New Department of Defense Disclosure Suggests That Chinese Lidar Firm’s 1260H Listing Is Not Based on Evidence of a Military Connection

Lidar technology firm Hesai (Nasdaq: HSAI) has furthered its claim that it has no association with the Chinese military, and has filed a motion for summary judgment with a U.S. court on July 3 arguing for the overturn of its designation on the Department of Defense’s 1260H list.

The motion came after the U.S. Department of Defense (DoD) released its related justification memorandum outlining its rationale for adding Hesai to the list.

According to the filing, the DoD's sole basis for designating Hesai Technology Co. Ltd. as a Chinese military company was a non-existent purported affiliation with the Chinese Ministry of Industry and Information Technology (MIIT), a regulatory and standards-setting body.

The DoD points to Hesai’s participation in public, commercial conferences and other industry standard-setting efforts, however, none of which proves that Hesai is affiliated with the MIIT. Many international companies such as Qualcomm also have representatives participate in the exact same conferences; and many international companies, including Volkswagen and Keysight Technologies also have participated in the same standard-setting activities in China.

The DoD cites certain recognitions awarded to Hesai that have nothing to do with the Chinese military. Thousands of other leading Chinese commercial companies across various industries, such as vinegar maker Shanxi Shui Ta Vinegar Co., Ltd., and bamboo panel manufacturer Hunan Taohuajiang Bamboo Materials Technology Co., Ltd. have also received the same awards. These recognitions are nothing more than means to foster local start-up companies that many governments also have done in the U.S. and elsewhere.

The DoD cites a license Hesai received from the MIIT for a separate and unrelated methane detector product to detect gas leaks. However, that license is a regulatory license that millions of other consumer electronics companies, including Apple and Tesla, hold in order to operate in the Chinese market. This regulatory protocol does not establish any affiliation with the MIIT, let alone with the military.

The “Chinese military company” designation was established by Section 1260H of the 2021 National Defense Authorization Act. It is intended to “identify each entity Secretary determines, based on the most recent information available, is operating directly or indirectly in the United States or any of its territories and possessions, that is a Chinese military company.”

Hesai, whose lidars help self-driving cars and driver-assistance systems gain a three-dimensional map of the road, was added to the designation list in January. It sued the Department of Defense in May urging for removal from the list.

The company said it “is fully committed to independence from government control or military involvement by any country, including China, and the lack of substantial evidence in the Department’s report demonstrates Hesai’s independence.”