DJI Seeks Court Intervention to Overturn U.S. DoD’s Chinese Military Company Label

On March 14, 2025, SZ DJI Technology Co., Ltd. and its subsidiary Shenzhen Dajiang Baiwang Technology Co., Ltd. (collectively “DJI”) filed a motion for summary judgment in the U.S. District Court for the District of Columbia, challenging the U.S. Department of Defense‘s (DoD) designation of the company as a “Chinese Military Company” (CMC) under Section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act (NDAA) for Fiscal Year 2021. The filing, detailed in a 51-page court document, accuses the DoD of arbitrary decision-making, violating due process, and exceeding its statutory authority—claims that could reshape how drone industry leaders navigate U.S. national security regulations.

A High-Stakes Legal Battle Takes Flight

DJI, the world’s leading manufacturer of consumer and commercial drones, argues that its CMC designation—first applied in October 2022 and reaffirmed on January 7, 2025—lacks substantial evidence and rational basis. The company seeks a court order to declare the DoD’s actions unlawful under the Administrative Procedure Act (APA), vacate the designation, and compel its removal from the CMC list. This legal move follows over two years of unsuccessful engagement with the DoD, including a comprehensive delisting petition submitted on July 27, 2023, which the agency allegedly ignored.

The stakes are high. The CMC label has branded DJI a national security threat, causing “significant and ongoing financial and reputational harm,” including terminated contracts and legislative restrictions. States like Arkansas, Florida, Mississippi, and Tennessee have restricted DJI drone use by public agencies, while Utah prohibits CMC-listed entities from land purchases. Federal laws, including the NDAA for Fiscal Year 2024, ban DoD contracts with CMCs.

Unpacking the DoD’s Designation Process

The DoD’s authority derives from Section 1260H, which targets entities owned by or affiliated with Chinese military bodies or contributing to China’s defense industrial base via military-civil fusion. DJI alleges the DoD misapplied this statute, relying on outdated data and failing to comply with December 23, 2024, amendments requiring public justification for unclassified listings—a requirement unmet in the January 2025 update.

Key flaws cited by DJI include:

• Ownership Claims: The DoD asserts DJI is “directly or indirectly owned” by the State-Owned Assets Supervision and Administration Commission (SASAC). DJI counters that its founder and early investors hold over 88% of stock and 99.3% of voting rights, with state-owned entities owning just 4.3% of shares and 0.5% of votes—insufficient for ownership under any standard.
• Military-Civil Fusion: The DoD labels DJI a contributor to China’s defense industrial base, citing its National Enterprise Technology Center (NETC) status and an unspecified “XMD” tie. DJI argues NETC recognition, shared by firms like Volkswagen, is civilian-focused, and it has no XMD connection.
• Procedural Lapses: The DoD ignored DJI’s 2023 petition, delayed administrative record releases, and denied a hearing, violating APA and due process standards.

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

Industry Context: A Drone Giant Under Siege

DJI’s market dominance is clear. Employing over 150 U.S. technicians, its drones—sold via retailers like Amazon—are vital for first responders, businesses, and hobbyists. The company pioneered safety features like geofencing and ADS-B receivers. Yet, the CMC label disrupts this ecosystem. A September 2024 U.S. Government Accountability Office report noted the Department of the Interior’s shift from DJI drones raised costs from $2,600 to over $15,000 per unit, hampering emergency response.

Technical and Regulatory Implications

DJI stresses its drones’ civilian design—lacking military-grade features like fixed wings—and its ban on combat use, evidenced by its 2022 sales suspension in Russia and Ukraine. The DoD’s claim of Ukrainian procurement via third parties contradicts DJI’s strict policies, highlighting a disconnect.

Regulatory pressure isn’t new. A 2017 U.S. Army ban over Data Security was later eased after validations by firms like Booz Allen Hamilton found no unauthorized data risks. The CMC label, however, escalates this scrutiny, potentially setting a precedent for foreign drone makers.

Market Impact: A Balancing Act

DJI’s battle with the U.S. Department of Defense marks a significant test of how far-reaching national security laws should extend into the civilian drone market. The company’s motion raises questions about the precise threshold for designating an entity as a contributor to a foreign military’s supply chain. DJI insists that its fundamental business model cannot be reconciled with the label it has received. The broader industry will be watching closely for the outcome, which could reshape how commercial drone manufacturers manage foreign investment, address data privacy concerns, and interact with U.S. regulatory agencies.

DroneXL’s Take

DJI’s lawsuit highlights the vital importance of thorough due diligence when taking actions that could disrupt established industries. Given the well-documented role of DJI drones in supporting first responders and commercial pilots across the United States, the core question is whether the Department of Defense can fulfill its obligations under the NDAA without penalizing a company whose technology underpins emergency response, commercial filming, and research. The outcome of this case may set a far-reaching precedent for how federal agencies classify and regulate foreign tech firms in an increasingly globalized drone market.

Meanwhile, the DoD’s rationale appears tenuous. The NETC designation is not inherently military in nature, and alleged ties to “XMD” remain unsubstantiated. Attempting to fit DJI into a national security narrative could undercut access to the company’s cutting-edge drone technology within the United States. If affordable domestic alternatives cannot quickly scale, both the commercial drone industry and essential public safety operations risk significant setbacks.