BREAK: DJI has added bad news for the Chinese company to the “List of Entities” of the US Department of Commerce

An updated “entity list” is bad news for the world’s largest drone manufacturer. DJI was put in the company of Huawei and others, a move that will have negative consequences for the company. I just received words through a conference call with the US Department of Commerce.

Surprisingly, the US Department of Commerce cited “human rights abuses” and not the expected reasoning of data security.

The Bureau of Industry and Security is part of the US Department of Commerce. And it maintains a list that includes “enterprises, research institutions, governmental and private organizations, individuals and other legal entities” that are subject to additional control and licensing requirements for the export and transfer of specific items. Huawei is one of the Chinese companies on this list because of concerns about the security of the company’s products.

Now DJI has been added to the list. And this is very bad news for the Chinese company.

Some saw this coming

It has been speculated that this move may come, and it is here now. It will take effect at 11:15 a.m. on Friday, December 20, when the list will be published publicly.

Why is DJI on the list? According to a briefing, it is not about the data security of DJI products – which DJI has repeatedly stated is not a problem. Instead, the US government considers DJI to have played a role in oppression and other human rights violations in China.

Now, you might be wondering how this could be possible. But in China, DJI products were allegedly used by the ruling Communist Party for surveillance and other human rights issues. It is said that an infamous video of Uyghurs with handcuffs, a persecuted Muslim minority, was shot by a DJI product operated by the state security.

Shot, apparently, with a DJI drone

The entire List of Entities is somewhat complex, so we’ll stick here directly from the Office of Industry and Security of the Department of Commerce or BIS:

The list of entities identifies foreign parties who are prohibited from receiving some or all of the items covered by the EAR (Export Management Regulations), unless the exporter obtains a license. These parties have a higher risk of diversion to weapons of mass destruction (WMD) programs, terrorism or other activities contrary to US national security and / or foreign policy interests. By publicly listing these parts, the List of Entities is an important tool to prevent unauthorized trade in EAR items. The BIS may add to the list of entities a foreign party, such as an individual, a business, a research institution, or a government organization, to engage in activities contrary to US national security and / or foreign policy interests. In most cases, license exceptions are not available for export, re-export or transfer (within the country) to a part of the Entity List of EAR items. Rather, prior authorization of the license is required, usually subject to a refusal policy.

US Bureau of Industry and Security

The semiconductor manufacturer SMIC is also on the list

The Bureau of Industry and Security also added Semiconductor Manufacturing International Corporation (SMIC) of China to the List of Entities. A BIS statement said that “BIS is taking this action to protect US national security.” The statement suggested that there was “evidence of activities” between SMIC and other “entities of interest” within China’s military-industrial complex.

We will not allow US advanced technology to help build an increasingly belligerent adversary’s army. Between SMIC’s troubled relations with the military-industrial complex, China’s aggressive enforcement of military merger mandates, and state-directed subsidies, SMIC perfectly illustrates the risks of China’s influence of US technology to support its military modernization. Restrictions on the list of entities are a necessary measure to ensure that China, through its national SMIC champion, is not able to capitalize on US technologies to allow indigenous high-tech levels to sustain their destabilizing military activities.

Wilbur Ross, Secretary of Commerce

What does this mean for DJI?

In the case of Huawei and SMIC, being on the list of entities means that companies cannot access certain technologies in the US. In the case of SMIC, for example, the action would prevent the acquisition or transfer of US technology that would help it manufacture chips.

We assume that the same will apply to DJI and I contacted the company for comments.

Why has everything become a challenge for DJI?

DJI is based in Shenzhen, a “special economic zone” with free wheels. That city is like steroid capitalism and does not feel, at least on the surface, as if it were part of a communist system in which the party is omnipotent.

But under the veneer of Shenzhen, is still China. And that means it is part of a system in which there are undeniable violations of human rights and widespread surveillance of its citizens. (The Communist Party even monitors all social media posts, and people have been imprisoned for crossing the line.)

DJI products, of course, can be used for surveillance purposes. Government security forces have used and are using DJI drones for this purpose. During a telephone briefing given today by the Bureau of Industry and Security, officials spoke of “oppression” and “blatant human rights practices.”

Apparently, any legally controlled subsidiary of DJI is subject to the same restrictions as the List of Entities.

What does this mean for consumers of DJI products?

Our understanding is that it does not it means that DJI products will be banned in the US, or at least that is our understanding. You will still be able to purchase the drone of your choice, just as you can still purchase Huwei products.

But if Huawei and SMIC are any indication, the transfer of any sophisticated technologies from the US to DJI will face restrictions and licenses – and they may not be allowed to continue. I asked former DJI employee David Benowitz, now with DroneAnalyst, for his comments:

The DJI that will be added to the list of entities will have serious repercussions for the drone industry, not only in preventing DJI from procuring US-made chips, sensors and other technologies, but also in limiting the availability of cheap and affordable drones for businesses and consumers. It is important to note that DJI has already started moving away from US suppliers before this announcement, just this week they moved away from the integration of US FLIR sensors in their latest drone hardware.

David Benowitz, DroneAnalyst

But the long-term implications?

If DJI is kept on the list of entities for a while, we will see an additional divergence in drone supply chains in the US and China, which has been happening for some time now. China has been in charge since the birth of the drone industry, but moving its main manufacturer to the list of entities will open up opportunities for American drone startups such as Skydio, Inspired Flight, FreeFly, Vantage Robotics, Teal Drones and many more.

David Benowitz, DroneAnalyst

Benowitz also weighted in online:

I also contacted Ian Smith, CEO of WareRobotics, via Twitter:

We don’t know how much the US-made technology that DJI is based on is based, but there are probably some. In the case of Huawei, the company’s phones are still sold in the US, but Huawei-specific applications are not on Google Play.

In the absence of additional information, we will not speculate on wider implications for DJI until we have more facts. We hope to provide interviews and we will update as soon as we have more information.

This post will be updated frequently; please check again.

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