A US federal appeals court has ordered a lower court to reconsider whether DJI should remain on the Department of Defense's Chinese Military Companies list, ruling that the district court erred by concluding from unclassified records alone that the Chinese drone maker contributes to China's defense industry. The US Court of Appeals for the District of Columbia Circuit directed the lower court to provide a reasonable public explanation for any decision and said it may review classified records on remand before deciding whether to uphold the Pentagon's designation. The ruling marks a significant procedural win for DJI, which was added to the list in 2022 and has argued that the designation is unlawful and misleading. A DJI spokesperson called the decision "an important step toward correcting an unjust designation," while the Department of Defense said it does not comment on pending litigation. DJI has said the listing cost it contracts, limited its ability to work with some US federal agencies, and stigmatized the company as a national security threat. The case carries broader implications because companies on the blacklist face restrictions on contracting with certain Pentagon contractors, with wider procurement prohibitions due to take effect in 2027. The appeals court's decision could shape how the Defense Department must justify future Chinese Military Companies designations, especially when classified information is involved, as more Chinese firms challenge their inclusion.