A U.S. appeals court on Friday ordered a lower court to reconsider the inclusion of DJI, a China-based drone manufacturer, on a Pentagon list of companies allegedly supporting the Chinese military. The U.S. Court of Appeals for the District of Columbia Circuit found that the lower court erred by relying solely on unclassified records to determine if the company contributes to China's defense industrial base.
The case follows a 2025 ruling by U.S. District Judge Paul Friedman, who initially rejected DJI's request to be removed from the list. DJI, the world’s largest drone maker, filed a lawsuit characterizing its placement on the list as unlawful. The company argued the designation resulted in lost business deals and prohibited it from securing contracts with multiple federal government agencies.
While the appeals court rejected DJI's arguments regarding due process and lack of evidence concerning government assistance, it found merit in the claim that the unclassified record provided no publicly stated rationale for the Secretary's conclusion. A DJI spokesperson called the ruling a step toward correcting an unjustified designation, while the Department of Defense declined to comment on the ongoing litigation.
The scale of the impact involves billions of dollars in global trade, as DJI is the world's largest drone manufacturer. The company reported that the designation has already led to the loss of business deals and a ban on contracting with multiple federal agencies, though specific dollar amounts per contract were not reported. A person or small business owner relying on DJI products for government-related work would notice a restriction on their ability to fulfill federal contracts starting in 2027 if the designation stands.
The legal outcome sets a precedent for how the U.S. government must justify placing foreign firms on military blacklists. Similar challenges are pending, including a lawsuit by Alibaba and a recent preliminary injunction granted to biotechnology firm WuXi AppTec. The case now returns to the lower court for further proceedings to determine if the Department of Defense can provide sufficient evidence to maintain DJI's status on the list. No specific date for the next hearing was reported.