China-based drone giant DJI has lost a federal court challenge against its designation as a company tied to Beijing’s military, a ruling that limits its access to US government contracts and further complicates its ability to sell drones in the US market.
US District Judge Paul Friedman in Washington, D.C., ruled on September 26 that the Defense Department had presented enough evidence to justify keeping DJI on its list of firms considered to contribute to China’s “defense industrial base.” DJI, which sells more than half of all commercial drones in the US, had argued it was neither owned nor controlled by the Chinese military.
The decision comes nearly a year after DJI filed its lawsuit. While the judge dismissed some of the Pentagon’s claims as unsupported, he concluded that US law gives the Pentagon wide authority to decide which companies qualify as military-linked.
The court cited evidence that China’s government has recognized DJI as a “National Enterprise Technology Center,” a title that brings subsidies and tax breaks, and also that state-owned conglomerate Chengtong holds a stake in the firm.
In its statement, DJI said it was disappointed with the ruling and is reviewing its options. The company stressed that the decision relied on one rationale “that applies to many companies that have never been listed.” DJI has argued the designation is “unlawful and misguided,” saying it has lost sales and suffered reputational harm as a result of being banned from contracting with US federal agencies.
The ruling highlights inconsistencies in how companies are treated. DJI’s lawyers pointed to other foreign firms that also receive Chinese state support but are not blacklisted. Judge Friedman responded that the government is not required to apply the same standard equally to all companies.
The setback comes at a sensitive time for DJI, which is also facing a looming US import ban on new products set to take effect in December 2025. Customs authorities have already restricted some shipments, prompting the company to halt new drone releases in the US market. Resellers and counterfeit suppliers have stepped in to fill the gap, often charging steep markups.
The case also reflects broader US concerns about Chinese technology firms. In July, the same judge sided with the government in a similar lawsuit brought by lidar maker Hesai Group. That company has appealed.
