Xiaomi Sues US Government Over Trump Administration Order Designating It As A 'Communist Chinese Military Company' And Banning Americans To Own Its Shares

Xiaomi Corporation, the world’s third-largest smartphone manufacturer, has sued the United States government seeking to undo a ban by Donald Trump administration prohibiting US investors from owning the company’s shares.

In a filing at the US District Court of Columbia, Xiaomi contented that the executive order by US Department of Defence (DOD) designating it as a Communist Chinese military company (“CCMC”) is “unconstitutional” and it deprives it of its liberty and property rights without due process of law".

In its lawsuit, Xiaomi argued that by DOD failed to provide a reasoned explanation for designating it as a CCMC, and by making a designation decision the DoD and Treasury department engaged in "arbitrary and capricious decision making".

“Xiaomi faces imminent, severe, and irreparable harm if the Designation remains in place and the restrictions take effect,” the company said in its lawsuit against Defence Secretary Lloyd Austin and Treasury Secretary Janet Yellen, both appointees of newly elected President Jo Biden.

On Jan 15, the U.S defence department banned Americans from investing in the Chinese technology firm Xiaomi by adding it to a list of companies that the department says support China’s military.

The order by Trump administration banned U.S. investors from buying Xiaomi stock (after 60 days from the date of the order) and also gave a year to sell existing holdings. The order, that was issued in accordance with an executive order issued by President Trump, had sent the company’s Hong Kong-listed shares tumbling almost 14 percent.

US investors make up the third-largest group of holders of Xiaomi’s share.

Xiaomi had strongly reacted against the addition to the U.S. investment blacklist. It maintained that it provides products and services for civilian and commercial use and is not owned, controlled or affiliated with the Chinese military. The company said it would take appropriate action to protect itself and its shareholders.

Xiaomi however was not added to the Commerce Department’s “entity list” which prohibits companies from exporting U.S.-created technology to firms without a license. Xiaomi continue using Qualcomm chips and the Android operating system from Alphabet

The Trump administration had also placed Chinese telecommunications equipment behemoth Huawei Technologies Co, chip maker Semiconductor Manufacturing International Corporation and drone manufacturer DJI on sanction lists that barred them from using US hi-tech hardware and software.