DJI’s Defiance: Lawsuit Challenges Pentagon’s “Military Company” Label

DJI’s Legal Battle: Navigating the Complex Web of US-China Relations and Drone Technology

DJI, the world’s largest drone manufacturer, finds itself embroiled in a high-stakes legal battle against the US Department of Defense (DoD). The company is suing to have its name removed from the DoD’s list of "Chinese Military Companies," arguing that the designation is inaccurate and has caused significant harm to its business and reputation. This lawsuit highlights the complex and often contentious relationship between the US and China, particularly concerning technology and national security, and underscores the growing scrutiny surrounding the use of drones in both commercial and potentially sensitive government applications.

The Core of the Dispute: DJI’s lawsuit centers on its claim that it has no operational ties to the Chinese military. The company alleges that its inclusion on the "Chinese Military Companies" list in 2022 has resulted in substantial negative consequences. "Since DJI was added to that list, the company claims, it has ‘lost business deals, been stigmatized as a national security threat, and been banned from contracting with multiple federal government agencies,’ and that its employees ‘now suffer frequent and pervasive stigmatization’ and are ‘repeatedly harassed and insulted in public places.’" The lawsuit further claims that the DoD failed to provide a clear explanation for the designation until DJI threatened legal action in September 2024, and even then, the reasoning provided was allegedly riddled with inaccuracies.

The DoD has yet to formally respond to the lawsuit or DJI’s accusations. This lack of immediate response further fuels the tension and underscores the gravity of the situation for DJI, a company that has long maintained its independence from the Chinese government.

A History of Scrutiny: The current lawsuit is not an isolated incident. DJI has faced increasing scrutiny from various US government entities for years, raising concerns about potential ties to the Chinese government and national security risks. These concerns have manifested in a series of actions taken at various levels of government:

• 2017: The US Army issued guidance advising units to cease using DJI drones, citing cybersecurity concerns. This early action signaled a growing unease about the security implications of utilizing foreign-made technology, especially in military contexts.
• 2019: The US Interior Department grounded its fleet of DJI drones, expressing worries about potential spying capabilities and the risk of data breaches. This decision highlighted the government’s growing awareness of the potential vulnerabilities associated with drone technology, particularly devices produced by entities perceived to have close ties to authoritarian governments. This further set the stage for future restrictions.
• 2020: The US Department of Commerce placed DJI on its Entity List, effectively prohibiting US companies from exporting technology to the drone manufacturer. The justification cited was DJI’s alleged involvement in "wide-scale human rights abuses within China through abusive genetic collection and analysis or high-technology surveillance." This action significantly impacted DJI’s access to key components and technology crucial for its operations.
• 2021: The US Treasury Department added DJI to its list of Non-SDN Chinese Military Industrial Complex Companies, stating that DJI supplied drones to the Chinese government for surveillance, particularly targeting the Uyghur population in Xinjiang. This designation solidified the narrative of DJI being complicit in human rights abuses, further damaging its international reputation. This designation carried serious implications, adding to the already existing restrictions placed on the company.
• 2024: Recent reports indicated that US Customs and Border Protection is blocking the import of some DJI drones under the Uyghur Forced Labor Prevention Act, creating further obstacles for the company. This most recent development adds even more complexity to the challenges DJI faces, adding another layer of restriction.

DJI’s Defense: Throughout this period, DJI has consistently denied any ownership or control by the Chinese government. The company has repeatedly emphasized that it is a privately held company with its own independent operations. They claim their drones are used globally for a wide range of purposes, including many beneficial applications within the US in sectors like emergency response and infrastructure inspection. "DJI insists it’s had ‘nothing to do with treatment of Uyghurs in Xinjiang’," stating that its role is simply to produce and sell drones, without control over their subsequent use. They also point to numerous independent audits – including some by US government agencies – that haven’t found security flaws in their products.

DJI acknowledges that two Chinese state-owned investment funds held minority stakes in the company, but emphasizes that these holdings were minimal and short-lived. The company explicitly highlights that the Shanghai Free Trade Zone Equity Fund held “less than 1% of DJI’s shares and less than 0.1% of DJI’s voting rights,” and that the Chengtong Fund divested its investment in June 2023. The company asserts that four individuals, including its founder, control a vast majority (99 percent) of DJI. This ownership structure, they argue, decisively counters claims of Chinese government control.

The Broader Context: The DJI case exemplifies the complex challenges posed by the growing integration of technology with geopolitics. The US government’s actions reflect broader concerns about the potential for Chinese technology to be used for purposes that conflict with US national security interests and human rights. The escalating tensions between the two countries create significant difficulties for companies operating in a globalized marketplace.

Legislative Landscape: Further complicating the situation is the current debate in Congress surrounding a potential complete ban on DJI drone imports into the United States. This proposed legislation, driven primarily by security concerns, reflects the prevalent sentiment among some US policymakers regarding Chinese technology. While the House of Representatives initially approved the measure, its inclusion in the final Senate bill remains uncertain. Even if the ban were to pass, existing drone owners would likely be allowed to continue operating their devices. Thus, a complete market ban even at the legislative level is not yet certain.

The Future: The outcome of DJI’s lawsuit will have significant implications across various industries reliant on drone technology. A ruling in DJI’s favor could lead to a re-evaluation of the DoD’s approach to labelling companies and the potential for future legal challenges against similar designations. A loss will solidify the narrative of the Chinese government’s influence on global technology and increase the pressure on DJI and other Chinese technology companies operating in the US. The case also underscores the need for a nuanced approach to assessing national security risks in an increasingly interconnected world, balancing legitimate concerns with the potential for overreach and unfair targeting. The ongoing legislative efforts in Congress to ban future DJI sales demonstrate the intricate dance between security concerns and market realities, further complicated by perceptions of human rights abuses in China.

The DJI case is about much more than just a single company. It reflects the evolving global environment, where technological advancements and geopolitical realities are inextricably intertwined. Its path forward, shrouded in legal uncertainty and geopolitical tension, remains a prime example of how technology can become a central battleground in the ongoing US-China strategic competition.

Article Reference