Hesai Says DOD Bid to Defend Chinese Military Company Designation 'Complete' Failure

The Pentagon's response to Chinese lidar company Hesai Technology's claims against its designation as a Chinese military company shows that the department "has no evidence" and "made no finding" that the company is "in any way connected to the Chinese military," Hesai said in a brief at the U.S. District Court for the District of Columbia (Hesai Technology Co. v. United States, D.D.C. # 24-01381).

DOD's "failure" to link Hesai with the "Chinese defense industrial base," as required by Section 1260H, the statute governing designations, "is so complete" that it abandons the evidence on which the designation relied and "attempts an eleventh-hour injection of new evidence." The department even "asks the Court to ignore the statutory requirement altogether," the brief said.

Earlier this month, the Pentagon defended its designation of Hesai, claiming that substantial evidence backs its finding that Hesai is a military-civil fusion contributor to the Chinese industrial base (see 2501140051). DOD laid out the following 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, Hesai's residence in a "military-civil fusion enterprise zone," and Hesai's advertisements on a non-governmental military equipment procurement platform.

In response to the government's claims, Hesai criticized DOD's reading of the applicable statutes as overbroad. The Pentagon said it's free to designate a firm a "military-civil fusion contributor" so long as its products are "dual use," meaning they have both commercial and military applications.

"But any product 'can' have military applications; the proper question under the statute is whether Hesai develops or supplies its products -- which the U.S. Department of Commerce deems suitable for export without legal restriction -- for defense purposes," Hesai said.

Accepting DOD's interpretation of the law "would give the Department carte blanche to label essentially any commercial entity in China, including hundreds of American and international companies, a 'military' company," the brief said. The Pentagon doesn't dispute this fact but merely "asks to be trusted to pick and choose which among the innumerable commercial companies" at play "deserve blacklisting," Hesai argued.

DOD hasn't shown that it "deserves" that power, it said, adding that the agency's designation "process in this case has been anything but rigorous." Hesai said it was "forced" to file suit to even "discover the listing rationale," and then was made to sift through a second designation and administrative record after the agency had to re-do the listing (see 2410230018).

Hesai said that due to the stakes surrounding being listed as a "military" company, "the least they should be able to expect from the U.S. government is a fair process, in which facts are carefully evaluated to determine if they justify a reasoned conclusion that" a firm is owned or controlled by the Chinese military or contributes to the Chinese defense industrial base. Instead, the company received "a conclusion in search of a factual justification."

"That is not the way the government is supposed to operate," the brief said.