"DJI advances toward removal from the Pentagon blacklist." Readers who see only this headline might conclude that the world's largest drone maker has finally shed the burden of regulation. But DJI's actual standing has not changed one bit from before the ruling.
What the U.S. Court of Appeals for the D.C. Circuit issued on August 14, 2026, was a remand of the district court's decision, which had upheld the Department of Defense's grounds for designation without ever reviewing the classified evidence behind it. DJI itself remains on the "Chinese military company" list. Neither the tariffs nor the federal procurement ban have stopped. Why has such a wide gap opened up between this procedural win in court and the reality unfolding in the market?
What the Ruling Dismantled in the District Court's Reasoning — and What It Left Standing
On August 14, 2026, the U.S. Court of Appeals for the D.C. Circuit partially granted DJI's appeal in its lawsuit against the Department of Defense and remanded the case to the federal district court in Washington, D.C. The panel consisted of Chief Judge Srinivasan, Judge Wilkins, and Judge Garcia, with Judge Garcia authoring the opinion. In September 2025, district court Judge Friedman had issued a summary judgment fully upholding the Pentagon's decision to designate DJI on the "Chinese military company" list under Section 1260H of the National Defense Authorization Act (NDAA). The appellate ruling overturned part of that decision. For DJI, this marked the first judicial win it had secured since its initial designation in 2022 — after years of annual redesignations, repeated litigation, and the September 2025 defeat.
What the appellate court took issue with was the core rationale behind the designation: the claim that "DJI contributes to China's military-industrial base." The Pentagon's internal report had every relevant section redacted except for the headings, and the district court had upheld the designation without ever actually reviewing the substance of that classified material. In the opinion, Judge Garcia wrote, "In other words, there is no publicly available rationale," finding this absence of review itself to be unlawful. At the same time, the court rejected the three other arguments DJI had raised, including its due process claims, leaving intact the designation's other pillar: the 2021 "National Enterprise Technology Center" designation DJI received from China's National Development and Reform Commission (NDRC), along with the subsidies and tax benefits that came with it.
The opinion notes that DJI holds 90% of the global consumer drone market and has maintained its dominant market position even after being designated. For a company of this scale, nearly four years of litigation yielded only a remand — DJI remains on the list as of the ruling. This was a narrow victory confined to the propriety of the review procedure, not a ruling on the merits of the designation itself.
The Wall Called the Chenery Doctrine: Classified Evidence Alone Cannot Sustain a Designation
The Chenery doctrine is a principle of administrative law rooted in a 1943 U.S. Supreme Court precedent. When a court reviews an agency's decision, the decision's validity must be judged solely on the grounds the agency itself articulated — even if the outcome happens to be correct, neither the court nor a lower tribunal may retroactively supply a different rationale to uphold it. Applying this principle to national-security-related designations makes decisions based on classified information especially difficult to handle. Imagine someone whose license has been revoked asking why, only to be told by the agency, "We can't disclose the details, but the revocation is correct." The question is whether a court can simply rubber-stamp that answer.
In DJI's case, the core of the Pentagon's report was almost entirely redacted, and no publicly available rationale effectively existed. Even so, to uphold the designation, the district court itself needed to actually examine the contents of the classified material and determine whether what was written there supported the conclusion that DJI "contributes to China's military-industrial base." Instead, the district court simply affirmed the Pentagon's determination without conducting that review. What the appellate court flagged was not whether the classified evidence actually substantiated the designation, but the sheer procedural gap of no one having verified it at all.
Viewed this way, the substance of DJI's "win" becomes clear. The court did not find that the content of the Pentagon's evidence was wrong. It found that the omission of the review process itself was unlawful. If, after remand, the district court examines the classified material and determines that it supports the designation, DJI will once again face the same conclusion.
Xiaomi's Four Months, DJI's Four Years: What Made the Difference
Another company fought the same "Chinese military company" list before DJI: Xiaomi. Designated in 2021, Xiaomi immediately sued, won a preliminary injunction, and had its designation fully lifted that same May after the U.S. government itself abandoned its appeal. Less than four months passed between designation and removal.
