The U.S. Court of Appeals for the D.C. Circuit recently ruled on a significant case involving DJI, a major drone manufacturer, and its designation as a "Chinese military company" by the Department of Defense (DOD). This ruling affects DJI's ability to operate in the United States and could have broader implications for foreign companies facing similar designations.
In the case, SZ DJI Technology Co., Ltd. v. DOD (Docket No. 25-5367), DJI argued that the DOD's designation violated its due process rights and lacked adequate evidentiary support. The court's decision, issued on August 14, 2026, partially affirmed the lower court's ruling but also reversed certain aspects, sending the case back for further proceedings.
Background
DJI is a well-known manufacturer of consumer and commercial drones, with customers ranging from hobbyists to government entities. In October 2022, the Secretary of Defense included DJI on a list of Chinese military companies without prior notice. After DJI petitioned for removal from the list, the Secretary denied the request and redesignated DJI in January 2024, again without advance notice.
DJI challenged this designation in the U.S. District Court for the District of Columbia, claiming violations of the Fifth Amendment's Due Process Clause and the Administrative Procedure Act. During the legal proceedings, the Secretary published a new list in January 2025 that again included DJI, but without providing a rationale for its continued designation.
The Secretary later provided a report claiming DJI was a "military-civil fusion contributor" to the Chinese defense industrial base, alleging that DJI received assistance from the Chinese government through military-related initiatives. DJI maintained that the Secretary's claims were unfounded and that the lack of transparency violated its rights.
The Ruling
The D.C. Circuit Court, led by Circuit Judge Garcia, ruled on several key points in the case. The court affirmed the district court's summary judgment on most of DJI's arguments but found merit in DJI's claim regarding the lack of evidence supporting the Secretary's conclusion that DJI contributes to the Chinese defense industrial base.
The court stated, "The Secretary’s report contained a section titled ‘DJI Contributes to the Chinese Defense Industrial Base,’ but every word of that section except for the heading was redacted in the unclassified record," highlighting the lack of transparency in the Secretary's rationale.
While the court rejected DJI's due process claim, it emphasized the importance of providing adequate justification for the designation. The ruling noted that the Secretary had not sufficiently explained why DJI was treated differently from other companies that might also fit the designation criteria.
Impact
This ruling has significant implications for DJI and other foreign companies operating in the U.S. The court's decision to remand the case means that the Secretary must provide a clearer justification for DJI's designation, which could influence how similar cases are handled in the future. The ruling underscores the need for transparency and due process in government actions that can severely affect a company's operations and reputation.
Moreover, the designation as a Chinese military company carries serious consequences, including restrictions on contracting with U.S. government agencies and potential reputational damage. This case sets a precedent for how the government must justify such designations, potentially affecting other companies facing similar scrutiny.
What's Next
The case will return to the district court for further proceedings, where the court may examine the classified record to determine whether the Secretary's designation of DJI was justified. It remains to be seen if DJI will appeal any future decisions or if related cases will arise as other companies monitor the outcome.