DOD Backs Designation of Lidar Firm as Chinese Military Company in DC Court

DOD laid out four rationales for the designation:

• Hesai knowingly received assistance from the Chinese government through "science and technology efforts initiated under the Chinese military industrial planning apparatus"
• Hesai is "affiliated" with the Chinese Ministry of Industry and Information Technology through research partnerships and projects
• Hesai resides in or is affiliated with a "military-civil fusion enterprise zone"
• Hesai advertises on a non-governmental military equipment procurement platform.

In its cross-motion, the Pentagon defended each of these four rationales, though it opened its argument by supporting its definition of the term "affiliated with," since it's not defined in Section 1260H -- the statutory basis for the designation. DOD said a "broad definition of that term is warranted given that the term’s ordinary definition refers to associations 'on the basis of a common purpose or of shared characteristics.'"

A "logical understanding of the statute" finds that Congress meant to include companies for whom the "total context of their operations, funding, and associations" shows that they share a "common purpose with the Chinese state, a dependency, or a set of characteristics" with the Chinese Ministry of Industry and Information Technology, the brief said. While Hesai said Section 1260H requires effective control over a company by the Chinese ministry, DOD said when a "statute's language is plain," the court must enforce it "according ot its terms," adding that when a term is undefined, the court must be guided by the term's "regular usage."

If Congress meant for the definition of a Chinese miliary company to include only entities that are effectively controlled by the Chinese military, "it would simply have said as much," DOD argued.

The Pentagon then defended each of its four rationales as being backed by substantial evidence. On Hesai's alleged affiliation with the Chinese Ministry of Industry and Information Technology, DOD said evidence shows that the ministry administers the "Little Giants" program of which Hesai is an "officially recognized company," administers and backs various research programs that Hesai participates in, oversees an "industry partnership in which Hesai participates" and provided an "administrative license to Hesai."

Throughout its defense, the Pentagon said no single factor is meant to be judged in "isolation" but in combination with all the other evidence. Responding to Hesai's claim that the research projects and partnerships aren't enough to prove affiliation with the Chinese industry ministry, DOD said that the law doesn't require the ministry to be more "intimately" involved in those partnerships and projects. "The statute defines the research partnerships and projects that qualify broadly," and DOD "reasonably" said the partnerships and projects "supported, funded, approved, or facilitated" by the ministry are enough to "form another data point demonstrating" affiliation, the brief said.

The Pentagon defended its rationale that Hesai knowingly received science and technology-related assistance from the Chinese government by noting the subsidies and assistance it received from the Chinese government and China's National Development and Reform Committee. Hesai argued that Congress required DOD to show that an entity knows that such assistance was initiated under the Chinese "military industrial planning apparatus." In response, the Pentagon said Section 1260H isn't a criminal statute, making it irrelevant "whether such an entity is aware or not whether the assistance it received had been initiated under China’s military industrial planning apparatus."

On whether Hesai resides in or is affiliated with a military-civil fusion enterprise zone, DOD noted that Hesai has a presence in both the Chongqing Economic Development Zone and the Jiading Industrial Zone, both of which qualify as military-civil fusion enterprise zones. Hesai challenged this rationale, noting that companies like Amazon and Volvo also have a presence in these zones.

The Pentagon said in response that it's reasonable to find that Amazon and Volvo don't have a presence in these zones, since "the national security risk associated with a company that is not developing, producing, or supplying military or dual-use products does not rise to the level of a company (such as Hesai) that produces dual-use products."

Regarding the fourth rationale, DOD said Hesai advertises on the website of "Beijing Huawei Technology," arguing that there "can be no serious disagreement" that the website is a non-governmental military equipment procurement platform. The site sells "new products in high-tech fields" for use in weapons.

In addition to defending its listing decision on an evidentiary basis, DOD argued that it wasn't required to independently show that Hesai contributed to the Chinese defense industrial base and that it didn't commit any due process violations by listing Hesai. Contrary to the lidar company's claims, "Congress did not require DoD to demonstrate that an entity separately meets the definition of 'a military-civil fusion contributor,' and 'contribut[es] to the Chinese defense industrial base,'" the brief said.

Claiming foul on the due process front, Hesai argued that the listing prevented it from pursuing DOD contracts. The government said this claim is "unripe," claiming that Hesai can't show that it will be barred from bidding on DOD contracts in 2026, "especially when they disclaim any present intention to do so -- but instead ask the Court to impermissibly adjudicate a 'hypothetical set of facts.'" Since the company doesn't plan to bid on DOD contracts, "there is no hardship."

While Hesai also claims it has suffered reputational harm, it's "well established that reputational harm alone is not sufficient to demonstrate a deprivation of a liberty or property interest such that they should be afforded due process rights," the brief said.