Caixin
May 26, 2021 08:14 PM
BUSINESS & TECH

U.S. Judge Issues Final Order Removing Xiaomi From China Military Banned List

The U.S. court’s decision means the formal lifting of restrictions on American investors buying or holding securities of Xiaomi, currently the world’s third-largest smartphone-maker. Photo: VCG
The U.S. court’s decision means the formal lifting of restrictions on American investors buying or holding securities of Xiaomi, currently the world’s third-largest smartphone-maker. Photo: VCG

Smartphone-maker Xiaomi Corp. is off the hook, for now, from an order handed down in the final days of the Trump administration that placed the company on the U.S. government’s proscribed Communist Chinese military companies (CCMC) list.

A federal court in Washington issued a final order on Tuesday vacating the designation by the U.S. Department of Defense of Xiaomi as subject to sanctions for alleged ties to China’s military, the Hong Kong-listed company said in a securities filing.

The court’s move to vacate means the formal lifting of restrictions on U.S. investors buying or holding securities of Xiaomi, currently the world’s third-largest smartphone-maker and the fastest growing among the top five vendors.

“The company reiterates that it is an open, transparent, publicly traded, independently operated and managed corporation,” Xiaomi said in the filing.

The final verdict from the court coincides with the Biden administration’s decision last week to postpone the start date of a ban on new U.S. investments in a list of companies allegedly linked to the Chinese military — this time until June 11.

In mid-January, just days before Trump left office, the Defense Department, in a surprise move, added Xiaomi to the CCMC list, which includes dozens of major Chinese companies and their subsidiaries across sectors such as aerospace, energy, shipbuilding, technology and telecommunications, including Xiaomi rival Huawei Technologies Co. Ltd.

Xiaomi responded by suing the U.S. government and denying any ties with the Chinese military. In the lawsuit, it said its inclusion on the list “did not provide any explanation for (the department’s) decision to designate Xiaomi as a (Communist Chinese Military Company), let alone identify the factual basis on which the designation was based.”

In March, the company won a reprieve when a U.S. District Court judge hearing the case temporarily blocked the Defense Department move and its resulting investment ban. In his ruling, Judge Rudolph Contreras said Xiaomi was likely to win a full reversal of the ban as the litigation unfolded and issued his initial injunction to prevent the company from suffering what he called “irreparable harm.”

Later in May, Xiaomi and the Defense Department agreed to find a settlement that would see the company removed from the list.

 Read more  

In Depth: Chinese Firms Take U.S. Government to Court to Undo Trump-Era 

Xiaomi was not the only Chinese internet company that had sued the U.S. government over prohibitions issued in the Trump era. Tencent-owned social and e-commerce tool WeChat and ByteDance Ltd., the owner of short-video sensation TikTok, have taken legal action against orders to restrict their apps from operating in the U.S. due to national security concerns.

A panel of judges on the U.S. appeals court in Washington signaled skepticism in mid-December over the Trump administration’s continuing efforts to effectively ban U.S. users from downloading TikTok.

In January, a separate U.S. Court of Appeals in San Francisco also voiced doubts over government efforts to overturn an order by a lower court judge, who had granted a preliminary injunction against restrictions set on WeChat users, ruling these amounted to an outright ban and violated their right to free speech.

In February, Biden’s administration asked U.S. federal courts to pause proceedings aimed at banning TikTok and WeChat. There has yet to be any final court verdict in either case.

Chinese technology companies are not out of the woods yet from U.S. laws targeting them. Earlier in May, a conservative leader in the U.S. Congress, and vocal China critic, once again labeled TikTok a national security threat.

His comments came as he promoted a bill that would prohibit federal employees from downloading TikTok videos on government devices. The bill was passed unanimously out of the Senate Homeland Security and Governmental Affairs Committee, suggesting it has bipartisan support as it moves toward becoming law.

Yang Ge contributed to this report.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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