed a lawsuit against the U.S. Department of Defense (DoD), seeking to remove its classification as a “Chinese Military Company,” which the company argues adversely affects its business operations.
U.S. District Court Judge Paul Friedman stated that he could not definitively conclude that DJI is “indirectly owned by the Chinese Communist Party.” However, he acknowledged the DoD’s substantial discretion in determining which companies belong on the list of Chinese military entities.
Judge Friedman found sufficient evidence to categorize DJI as a “military-civil fusion contributor,” noting that it is recognized and supported by the Chinese government. He indicated that the state-backed entity Chengtong has an “unspecified ownership stake” in DJI, and under section 1260H guidelines, this designation allows the DoD to label the company a Chinese Military Company.
While the judge dismissed several claims by the DoD due to lack of evidence, he remarked on a significant error in the DoD’s rationale, where it confused two of China’s industrial development zones while trying to establish a link between DJI’s factories and state-sponsored zones.
Furthermore, the court considered that DJI is designated by China’s National Development and Reform Commission as a “National Enterprise Technology Center,” which qualifies the company for substantial financial benefits, including cash subsidies and tax advantages. This designation contributed to the judge’s agreement that the DoD could classify DJI as a Chinese Military Company if it chose to do so.
DJI argued that other Chinese companies, such as the local branches of Volkswagen and Nokia, do not face similar treatment despite having comparable attributes. However, Judge Friedman emphasized the DoD’s broad authority to differentiate between entities on the list. DJI has the option to appeal this decision, and inquiries have been made regarding whether the company intends to pursue that route.
Source: https://www.theverge.com/news/786540/dji-loses-chinese-military-company-lawsuit-dod