Pentagon can call DJI a Chinese Military Company, court rules

Last October, dronemaker DJI sued the US Department of Defense, arguing it should no longer face the stigma of being listed as a “Chinese Military Company” and continue to risk business as a result. It just lost. While US District Court judge Paul Friedman “cannot conclude” that DJI is “indirectly owned by the Chinese Communist Party,” he found that the DoD has broad discretion to decide which companies do and do not belong on the list of Chinese military companies. Friedman concluded there was enough evidence that DJI is supported and recognized by the Chinese government to call it a “a military-civil fusion contributor,” and that state-sponsored entity Chengtong has “some unspecified ownership stake” in the company. Just being a “military-civil fusion contributor” is enough to label it a Chinese Military Company as well, according to the rules (section 1260H) for that designation. He also rejected quite a few of the DoD’s other claims for insufficient evidence, and pointed out that it confused two of China’s different industrial development zones when trying to prove DJI’s factories were located in a special state-sponsored zone. But the fact that China’s National Development and Reform Commission designates DJI as a “National Enterprise Technology Center,” which gives it large cash subsidies, “special financial support” and “a large number of tax benefits,” was enough to convince this judge to let the DoD call it a Chinese Military Company if it wants. And though DJI argued that the Chinese arms of Volkswagen and Nokia aren’t being treated the same way despite their “similar attributes,” Friedman says the DoD has “broad discretion to decide to place X on the list, while also deciding not to place Y on the list.” This is just the latest blow against DJI in the United States, where it faces a total import ban on new products this December, and where US customs has already stopped blocking many consumer drone shipments, to the point that shelves have gone bare, scammers are setting up shop, loopholes may be getting exploited, and DJI doesn’t bother launching new drones here at all. But it is a decision that DJI could possibly appeal — though the company tells The Verge it is still weighing its options for now. Here’s DJI’s statement, provided by spokesperson Daisy Kong: > While DJI is pleased that the Court agreed with DJI and rejected most of DoD’s purported justifications for listing DJI, we are disappointed that the Court nonetheless upheld the listing. This decision was based on a single rationale that applies to many companies that have never been listed. DJI is currently evaluating its legal options in light of this decision. > DJI’s success is built on relentless innovation, and the market continues to choose our products for their reliability, safety, and accessibility. We remain committed to serving our U.S. customers and partners, and we call for fair competition in the United States. This is the approach that truly benefits the economy, the industry, and, most importantly, the operators who use our technologies to strengthen businesses and enhance public safety in communities across the country. You can read the judge’s full opinion, including his overview of various kinds of evidence presented by the DoD and DJI, below. Update, September 26th: Added DJI statement.