Why the D.C. Circuit Sent DJI’s Pentagon Designation Case Back for Review

The D.C. Circuit gave DJI an important procedural win—but not a victory that clears the company from the Pentagon’s list of alleged Chinese military companies. The appeals court sent the case back to a lower court to reconsider whether one key finding was supported after reviewing the classified evidence the Defense Department had submitted.

What the Pentagon designation means

Congress’s Section 1260H requires the Defense Secretary to identify and annually publish companies operating in the United States that the department determines are “Chinese military companies.” One relevant category covers companies identified as contributors to China’s defense industrial base through military-civil fusion activities.

The Defense Department first placed DJI on the list in October 2022 without advance notice. After DJI sought removal, the department denied the request and redesignated the company in January 2024. DJI was listed again in January 2025.

The department’s stated theory included two related findings: that DJI contributed to China’s defense industrial base and that it knowingly received Chinese-government assistance through science and technology efforts connected to military-industrial planning. The public explanation for the first finding was fully redacted.

The designation has practical consequences. It restricts the Defense Department from contracting with designated companies and affects certain Department of Energy grants, contracts, and loans. The public label can also create reputational and commercial harm.

DJI’s lawsuit and the 2025 lower-court ruling

DJI sued the Defense Department in October 2024 under the Administrative Procedure Act and the Fifth Amendment. The company argued that the designation lacked adequate evidence and explanation, violated due-process protections, and caused serious reputational and commercial losses.

On September 26, 2025, the U.S. District Court for the District of Columbia allowed the designation to stand. The court rejected several of the government’s supporting allegations, according to DJI, but still upheld the designation based on findings the court considered sufficient.

DJI appealed. The company has consistently described itself as a civilian drone and camera-technology company that is not owned or controlled by the Chinese government or affiliated with China’s military.

DJI also says that its products’ possible military relevance comes from the dual-use nature of commercially available drones, rather than from military ownership, military manufacturing, or combat-focused marketing. The company says it condemns combat use and has adopted policies and measures intended to discourage or prevent it.

Those positions did not resolve the statutory question in the district court’s view. The court reasoned that DJI’s policies against military use did not eliminate the technology’s potential or actual military applications.

What the appeals court decided

On August 14, 2026, the U.S. Court of Appeals for the District of Columbia Circuit affirmed some parts of the lower court’s judgment, reversed another part, and remanded the case for further proceedings.

The central issue was the finding that DJI contributes to China’s defense industrial base. The appeals court held that the district court could not uphold that finding based only on the unclassified record when the Defense Department’s public explanation had been completely redacted. The court noted that Section 1260H permits the government to submit classified supporting material to a reviewing court ex parte and in camera.

In practical terms, the lower court must now assess the full administrative record, including the classified evidence, before deciding whether that particular justification is adequately supported and legally sustainable.

The ruling is narrow. It does not find that DJI is unrelated to China’s defense sector, reject every basis for the designation, or order DJI’s immediate removal from the Pentagon’s list. Three of DJI’s broader arguments were rejected, according to reporting on the decision, while the classified-record issue was sent back for reconsideration.

Why the classified-record issue matters

National-security designations often involve information the government says cannot be made public. The appeals court’s decision does not prevent the Defense Department from relying on classified material. Instead, it requires the reviewing court to examine the material on which the government relies when the public record does not independently explain a central conclusion.

That distinction is significant for other companies facing similar designations. A government agency may protect sensitive information from public disclosure, but a court still has to perform a meaningful review of the evidence supporting the agency’s decision. The decision therefore concerns both DJI’s immediate status and the judicial process used to review national-security classifications.

What the ruling means for drone buyers and agriculture

DJI makes consumer and commercial drones used by governments, businesses, and hobbyists. Commercial applications include imaging, inspection, public safety, mapping, and agricultural operations.

In agriculture, drone platforms can support field imaging, crop monitoring, mapping, and precision-application workflows. The U.S. agriculture-drone market was estimated at $506.3 million in 2024 by Grand View Research, which lists DJI among the companies operating in the market.

The appeals ruling does not by itself change what every U.S. customer can buy or operate. The Section 1260H case is separate from other possible import, procurement, telecommunications, aviation, or equipment-authorization restrictions.

For farms and commercial operators, the immediate takeaway is continuity with legal uncertainty: DJI remains designated while the lower court conducts the ordered review. The eventual outcome could affect the company’s ability to contest the Pentagon label, but the August 14 decision alone does not remove the designation or provide a final ruling on DJI’s broader claims.