DJI's trajectory has been entirely different. Since its first designation in 2022, the Pentagon has renewed the designation every year, and DJI has filed suit each time. It lost at the district court in September 2025, and only with this August 2026 ruling has it finally secured a partial win — yet it still remains on the list. Counting from its initial designation, DJI has now spent nearly four years on this fight.
The reason two companies pursuing the same goal — removal from the military-company list — ended up with opposite outcomes lies in the differing strength of the grounds supporting each designation. In Xiaomi's case, the U.S. government itself concluded mid-litigation that its position was untenable and backed down before the fight even began in earnest. In DJI's case, while one pillar built on classified evidence collapsed due to a procedural defect, another pillar — the 2021 NDRC designation — remains untouched. Section 1260H of the NDAA targets companies deemed to receive capital or subsidies from the Chinese government and to contribute to its military-industrial base, and a company's record of receiving NDRC recognition and associated benefits can, on its own, satisfy that standard. As long as one pillar keeps standing even after the other breaks, DJI cannot move off the list.
List, Tariffs, Procurement Ban: Nothing Changes in Practice
As of August 14, the day the ruling came down, DJI remains on the Pentagon's "Chinese military company" list. On that very same day, the Trump administration announced new drone tariffs — 100% on aircraft over 25kg equipped with thermal cameras, and 25% on already-certified smaller aircraft — set to take effect September 3. Furthermore, since the American Security Drone Act took full effect on December 22, 2025, federal agencies and federally funded projects have already been barred from using aircraft from designated companies including DJI. The appellate ruling has stopped none of these.
This is no coincidence. What the appellate court affirmed was narrowly limited to the single point that the district court had skipped its review procedure; it made no determination whatsoever about either the substance of the classified evidence or the separate NDRC-based rationale. Reexamining the classified material after remand will take the district court considerable time, and during that time all three regulatory measures — the list, the tariffs, and the procurement ban — will continue unabated.
The beneficiaries of this arrangement are U.S.-made alternative drone makers like Skydio and Autel, which can expand their sales channels more easily as companies exempt from the federal procurement ban. Whatever DJI wins in court, the demand to replace DJI aircraft in federal procurement settings will not disappear. On the losing end are DJI itself, along with U.S. police and fire departments that have come to rely on DJI's drones in field operations for their balance of price and performance, and American consumers who will end up paying tariff-inflated prices for the aircraft.
The tightening of regulations around Chinese-made drones is not a phenomenon confined to the United States. In Japan, the Japan Coast Guard announced in 2020 its policy of halting procurement of Chinese-made drones — a move toward alignment among allied nations that predates this ruling. Regardless of how DJI's litigation plays out, there is no sign that this broader trend will reverse.
What to Watch Next After the Remand
According to Chinese state media reports, a DJI spokesperson praised the ruling as "an important step toward correcting an unjust designation." Even if DJI's internal reaction is positive, that is a separate matter from the actual scope of what this ruling accomplishes.
As of this writing, it remains unclear what the district court will do next following the remand. What the appellate court has demanded is that the classified material actually be examined and the propriety of the designation reconsidered — requiring either that the Pentagon provide a more concrete public rationale, or that the district court itself review the material in a closed hearing. Either process will take time, and no hearing schedule has yet been set. If the Pentagon discloses even part of the redacted sections, proceedings could move faster, but since lifting a classification designation itself requires separate political and security-related coordination, a simple timeline is hard to predict.
For DJI to ultimately come off the list, it is not enough for a re-examination of the classified evidence to conclude that it does not support the designation. The pillar built on the 2021 NDRC designation must also collapse simultaneously — only when both pillars fall together will the designation be lifted. Unlike Xiaomi's case, which was resolved within a few months, the road ahead for DJI will likely require at least one more round of judicial determination. All that today's ruling shows is that it is once again the Pentagon's turn to confront its evidence.