Chinese drone maker DJI has achieved a partial victory in its years-long dispute with US regulators. According to Tom's Hardware, last Friday a US appeals court found insufficient the lower court's reasoning that underpinned the company's designation as tied to China's defense sector. The decision comes against a backdrop in which DJI has been listed on the US Department of Defense's 1260H list since October 2022, and since December 2025 the FCC has banned the entry of the company's new drone models into the US market.

Court Doubts the Basis for the Designation

In the assessment of the three-judge panel, at the previous stage the judge effectively upheld the government agency's decision without having reviewed the classified portion of the report, which set out the arguments in favor of the corresponding designation. As Judge Bradley Garcia noted, the public portion of the Pentagon's December 2024 report contains only the formulation "DJI supports China's defense industry," while the entire subsequent text is redacted and unavailable in open sources. In the court's view, this deprives the agency's arguments of proper substantiation.

Procedural Violation in the First-Instance Court

The panel noted that District Judge Paul Friedman, who in September 2025 issued a ruling against DJI, was never given access to the classified portion of the Pentagon's report. His position relied on other materials in the case, which, according to the appeals court, violates the principles of fair functioning of the US judiciary. Nevertheless, on other grounds DJI's appeal was dismissed, forcing the company to remain on the "blacklist" until the lower court completes its re-examination of the case.

Market Dominance and Beijing's Support

Working against DJI was its dominant position in the global market: according to data available to the court, the company holds about 70% of the global drone market, and in the consumer segment this share reaches 90%. The loss of contracts with US agencies, in the court's view, will not be able to significantly affect the business on a global scale. At the same time, the panel upheld the argument that DJI receives support from Chinese authorities in the form of subsidies and other preferences, and the defense's attempts to deny this were not taken into account.

New Pentagon Arguments and Tariffs

In early June 2026, the Pentagon published a new edition of the 1260H list, justifying DJI's retention by its ties to China's Ministry of Industry and Information Technology and to China's security agencies. The emergence of new arguments, in the appeals court's view, calls into question the relevance of DJI's position; however, the court is not going to re-examine the June list on these grounds. In parallel, the company is challenging the US president's decision to impose a 100-percent import tariff on Chinese drones and the FCC ban on the import of all devices manufactured outside the US, including already approved models with LiDAR and thermal imaging systems.

Contradictory Data

Here the versions of the parties and the courts diverge. On the one hand, the appeals court doubted the justification of the initial designation and pointed to procedural violations, which DJI interprets as an increase in the chances of challenging the verdict. On the other hand, in June 2026 the Pentagon strengthened its position with new arguments about ties to China's MIIT and security agencies, and the appeals court itself, on other grounds, kept the company on the list and refused to re-examine the June list. Thus, formally DJI's status has not changed, although the legal basis for it has been substantially weakened.

What's Next

Now District Judge Friedman must review the classified portion of the Pentagon's report; he will decide whether DJI's lawyers get access to this information. The outcome of the re-examination will determine whether the company remains on the 1260H list and whether the FCC ban on supplying new drone models to the US market will be lifted.