The Pentagon never explained why DJI “contributes” to China’s defense industry

On 14 August 2026 the United States Court of Appeals for the District of Columbia Circuit issued its decision in SZ DJI Technology Co., Ltd. v. United States Department of Defense (No. 25-5367): affirmed in part, reversed in part, remanded to the district court on the designation of DJI — the world’s largest drone maker — as a “Chinese military company” under Section 1260H of the federal defense law. The reversal turns on a single point, but it is the one holding up the whole case: the section of the Defense Secretary’s report titled “DJI Contributes to the Chinese Defense Industrial Base” is redacted in full, every word but the heading. The Court says so in a sentence that carries the whole story, verbatim: “There is, in other words, no publicly stated rationale for why the Secretary believes DJI contributes to the Chinese defense industrial base.”

The facts, from the ruling

DJI first appears on the Pentagon’s list in October 2022, without advance notice. It petitions for delisting, is denied, and in January 2024 is redesignated, again without notice. In October 2024 it sues the Department of Defense (U.S. District Court for the District of Columbia, No. 1:24-cv-02970), invoking Fifth Amendment due process and the Administrative Procedure Act. In January 2025 the Secretary publishes a new list that again includes DJI, with no rationale in the published text — but on 6 December 2024 he had already handed DJI a report explaining the designation, in part. On 26 September 2025 the district court grants summary judgment for the government, relying only on the unclassified record. DJI appeals; argument is held on 6 February 2026, the ruling follows six months later. The panel — Chief Judge Srinivasan, Circuit Judges Wilkins and Garcia, opinion by Garcia — rejects three of DJI’s four grounds and accepts one.

The three grounds rejected, and why they matter

DJI loses on due process: the Court applies the “stigma-plus” doctrine and asks whether the designation has “broadly preclude[d]” DJI — verbatim, bracket in the ruling — from pursuing its business. The answer is no, verbatim: “DJI holds 90% of the global consumer market and nearly 70% of the drone sector writ-large.” A congressional testimony cited by the ruling, not the Secretary’s own report. Staying market leader through years of designation falls short of the stigma required under the Old Dominion Dairy precedent. DJI also loses on the evidence behind the “assistance” finding: the Secretary’s report, in its unredacted portion, ties DJI’s 2021 recognition as a “National Enterprise Technology Center” to tax breaks and state subsidies; the Court finds the inference substantial. Finally, it loses on disparate treatment against Nokia Bell, Volkswagen, and Nissan: nothing in the record shows the Secretary ever considered them.

The fourth ground: the Chenery rule

Here the Court sides with DJI. To hold that DJI “contributes” to China’s defense industrial base, the district court had not examined the classified record — it had relied on the government’s litigation arguments and on other sections of the report. The Court of Appeals calls this a straightforward violation of the Chenery principle, verbatim: courts “must judge the propriety of [agency] action solely by the grounds invoked by the agency.” The bracket is the ruling’s own, not ours. And it adds: “It is exactly the type of post hoc argument the Chenery principle prohibits.” The remand leaves the district court free to review the classified record and decide whether the contribution finding survives — and whether DJI or its counsel may access it in some form.

What is filed, what is stated, what only the press reports

Filed, public, downloaded by us: the ruling itself, and the list published on 10 June 2026 in the Federal Register (91 Fed. Reg. 35,189), which in the meantime added new grounds for DJI — indirect affiliation with SASAC, direct affiliation with China’s Ministry of Industry and Information Technology and the People’s Armed Police, designation as a “Single Champion” — whose sufficiency the Court has not yet assessed. Stated, not established by any judge: the commercial losses DJI lists in its own appellate brief — one of its largest U.S. contractors and another major client allegedly ceasing purchases, a number of states allegedly barring their agencies from using its drones — remain a party’s claims, which the Court found insufficient regardless of whether they are true. Reported only by the trade press: how DJI, in the statement it issued after the ruling and gave in full to DroneXL, frames its win: “The Court’s finding that the public record contained insufficient evidence is a significant step toward correcting an unjustified designation.” Not quite accurate: the Court held the public record sufficient for the “assistance” finding — it found it insufficient only for the “contribution” finding, the one entirely redacted. DroneXL itself makes that correction, in the same piece that carries the statement.

What we have not verified

We have not read the classified record: no one outside the government and the Court can, for now. We have not independently checked the 90%-market-share testimony or the Reuters piece on reputational harm that the ruling cites: the perma.cc links in the opinion return a Cloudflare block (HTTP 403) on every attempt, so we relay them only as the Court quotes them, not from the original source. We do not know when the district court will rule on remand, nor whether it will grant DJI access to the classified record. We have not verified DJI’s claimed commercial losses, nor the sufficiency of the grounds published in June 2026 — a question the Court leaves explicitly open.

The lesson for technology buyers

A government designation — “Chinese military company,” but the same holds for any list of trusted or barred suppliers — is not a binary light to read off its heading. Here the heading of one paragraph is public, the rest is black; yet that same designation has produced real consequences for years — no Defense or Homeland Security contracts, no Department of Energy funding — while the part meant to justify it stays unreadable to anyone without classified access, DJI included. A buyer of any critical capability from a supplier subject to lists like this one should want to know not just whether the supplier is on or off a list, but which version, with what stated grounds, in which year: DJI was listed in 2022, redesignated in 2024, and again in January and June 2026, each time on partly different grounds. And it should remember that a court can judge only on the reasons an authority put in writing — not on what its lawyers add afterward, in the courtroom: the same discipline worth demanding of a supplier when asking why a system reached a decision, not what its engineers say after the fact it should have decided.

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The two axes, applied

Comply. The register of suppliers subject to government designations — national-security lists, exclusion lists, trust lists — stops being a check done once and becomes a review that runs at every update: which list, which version, which rationale is public and which stays classified, with a dated trail, ready for an audit, a tender, or a board meeting.

Decide. The same framework holds suppliers, public designations, and court records together in a single operating model, on which AI agents execute decisions with a human operator in command — for large enterprises, defense, government, and healthcare. Always in two modes: on-premises, on self-contained machines that do not require deep integration into the client’s network, or dedicated cloud with a dedicated VPN and data centers in Italy, always with shared management: no one is left alone deciding whether a supplier is still trustworthy on the strength of a paragraph heading with no paragraph beneath it.

From the first session, at no cost, comes the dated map of the public designations weighing on your critical suppliers — which are reasoned in writing, which are a heading with no text beneath it, blank boxes included: it is yours to keep even if we do not go on to work together. Talk to one of our engineers.