In a joint status report filed on May 11, 2021, the Department of Defense (DOD) and Xiaomi Corporation (Xiaomi) notified the U.S. District Court for the District of Columbia that they have reached an agreement in which Xiaomi will be removed from DOD’s list of Communist Chinese Military Companies (CCMC). DOD agreed that a final order from the court vacating DOD’s January 14, 2021 designation is appropriate, and the parties confirmed they will negotiate over the specific terms of such an order.
This outcome comes after the court issued a preliminary injunction in March 2021 which prohibited DOD from enforcing its January 2021 designation. See Update of March 17, 2021. This agreement also comes only a week after DOD suffered a similar setback when the same court granted another Chinese company a similar preliminary injunction prohibiting DOD from enforcing its designation of Luokung Technology Corp. as a CCMC pursuant to Executive Order (EO) 13959 and Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (NDAA).
Under EO 13959, U.S. persons are prohibited from conducting any transaction in publicly traded securities, or securities that are derivative of, or are designed to provide investment exposure to such securities of any CCMC, subject to wind-down timelines. For additional background on this U.S. prohibition on investment in CCMCs, see Updates of November 24, 2020, and January 15, 2021.