The U.S. Court of Appeals for the D.C. Circuit gave DJI a partial victory on August 14, 2026, reversing one part of a lower-court decision concerning DJI’s designation as a “Chinese military company.” The ruling did not remove DJI from the Department of Defense’s Section 1260H list. Instead, it returned one disputed issue to the district court for further review.
What the Appeals Court Decided
DJI challenged its January 2025 designation on four grounds. It argued that the government denied it due process, lacked substantial evidence that DJI was receiving qualifying Chinese-government assistance, failed to explain different treatment of allegedly similar companies, and lacked support for the separate finding that DJI “contributes” to China’s defense industrial base.
The three-judge panel rejected DJI’s first three arguments. It agreed with DJI only on the fourth. In the unclassified administrative record, every word explaining the “contributes” finding was redacted except the section heading. The district court did not review the classified explanation and instead relied on arguments and evidence presented elsewhere.
The appeals court held that this approach violated the Chenery principle, which requires courts to evaluate agency action using the grounds the agency itself invoked rather than a later rationale supplied during litigation.
Why DJI Remains on the List
The appeals court affirmed part of the district court’s judgment, reversed part, and remanded the case. It did not order DJI removed from the Section 1260H list. On remand, the district court may examine the classified record and decide whether it supports the Defense Department’s finding that DJI contributes to the Chinese defense industrial base.
DJI told Reuters that the ruling was “a significant step toward correcting an unjustified designation.” A Defense Department spokesperson declined to comment on ongoing litigation. No timetable for the district court’s next decision has been announced.
The June 2026 Designation Is a Separate Complication
While the appeal was pending, the Defense Department published a new Section 1260H list in June 2026 that again included DJI and provided additional stated rationales. The current list alleges affiliations involving Chinese government and security bodies, a “Single Champion” designation, and a connection to a military-civil fusion enterprise zone.
The appeals court’s decision reviewed the January 2025 designation. It noted that the June 2026 list contains some new rationales, but said the record did not establish whether those rationales are factually supported and independently sufficient. The court expressed no final view on them.
What This Means for U.S. Drone Operators
The immediate practical position has not changed: DJI remains listed, and the litigation continues. Section 1260H restrictions affect Defense Department contracting and procurement. Reuters reports that a broader restriction on Defense Department purchases through third parties is scheduled to take effect in 2027.
The designation is not, by itself, a nationwide ban on private ownership or operation of DJI drones. State restrictions, federal procurement rules, and the FCC’s separate equipment-authorization proceeding have different legal bases and scopes. Operators should distinguish this court case from the FCC proposal affecting certain foreign-made drone equipment.
For public agencies and government contractors, the useful next step is to review the procurement rules attached to the funding and contract at issue rather than assume that every DJI flight is prohibited. For other operators, watch the district-court docket and any future Section 1260H updates.
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