Court Rules Pentagon Can Label DJI a Chinese Military Company
▼ Summary
– DJI lost its lawsuit against the US Department of Defense, which sought removal from the “Chinese Military Company” list.
– The judge ruled the DoD has broad discretion to designate companies on the list, even with conflicting evidence.
– The court found DJI is a “military-civil fusion contributor” and receives state support, justifying the designation.
– The judge rejected several DoD claims due to insufficient evidence but found the cash subsidies and tax benefits decisive.
– DJI could potentially appeal the decision, as the ruling allows for unequal treatment of companies with similar attributes.
A recent federal court ruling has affirmed the Pentagon’s authority to designate drone manufacturer DJI as a Chinese Military Company, dealing a significant blow to the company’s legal challenge. While the court acknowledged limitations in the Department of Defense’s evidence, it ultimately determined that the broad discretion granted to the DoD under the relevant statutes was sufficient to uphold the controversial listing.
Last fall, DJI initiated a lawsuit against the US Department of Defense, seeking to remove the “Chinese Military Company” label. The company argued the designation created an unfair stigma and posed a substantial risk to its commercial operations. The legal effort has now concluded with a defeat for the drone maker.
In his ruling, US District Court Judge Paul Friedman stated he could not definitively conclude that DJI is indirectly owned by the Chinese Communist Party. However, he emphasized that the Department of Defense possesses wide latitude in deciding which entities belong on the list. The judge found that there was enough supporting material to classify DJI as a “military-civil fusion contributor,” noting that state-owned entity Chengtong holds an unspecified ownership stake. Under the rules of section 1260H, this classification alone is adequate grounds for the military company designation.
The court did not accept all of the Pentagon’s arguments, rejecting several claims due to insufficient evidence. The judge also pointed out an error where the DoD confused two separate Chinese industrial zones while attempting to prove DJI’s factories were situated in a special state-sponsored area.
A pivotal factor in the decision was DJI’s status as a “National Enterprise Technology Center,” a title bestowed by China’s National Development and Reform Commission. This recognition comes with substantial government support, including large cash subsidies, special financial assistance, and significant tax benefits. The judge determined that this level of state backing provided a reasonable basis for the DoD’s classification.
DJI also contended that other companies with Chinese operations, such as Volkswagen and Nokia, exhibit similar attributes but are not subjected to the same listing. Judge Friedman responded that the DoD has the discretionary power to place one company on the list while choosing not to include another.
This ruling may not be the final word on the matter, as DJI has the option to appeal the decision. The company’s next steps remain unclear as it evaluates the implications of the court’s opinion, which details the evidence presented by both sides in the dispute.
(Source: The Verge)
