US Defends DOD's Definition of Affiliation in Designating Chinese Military Companies in DC Court

The U.S. defended its designation of Chinese lidar company Hesai Technology as a "Chinese military company" in a Feb. 12 brief at the U.S. District Court for the District of Columbia, responding to a host of arguments from Hesai claiming that the designation wasn't backed by substantial evidence and committed various legal errors (Hesai Technology Co. v. United States, D.D.C. # 24-01381).

DOJ walked through the four criteria under which the Pentagon made its listing designation, claiming that "ample evidence supports each" basis for designating Hesai. The government also argued that the statute under which DOD made the listing, Section 1260H, "does not require DoD to establish that Hesai independently satisfies the definition of a 'military-civil fusion contributor' and contributes to the 'Chinese defense industrial base.'"

DOD outlined four rationales for the designation: Hesai's receipt of assistance from the Chinese government through "science and technology efforts," Hesai's research ties to the Chinese Ministry of Industry and Information Technology (MIIT), Hesai's residence in a "military-civil fusion enterprise zone," and Hesai's advertisements on a non-governmental military equipment procurement platform (see 2501140051).

Among other things, Hesai urged the court to accept its definition of the term "affiliated with" in the statute, which centers on "effective control" (see 2501310061). In response, the U.S. said that while there's no definition of the term in Section 1260H, Congress defined the term in a later bill as "in close formal or informal association." And while this definition doesn't control here, "it clarifies Congress’ intent that the term bear its plain meaning and not the specialized, restrictive meaning Plaintiffs ascribe to it," the brief said.

Hesai also argued that it would be "absurd" for Congress to make it easier for a company to qualify as a Chinese military company based on associations with MIIT than with the Chinese military itself. DOJ said in response that this "was the precise intent, and it is not this Court’s task to second-guess Congress’ judgments or to rewrite Congress’ language."

The lidar company also challenged the actual finding that it was affiliated with MIIT, arguing that its research programs and projects with the ministry are too indirect to establish affiliation. DOJ said in response that Hesai tries to "minimize and downplay the numerous threads connecting it to MIIT." However, the statute has no requirement that "second- and third-order connections" to the ministry or connections to MIIT shared by other firms "cannot show an affiliation with MIIT" if the "sum of the weight of those connections" leads to a "common purpose, shared characteristics, or a close association with MIIT," the brief said.

Hesai also argued that Section 1260H requires that a designated company must know that assistance it received from the Chinese government was initiated under China's military industrial planning apparatus. The U.S. said that no such requirement exists. Congress "was concerned about symbiotic relationships between Chinese government entities and Chinese companies," and, as a result, there's no reason to suggest that this further showing must be made, the brief said.

The lidar company also said the Pentagon made a legal error in construing the statute, arguing that DOD must make separate findings that an entity is a "military-civil fusion contributor" that contributes "to the Chinese defense industrial base."

DOJ claimed that the statute says "military-civil fusion contributor" includes eight types of entities, meaning that if DOD finds that an entity is one of these types, it must identify the entity as a "military-civil fusion contributor to the Chinese defense industrial base." If the Pentagon then finds that the entity is "engaged in providing commercial services, manufacturing, producing, or exporting," then the entity is deemed a "Chinese military company." That is all the statute requires, the U.S. said.

The brief said there's a "common-sense difference" between a company making "everyday items that both civilians and military personnel happen to use," and a company that makes "advanced laser technology that is recognized as a dual-use technology with substantial applications in the military sector."

DOJ added that Hesai's claim that the end of Chevron deference means the end of heightened deference in cases involving national security is mistaken. Chevron deference "is not the same as deference given to evidence presented by the federal government in foreign affairs and national security cases," the brief said.