DJI writes to the house – DJI Ban – sUAS News – The Business of Drones

June 25, 2024

Chairman John R. Moolenaar
Select Committee on Strategic Competition between the United States and the Chinese Communist Party
United States House of Representatives
Washington, D.C. 20003

Ranking Member Raja Krishnamoorthi
Select Committee on Strategic Competition between the United States and the Chinese Communist Party
United States House of Representatives
Washington, D.C. 20003

Dear Chairman Moolenaar and Ranking Member Krishnamoorthi:

It is our understanding that the Select Committee on Strategic Competition between the United States and the Chinese Communist Party will hear testimony from a domestic drone manufacturer on June 26 at a hearing titled, “Combatting the PRC’s Strategy to Dominate Semiconductors, Shipbuilding, and Drones.”

Given that you will hear directly from one of our competitors, we want to share some facts that are vital to
this discussion. We also encourage the Committee to listen to the Americans who use DJI drones and incorporate their voices on your panel. Restricting DJI drone imports or use would have a ripple effect
throughout the entire U.S. drone ecosystem. Members of that ecosystem deserve to be heard.

• DJI was founded to develop drones that would make the world a better place and benefit society.
  From our beginnings in a single Hong Kong university dorm room in 2006, we have grown to a global company with a global workforce. Today, DJI products are redefining industries. Professionals in law enforcement, agriculture, conservation, search and rescue, energy infrastructure, filmmaking and more trust DJI. Our products bring new perspectives to their work and help them accomplish feats more safely, faster, and with greater efficiency than ever before. DJI has been credited with creating the small off-the-shelf drone category and holds or has pending more than 5,000 global patents. Thanks to this first-mover advantage and continued innovation, research, and development, global consumers choose DJI products overwhelmingly for commercial and recreational purposes.

• Impacts of proposed restrictions on DJI drones would go far beyond our company and affect
  the entire U.S. drone industry. Farmers use DJI drones to assess crop health. First responders use
  them to find missing children. Developers deploy them at construction sites to keep workers out of
  harm’s way. There are countless other applications. A recent economic impact analysis found that DJI
  enables more than $116 billion in economic activity across the U.S. and supports more than 450,000
  American jobs. If restrictions on DJI drone use or imports go into effect, these benefits to the U.S.
  economy would be at risk. It would also leave a vacuum in the U.S. drone ecosystem by removing the largest manufacturer from the market. Other manufacturers could not meet the spike in demand that would result from such restrictions. A “rip and replace” effort is bad policy; even if current domestic manufacturers could address heightened demand, these alternative drones often prove to be far less capable, cost significantly more, and are less reliable compared to DJI drones currently in use today.

• DJI is a private company and has been since its 2006 founding. The founder, Frank Wang, maintains
  control over the company, with Frank and his private-sector co-founders holding 97% of the voting
  rights and 76% of the company shares. Importantly, no government entity or its representatives sit
  on DJI’s board or have any role in its management. DJI’s remaining investors are from the private
  sector, including American investment firms, with the exception of a 5% stake with 0.6% voting rights
  that are owned by six separate entities (three state-owned banks, one state-owned insurance company, and two municipal investment funds). These enterprises are the same as any institutional investor that purchases stock in a private company, regardless of where that company is headquartered. They do not play any active role in company management, do not advise the company, and have not influenced DJI’s product development.

• DJI has not been uniquely subsidized by the Chinese government. Critics of DJI who accuse the company of receiving targeted subsidies mischaracterize the facts. DJI is treated like any other
  company in China. Companies around the world benefit from friendly macroeconomic policies in theirhome countries. For example, the United States has instituted tax credits for research & development (R&D) activities,1 small businesses, 2 and hiring specific employees. 3 On top of this, many states and municipalities also offer incentives to local businesses in their area. 4 By so broadly defining subsidization, every company taking advantage of any local policies would be considered “subsidized” as well.

• DJI does not engage in “product dumping.” DJI is able to offer its products to the global market at
  competitive pricing because it manufactures at scale to meet demand in more than 100 countries. Like any manufacturer, it is the combination of mass production, supply chain integration, global price competition, and continual investment in research and development that enables DJI to meet end user expectations. The U.S. District Court for the District of Delaware5 in 2019 confirmed this. It concluded that a DJI competitor “failed to allege a below-cost price, or other facts demonstrating that DJI sold prosumer drones in a predatory manner.” As the court determined, DJI’s practices “are fully consistent with robust competition in a growing market, including allegedly declining prices, increasing output, product innovation, and repeated new entry.”

