TECH Signal 403
Appeals court orders fresh review of DJI's military designation, keeps it on Pentagon list
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The D.C. Circuit reversed a lower court's reliance on a fully redacted justification, ordering a fresh review of classified evidence while DJI remains on the Pentagon's Section 1260H list.
Engineers must continue to treat DJI drones as restricted for US government projects until the court reviews the secret evidence behind the military-company claim. The ruling reinforces that agencies may not rely on redacted justifications they did not actually consider, highlighting procedural safeguards in national-security designations. The decision leaves open the possibility that future challenges to similar designations will be evaluated under the same evidentiary standard.
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The appeals court reversed the lower court's reliance on a fully redacted justification and ordered a fresh review of the classified evidence supporting DJI's designation.
DJI remains on the Pentagon's Section 1260H list while the case returns to the lower court for that review.
The panel affirmed that DJI receives assistance via its National Enterprise Technology Center status but found the company's market dominance insufficient to prove broad preclusion from business.
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The D.C. Circuit reversed a lower court ruling that had upheld DJI's designation as a Chinese military company based solely on a fully redacted justification. The appeals court found that the district judge had not examined the classified evidence behind the claim. It ordered the case to be returned for a fresh review of that classified record while DJI remains on the Pentagon's Section 1260H list. The panel rejected DJI's other arguments, leaving the core contribution finding intact for now.
For engineers, the outcome means that DJI drones continue to be treated as restricted equipment for US government contracts and federally funded projects. Teams must either seek alternative drone suppliers or allocate resources to manage compliance risks associated with the ongoing designation. The uncertainty surrounding the classified evidence review can affect procurement timelines and increase overhead for risk assessments. Until the lower court re-examines the secret record, the status quo of limited access persists.
The decision does not touch the Pentagon's updated 1260H list released in early June, which rests on different justifications such as a 'Single Champion' designation and alleged ties to China's Ministry of Industry and Information Technology. Even if DJI succeeds on remand, that June listing would remain in effect under the 2024 NDAA amendments. The panel also affirmed the finding that DJI benefits from its recognition as a National Enterprise Technology Center, noting the associated subsidies and preferential treatment. Consequently, any victory on the original grounds would not overturn those separate findings.
The ruling reinforces the principle that agencies must defend their actions on the grounds they actually invoked, not on redacted summaries they never read. This procedural safeguard may influence how future challenges to similar military-company designations are litigated. It highlights the role of classified evidence review in ensuring that national-security determinations are substantiated. Engineers should monitor how courts apply this standard to other technology firms facing comparable listings.
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