Death by a Thousand and Two Hundred Sixty Cuts? PRC Companies Fight 1260H List Designations
More PRC companies are filing legal challenges against the U.S. Department of War (DoW) after their inclusion on the Department’s 1260H List in June 2026. The list includes companies that are deemed Chinese military-civil fusion (MCF) contributors, and which operate directly or indirectly in the United States. Litigation and reputational concerns, supply chain questions, and other risks are expected to increase as major corporate entities file lawsuits and attempt to allay U.S. security concerns or obfuscate risk.
June 2026 Updated List
On 8 June 2026, the DoW released the updated version of the 1260H List,[1] after briefly posting and then removing a prior update in February. Major additions to the list include Alibaba, Baidu, BYD, WuXi AppTec, and Unitree, all of which are major players in PRC industries of national interest.
The list was first authorized in section 1260H of the 2021 National Defense Authorization Act (NDAA), requiring an updated list every year. The list includes PRC companies that operate directly or indirectly in the United States and its territories, but it does not directly impose sanctions or export controls on the listed companies. Instead, the list encouraged other federal agencies to impose sanctions or export controls on the listed companies, based on individual agency responsibilities and authorities.
A 1260H designation is generally treated by the Department of Commerce’s Bureau of Industry and Security as a significant red flag, and listed entities may qualify as a Military End-User under the Export Administration Regulations (EAR).[2] Military End-Users are subject to a license requirement for export, reexport, or transfer of items covered by the EAR.
The DoW has not released any additional information regarding the newly listed companies since the update, but it created a website to help “industry partners navigate section 805 supply chain requirements.”[3] The website provides basic guidelines for the new requirements, an email address for questions, and a waiver form for companies requesting extensions to comply with the future requirement.
Section 805 of the 2024 NDAA prohibits the Department from entering into, renewing, or extending contracts directly to 1260H listed entities or their subsidiaries. Additionally, the law prohibits the DoW from contracting with any entity that retains a lobbyist that also represents a company on the 1260H list.[4] Beginning on 30 June 2027, the Department will also be banned from procuring goods or services that incorporate products or services developed by the listed entities and their subsidies, excluding basic components.[5]
PRC Companies File Legal Challenges
On 11 June 2026, three days after the updated list’s publication, WuXi AppTec—a prominent PRC biotech company—filed suit against the DoW in the United States District Court for the District of Columbia for allegedly violating the Administrative Procedure Act (APA) and the Fifth Amendment.[6] WuXi AppTec argues that the DoW has no evidence for its claim that “WuXi AppTec is indirectly owned by [the State Owned Assets Supervision and Administration Commission for the State Council (SASAC)] and indirectly affiliated with [State Administration of Science, Technology, and Industry for National Defense (SASTIND)] and the PLA (Section 1260H(g)(2)(B)(i)(I)).”[7] WuXi AppTec argues that the designation was the result of political pressure rather than an actual national security concern. It asserts that the company is publicly traded and performs no defense work and has no connections to the PRC military or China’s ruling Chinese Communist Party (CCP). The company alleges that the DoW provided no real evidence for its assertions and exceeded its authority.
On 23 June 2026, Alibaba—a major PRC technology company that operates China’s largest ecommerce platform—also filed suit against the DoW in the United States District Court for the Northern District of California (San Jose Division), alleging violations of the APA, First Amendment, and Fifth Amendment.[8] Alibaba asserts that they are an ecommerce and cloud computing company with no connection to the PRC military, refuting allegations that it is affiliated with the SASAC and China’s Ministry of Industry and Information Technology (MIIT), and associated with the MCF strategy. Alibaba’s “only connection to MIIT is the ordinary regulatory compliance that every technology company operating in China–including many American firms–must observe,”[9] according to Alibaba. Finally, Alibaba disputes the constitutionality of the 1260H rule because many of its long-time lobbyists have quit due to the rule’s lobbying restriction, alleging that the restriction constitutes stripping the company of its First Amendment rights.
Alibaba and WuXi are not the first companies to sue the DoW over the 1260H list. In 2024, DJI, the world’s leading drone manufacturer, sued the Pentagon over its inclusion on the list. DJI argued that it was not given time to protest the designation and that it did not have ties to the PRC military or the MCF strategy.
However, DJI lost the case in 2025. The court decided that even though the DoW had overstated some of its claims, there was sufficient evidence to label DJI as a PRC military company. Furthermore, the court decided that there was a clear military use of DJI’s products and that DJI’s associations made it a part of a China’s “military industrial planning ecosystem.”[10] At the end of 2025, the Federal Communications Commission (FCC) placed all foreign drone makers on its covered list, so DJI is now flagged on both the 1260H list and the FCC’s covered list.
Outlook
Looking ahead, the DoW will likely face mounting legal challenges as it targets additional firms with less explicit ties to China’s military. Some listed companies, including Baidu, said that they are prepared to “use all options available”[11] to be removed from the list, meaning there could be more lawsuits filed in the coming months. If Baidu and others remain on the list, American companies will encounter challenges untangling supply chains to comply with the DoW’s coming restrictions.
American companies, regardless of their contractual relationships with the DoW, should be prepared to comply with the DoW’s evolving rules for the 1260H list. They should also be aware of the PRC’s response to the 1260H list’s expansion and future court decisions. China issued two sets of restrictions on American companies just two weeks after the expanded 1260H list was published, even though Beijing did not specify that the restrictions were in response to the expansion of the list. China’s Ministry of Finance (MOF) also banned purchasing bodies from buying goods from 46 U.S. companies for Chinese government procurement projects.[12] Additionally, the PRC Ministry of Commerce added ten U.S. companies to the PRC’s Export Control Entity List, which restricts listed companies’ access to dual-use items.[13]
[1] https://media.defense.gov/2025/Jan/07/2003625471/-1/-1/1/ENTITIES-IDENTIFIED-AS-CHINESE-MILITARY-COMPANIES-OPERATING-IN-THE-UNITED-STATES.PDF
[2] https://www.hlc.com/en/publications/insights-us-department-of-defense-issues-updated-section-1260h-chinese-military-companies-list
[3] https://www.war.gov/News/Releases/Release/Article/4529413/department-of-war-launches-new-website-to-help-industry-partners-navigate-secti/
[4] 10 USC 4663
[5] Section 805 FY24 NDAA
[6] WuXi AppTec Co., Ltd. v. U.S. Department of Defense
[7] https://media.defense.gov/2026/Jun/08/2003945537/-1/-1/1/ENTITIES-IDENTIFIED-AS-CHINESE-MILITARY-COMPANIES-OPERATING-IN-THE-UNITED-STATES-IN-ACCORDANCE-WITH-SECTION-1260H.PDF
[8] Alibaba Group Holding Limited v. United States Department of Defense
[9] Ibid.
[10] https://www.whitecase.com/insight-alert/court-upholds-department-defense-designation-dji-chinese-military-company-cautionary
[11] https://www.bbc.com/news/articles/c75y6e5p9reo
[12] https://www.squirepattonboggs.com/insights/publications/dueling-lists-china-s-answer-to-the-section-1260h-expansion-and-the-risk-in-the-pattern-what-us-stakeholders-should-know/
[13] The U.S. companies are MP Materials, USA Rare Earth, Aveox, Red Cat Holdings and its Teal Drones subsidiary, Jaia Robotics, IMSAR, Bell Aerospace & Technologies, Oshkosh Defense, and L3Harris Maritime Services.
