DJI Seeks Courtroom Intervention To Overturn U.S. DoD’s Chinese language Navy Firm Label

On March 14, 2025, SZ DJI Expertise Co., Ltd. and its subsidiary Shenzhen Dajiang Baiwang Expertise Co., Ltd. (collectively “DJI”) filed a movement for abstract judgment within the U.S. District Courtroom for the District of Columbia, difficult the U.S. Division of Protection’s (DoD) designation of the corporate as a “Chinese language Navy Firm” (CMC) below Part 1260H of the William M. (Mac) Thornberry Nationwide Protection Authorization Act (NDAA) for Fiscal Yr 2021. The submitting, detailed in a 51-page court docket doc, accuses the DoD of arbitrary decision-making, violating due course of, and exceeding its statutory authority—claims that would reshape how Drone Business leaders navigate U.S. nationwide safety rules.

A Excessive-Stakes Authorized Battle Takes Flight

DJI, the world’s main producer of shopper and industrial drones, argues that its CMC designation—first utilized in October 2022 and reaffirmed on January 7, 2025—lacks substantial proof and rational foundation. The corporate seeks a court docket order to declare the DoD’s actions illegal below the Administrative Process Act (APA), vacate the designation, and compel its removing from the CMC checklist. This authorized transfer follows over two years of unsuccessful engagement with the DoD, together with a complete delisting petition submitted on July 27, 2023, which the company allegedly ignored.

The stakes are excessive. The CMC label has branded DJI a nationwide safety menace, inflicting “vital and ongoing monetary and reputational hurt,” together with terminated contracts and legislative restrictions. States like Arkansas, Florida, Mississippi, and Tennessee have restricted DJI drone use by public companies, whereas Utah prohibits CMC-listed entities from land purchases. Federal legal guidelines, together with the NDAA for Fiscal Yr 2024, ban DoD contracts with CMCs.

Unpacking the DoD’s Designation Course of

The DoD’s authority derives from Part 1260H, which targets entities owned by or affiliated with Chinese language army our bodies or contributing to China’s protection industrial base through military-civil fusion. DJI alleges the DoD misapplied this statute, counting on outdated information and failing to adjust to December 23, 2024, amendments requiring public justification for unclassified listings—a requirement unmet within the January 2025 replace.

Key flaws cited by DJI embody:

• Possession Claims: The DoD asserts DJI is “instantly or not directly owned” by the State-Owned Belongings Supervision and Administration Fee (SASAC). DJI counters that its founder and early traders maintain over 88% of inventory and 99.3% of voting rights, with state-owned entities proudly owning simply 4.3% of shares and 0.5% of votes—inadequate for possession below any commonplace.
• Navy-Civil Fusion: The DoD labels DJI a contributor to China’s protection industrial base, citing its Nationwide Enterprise Expertise Heart (NETC) standing and an unspecified “XMD” tie. DJI argues NETC recognition, shared by companies like Volkswagen, is civilian-focused, and it has no XMD connection.
• Procedural Lapses: The DoD ignored DJI’s 2023 petition, delayed administrative document releases, and denied a listening to, violating APA and due course of requirements.

These echo prior rulings. In 2021, the court docket invalidated DoD designations of Xiaomi and Luokung as CMCs for missing proof.

Business Context: A Drone Big Below Siege

DJI’s market dominance is evident. Using over 150 U.S. technicians, its drones—offered through retailers like Amazon—are important for First Responders, companies, and hobbyists. The corporate pioneered security options like geofencing and ADS-B receivers. But, the CMC label disrupts this ecosystem. A September 2024 U.S. Authorities Accountability Workplace report famous the Division of the Inside’s shift from DJI drones raised prices from $2,600 to over $15,000 per unit, hampering emergency response.

Technical and Regulatory Implications

DJI stresses its drones’ civilian design—missing military-grade options like fastened wings—and its ban on fight use, evidenced by its 2022 gross sales suspension in Russia and Ukraine. The DoD’s declare of Ukrainian procurement through third events contradicts DJI’s strict insurance policies, highlighting a disconnect.

Regulatory stress isn’t new. A 2017 U.S. Military ban over information safety was later eased after validations by companies like Booz Allen Hamilton discovered no unauthorized information dangers. The CMC label, nevertheless, escalates this scrutiny, doubtlessly setting a precedent for international drone makers.

Market Affect: A Balancing Act

DJI’s battle with the U.S. Division of Protection marks a big take a look at of how far-reaching nationwide safety legal guidelines ought to prolong into the civilian drone market. The corporate’s movement raises questions concerning the exact threshold for designating an entity as a contributor to a international army’s provide chain. DJI insists that its basic enterprise mannequin can’t be reconciled with the label it has acquired. The broader trade can be watching intently for the result, which may reshape how industrial drone producers handle international funding, deal with information privateness considerations, and work together with U.S. regulatory companies.

DroneXL’s Take

DJI’s lawsuit highlights the important significance of thorough due diligence when taking actions that would disrupt established industries. Given the well-documented function of DJI drones in supporting first responders and industrial pilots throughout the USA, the core query is whether or not the Division of Protection can fulfill its obligations below the NDAA with out penalizing an organization whose know-how underpins emergency response, industrial filming, and analysis. The result of this case could set a far-reaching precedent for the way federal companies classify and regulate international tech companies in an more and more globalized drone market.

In the meantime, the DoD’s rationale seems tenuous. The NETC designation isn’t inherently army in nature, and alleged ties to “XMD” stay unsubstantiated. Trying to suit DJI right into a nationwide safety narrative may undercut entry to the corporate’s cutting-edge Drone Expertise inside the USA. If reasonably priced home alternate options can’t rapidly scale, each the industrial drone trade and important public security operations threat vital setbacks.