The U.S. Court of Appeals for the D.C. Circuit ruled on August 18, 2026, that Hesai Technology Co., Ltd. and its subsidiary, Hesai, Inc., must be given due process before being designated as a Chinese military company. This decision affects how the Department of Defense (DOD) handles designations that carry significant legal and reputational consequences for companies. The court found that the Secretary of Defense failed to provide adequate notice and an opportunity for Hesai to respond before finalizing its designation.
This ruling is important because it sets a precedent for how the government must treat companies facing similar designations. It emphasizes the need for transparency and fairness in government processes, especially when reputational harm and legal restrictions are involved.
Background
The case, Hesai Technology Co., Ltd. v. DOD (Docket No. 25-5256), began when the Secretary of Defense included Hesai on a list of “Chinese military companies” operating in the United States. This designation was made under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021, which mandates the Secretary to publish an annual list of such companies. The designation carries serious implications, including restrictions on government contracts and funding.
Hesai, which specializes in Light Detection and Ranging (LiDAR) products used in autonomous vehicles, filed a lawsuit in May 2024, claiming that the Secretary’s designation violated its rights under the Fifth Amendment’s Due Process Clause and the Administrative Procedure Act (APA). The district court initially granted summary judgment in favor of the Secretary, but Hesai appealed the decision.
The Ruling
The D.C. Circuit Court reversed the district court's decision, focusing on Hesai’s due process claim. The court stated, “Because the Secretary’s designation carries reputational and legal consequences, it implicates a protected interest.” The court emphasized that the Secretary failed to provide Hesai with notice of the unclassified materials he intended to rely on and did not allow them a meaningful opportunity to respond before finalizing the designation.
The opinion, delivered by Circuit Judge GARCIA, highlighted that the designation's implications extend beyond reputational harm. It restricts Hesai from pursuing government contracts and financial assistance, which the court recognized as a deprivation of a legal right. The ruling pointed out that the Secretary's actions did not comply with due process requirements, which necessitate that affected parties receive notice and an opportunity to contest their designation.
Impact
This ruling has significant implications for how the government handles similar designations in the future. It reinforces the principle that companies must be afforded due process rights when facing actions that could harm their reputation and restrict their business opportunities. The court's decision could lead to changes in how the DOD and other federal agencies implement such designations, ensuring that companies have the chance to defend themselves before being labeled as military entities.
Furthermore, this ruling may influence other cases involving governmental designations and the due process rights of corporations. It underscores the need for transparency and fairness in administrative processes, particularly when national security and reputational issues are at stake.
What’s Next
The case has been remanded to the district court, which will instruct the Secretary of Defense to provide the due process required before any future designations. It is unclear if the Secretary will appeal this decision, but the ruling sets a clear expectation for how similar cases will be handled moving forward.