• DJI does not manufacture military-grade equipment and does not market or sell products for use
  in combat, in China or otherwise. To be clear, DJI does not meet the statutory criteria for inclusion on
  the Department of Defense’s 1260H list, and we have written to Defense Secretary Lloyd Austin to
  request a reconsideration of our position on the list accordingly. We also oppose any outside attempts to modify our products for combat, such as attaching weapons. As such, we contractually prevent our resellers from knowingly distributing our products to anyone that intends to use them in combat. If DJI finds that a partner is selling DJI products to a customer who plans to use them for combat purposes or is helping modify products for military use, DJI terminates its business relationship with them.

• DJI absolutely deplores and condemns any use of its products to cause harm anywhere in the
  world. This is a core belief of our company. Again, DJI was founded to develop drones that would
  make the world a better place and benefit society. While we cannot control how our products are used once they are purchased, we proudly take proactive steps to prevent the use of our products for harm. For example, without any government request or action, DJI proactively suspended all business activities in Russia and Ukraine in April 2022. It was the right thing to do, so we did it. Neither DJI nor its subsidiaries have sold any products regardless of end purpose to Russian entities or distributors since then. We take any report of our resellers violating their obligations to DJI on prohibited sales seriously and will investigate to determine if a violation has occurred.

• DJI’s internal procedures dictate that the company does not do business with parties on U.S.
  sanctions lists. This includes Chinese entities on those lists – even when there is not a U.S. nexus to
  1 See https://www.irs.gov/businesses/research-credit 2 See https://www.healthcare.gov/small-businesses/provide-shop-coverage/small-business-tax-credits/ 3 See https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit 4 See the California Competes Tax Credit, for example: https://business.ca.gov/california-competes-tax-credit/ 5 See C.A. No. 16-706-LPS: https://www.ded.uscourts.gov/sites/ded/files/opinions/16-706.pdf
  such transactions. DJI also requires distributors to sign export control agreements and
  commitment letters to avoid any diversion of products to restricted parties. When a violation by a
  reseller is discovered, DJI ends its business relationships with the offending party. Further, DJI
  includes human rights compliance-related clauses in its supplier agreements. Attempts to cite a
  single 2017 memorandum of understanding as evidence that DJI provided equipment to entities in
  Xinjiang is a misrepresentation of the truth. In that case, the contracting entity was not on U.S.
  sanctions lists at the time – and importantly, that contract was never fulfilled.

• Those who use DJI products are in control of the data they collect and generate. DJI customers
  must affirmatively opt-in if they want to share photos or videos with DJI. Starting this month, to further enhance our privacy policies, DJI took the additional step of removing the option for U.S.-based users to sync flight logs with our servers. Operators can also choose to activate “Local Data Mode” to sever the connection between their flight app and the internet, or use the drone with their mobile’s “airplane mode” for further peace of mind. When “Local Data Mode” is on, the app will close all data services and will not send any network requests. More information can be found in DJI’s Trust Center.

• Independent firms and U.S. government agencies have repeatedly validated and confirmed
  DJI’s security. DJI data practices and products have received security certificationsfrom international
  and U.S. government standard-setting bodies, including ISO 27001, NIST FIPS 140-2 CMVP Level
  1, and the American Institute of Certified Public Accountants SOC2 certification. Further, a 2022 audit
  confirmed that DJI products met NIST IR 8259 and ETSI EN 303645 standards in terms of network
  security and privacy protection. They are also GDPR-compliant.

• DJI has never received any requests for data under China’s National Security Law. Like other
  global technology companies, DJI routinely receives requests for information from governments
  around the world. Our policy is only to accept requests about users operating in the country making
  the request. In addition, DJI requires all governments to produce a warrant, subpoena, or other formal legal request, which we evaluate under relevant law before producing any customer information. Crucially, DJI has no flight data to provide if customers do not choose to opt-in to share their data, or use their drone in “Local Data Mode.”

DJI fully supports efforts to ensure that drone user data remains safe and secure regardless of where those drones are manufactured. However, we are gravely concerned by approaches that put country of origin above all else, which could leave potential vulnerabilities in drones manufactured elsewhere unaddressed and prevent the people and organizations that use our drones—whether universities, businesses, farmers, consumers or first responders—from choosing for themselves which drones are best for their needs.

We welcome the opportunity to serve as a resource as Congress advances policies that will ensure the safety, data security, and continued growth of the American drone industry. We would be happy to meet with you to demonstrate the data security features on our drones or address any specific concerns.

Adam Welsh
Head of Global Policy
DJI
CC: Members of the Select Committee on Strategic Competition between the United States and the
Chinese Communist Party