Three court rulings faulted Pentagon China designations; none took a company off the list

A notice published in the Federal Register on 10 June 2026 records a decision already taken. Section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 directs, as the notice summarises it, that "the Secretary of Defense is to identify and publish a list of 'Chinese military companies' annually until December 31, 2030". The determination behind the June list is attributed to the Deputy Secretary of Defense: "The Deputy Secretary of Defense has determined that the following entities qualify for designation as 'Chinese military companies,'" the notice states. No individual is named as having made it. In the text captured for this piece the only individual identified in an official capacity is Aaron T. Siegel, whose name appears as an Alternate OSD Federal Register Liaison Officer at the Department of Defense; the notice does not present that role as the source of the determination.

What the captured text sets out are statutory criteria rather than company-by-company reasons: the entities are described as engaged in providing commercial services, manufacturing, producing or exporting, as Section 1260H(g)(2)(B)(ii) requires. Listed entities may request reconsideration, the notice adds. The consequences are not reputational alone. A WilmerHale client alert records that from 30 June 2026 the Pentagon may not enter into, renew or extend a contract to procure goods, services or technology from a listed entity, and that from 30 June 2027 the bar widens to contracts for goods or services that "include goods or services produced or developed by" one. The same alert counts the update the Department released on 8 June 2026: 65 entities added, 17 of them parent-level listings and 48 subsidiaries, with 10 previously listed entities removed. Among the names it points to on the list are Alibaba, Baidu, BYD, JA Solar and Trina Solar.

Then the designations met a court file. Three rulings, two of them dated August 2026, went against the Department in three separate cases brought by three listed companies, from the U.S. District Court for the District of Columbia and from the D.C. Circuit.

The first, in WuXi AppTec Co., Ltd. v. U.S. Department of Defense, is signed by Chief Judge James E. Boasberg and dated August 7, 2026. It takes the Department's supporting report apart rationale by rationale. The report offered two pieces of support, the first of them a 2019 web post read as demonstrating that AVIC held a 5.32% stake in the WuXi entity. From those sources, the opinion records, the Department concluded that an entity owned by SASAC held more than 5 percent of WuXi's equity. The court's verdict on that step runs to four words: "This is flat-out wrong." The 5.32% was a share of a fund's net asset value, and treating it as a share of the company was not, the opinion holds, one plausible reading among several, nor an inference from the evidence, but a misstatement.

A second rationale rested on five sets of scientific studies described as conducted with SASTIND-supervised universities; the compilation offered in support, the opinion finds, contradicts one assertion and fails to substantiate the other. A third justification repeats the same error on a smaller scale, and a single entry resting on the same mischaracterisation as the five sets of studies is the whole of the evidence connecting the company to the People's Liberation Army. On that record the court holds WuXi likely to succeed on its claim that the designation was arbitrary and capricious, and enjoins the Department from enforcing it. The opinion also records what the listing did commercially: one U.S. biopharmaceutical customer paused all engagement, and another put collaborative projects on hold. The relief is preliminary, and nothing in the opinion text captured for this piece finds the company free of military ties.

A scarlet letter sends a clear message: keep away.

The second ruling, SZ DJI Technology Co., Ltd. v. Department of Defense, No. 25-5367, was decided by the D.C. Circuit in August 2026. The public rationale for DJI's listing, as the panel quotes it, closes a circle: DJI is a "military-civil fusion contributor to the Chinese defense industrial base" because it "contributes to the Chinese defense industrial base." From that, the panel concluded that nothing stated publicly explains why the Secretary regards the company as a contributor to that base. When the government defended the listing on grounds the published record did not state, the panel called the approach a straightforward violation of the Chenery principle, the rule that a court judges an agency action only on the grounds the agency itself invoked.

The panel did not give DJI everything. On due process it held the company had failed to show it was deprived of a protected interest in property or liberty, and that its alleged losses fell well short of being broadly precluded from its chosen business. Another public element the extract recites is a set of benefits said to attach to DJI's NETC qualification: tax breaks, free cash subsidies and financial support from state-owned capital funds. The judgment below was affirmed in part and reversed in part and the case remanded; on remand, the opinion states, the district court may examine the classified record and determine whether to uphold the determination. Section 1260H allows classified information to reach the reviewing court ex parte and in camera.

The third ruling, Hesai Technology Co., Ltd v. DOD, was filed for the court by Circuit Judge Garcia. Its central finding is procedural and, on the panel's account, uncontested: "It is undisputed that the Secretary redesignated Hesai without providing Hesai the unclassified materials on which he intended to rely or an opportunity to respond before finalizing the decision." The Constitution, the opinion holds, required notice of those unclassified materials and a meaningful opportunity to respond before the designation was made final. Hesai satisfied the stigma-plus test, the reputational-harm half of it undisputed, and the opinion notes that federal law bars listed companies from some government contracts and forms of financial assistance.

The remedy stops short of removal. The district court's judgment is reversed and the matter goes back to the Secretary, but the panel writes that "we remand without vacating the 2024 designation before us". The 2024 designation stands while the process it lacked is supplied. The panel also recorded that the record does not establish that the designation lacks "continuing reputational effect", or that the "asserted failure to provide pre-designation process" will not recur.

Three companies, three findings against the Department, and not one company ordered off the list. Global Investigations Review reported that challenges to the Pentagon's listing decisions have succeeded proportionately more often than suits contesting OFAC designations, and that lawyers attribute this to "the Defense Department's relative inexperience carrying out the exercise." Set beside the June expansion, the sequence is an awkward one for the Department: 65 additions in June, and three faulted designations in the courts - though none of the captured opinions ties the designation it reviews to the June update, and the one before the Hesai panel was expressly the 2024 designation.

As analysis, on the facts cited above: what these courts faulted was the file, not the policy. Nothing in the opinion text captured for this piece holds that any of these companies is free of military ties. DJI's due process claim failed outright, Hesai's designation was expressly left in force, WuXi's relief is preliminary, and in DJI's case the government may yet prevail once the district court has examined the classified record. No response from the Department to any of the three rulings appears in the sources gathered for this piece. A falsifiable close: on this record, WuXi AppTec, DJI and Hesai are all still carried on the 1260H List on 31 December 2026.

Three things a reader can check next, one of them with a date attached. The proceedings on remand in the case docketed at the D.C. Circuit as No. 25-5367, where a district court may now read the classified record behind DJI's listing. Hesai's designation, back with the Secretary for the process the panel says was owed. And 30 June 2027, when the second procurement bar takes effect and reaches contracts for goods or services produced or developed by any entity still on the list that day.