Federal Court Enjoins DoD Designation of WuXi AppTec as a “Chinese Military Company” Under Section 1260H

Executive Summary

On August 7, 2026, Chief Judge James E. Boasberg of the U.S. District Court for the District of Columbia granted a preliminary injunction barring the Department of Defense from enforcing its designation of WuXi AppTec Co., Ltd. (“WuXi”) as a “Chinese military company” under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021 (the “1260H List”). The court found that WuXi established a likelihood of success on the merits of its claim that the designation was arbitrary and capricious under the Administrative Procedure Act (APA), concluding that all three rationales offered by DoD were factually deficient. The ruling has significant near-term implications for WuXi’s commercial relationships and whether it will be ultimately designated as a biotechnology company of concern (BCC) under the BIOSECURE Act.

Our prior alert on the DoD’s designation of WuXi to the 1260H List and the related implications under the BIOSECURE Act is available here.

Case Background and Ruling

On June 8, 2026, DoD published an updated Section 1260H List that included WuXi alongside BGI Group, MGI Tech Co., Ltd., and Complete Genomics, Inc., among other companies. The designation of WuXi was supported by a single-sentence justification: “WuXi AppTec is indirectly owned by SASAC and is indirectly affiliated with SASTIND and the PLA.”

WuXi promptly challenged the designation in the U.S. District Court for the District of Columbia, asserting, among other arguments, substantive and procedural claims under the APA. The preliminary injunction motion addressed only the substantive APA claim, which challenged the DoD’s justification as arbitrary and capricious. The court addressed each of the stated reasons provided by DoD for including WuXi on the 1260H List and found all to be factually deficient, as further explained below.

1. Indirect Ownership by SASAC

The court held that DoD relied on a web posting indicating that AVIC – an enterprise owned by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) – “held a 5.32% stake” in WuXi.¹ The court found this assertion “flat-out wrong,” explaining that the DoD had confused the percentage of an AVIC fund’s portfolio invested in WuXi stock with the percentage of WuXi’s equity owned by that fund. The court concluded that AVIC’s actual position amounts to approximately $200,000 in publicly traded shares, or roughly 0.001% of WuXi’s equity.²

2. Indirect Affiliation with SASTIND

The DoD cited a compilation of approvals from the Ministry of Science and Technology of the People’s Republic of China (MOST) for clinical drug studies, in which WuXi appeared.³ However, the court found that WuXi was listed solely as a “Third-Party Laboratory,” a category separate from the applicants and medical institutions conducting the research.⁴ This did not support the DoD’s claim that WuXi “received approval from MOST” or conducted research “in partnership with” State Administration of Science, Technology and Industry for National Defense (SASTIND)-supervised universities.⁵

3. Indirect Affiliation with the PLA

The DoD’s sole evidence of an indirect affiliation with the People’s Liberation Army (PLA) was a single entry showing that a WuXi subsidiary served as a third-party laboratory for a study conducted at the PLA General Hospital.⁶ The actual applicant for the study was a European pharmaceutical company.⁷ The court characterized this as the same type of mischaracterization underlying the SASTIND rationale.⁸

Scope of Preliminary Injunction

The court concluded that a preliminary injunction was warranted because WuXi is likely to succeed on the merits of its claim that the Section 1260H designation was arbitrary and capricious, and WuXi had demonstrated that the designation had imposed irreparable harm—evidence showed that WuXi’s customers had terminated, paused, or redirected programs within weeks of the designation.⁹

The preliminary injunction bars the DoD from enforcing the 1260H designation as to WuXi during the pendency of the litigation. However, the court expressly noted that the injunction does not prevent the DoD from redesignating WuXi “on a justification that accurately describes the evidence and reasonably explains why that evidence satisfies the statute.”¹⁰

Implications Under the BIOSECURE Act and Other Federal Laws

BIOSECURE Act

The preliminary injunction has direct implications under the BIOSECURE Act and other federal laws. The Section 1260H designation serves as a necessary predicate for BCC status through one of the Act’s two designation pathways, which requires a company to both appear on the 1260H List and be involved in the manufacturing, distribution, or procurement of biotechnology equipment or services.¹¹ Unless the DoD ultimately prevails on the merits in the current case or DoD redesignates WuXi as a 1260H-Listed entity on a different justification which can withstand judicial scrutiny, WuXi cannot be listed as a BCC through the above-described pathway.

However, the Office of Management and Budget, which is responsible for publishing the initial BCC list, may still list WuXi through the second pathway for designation, requiring that the company “(i) is subject to the administrative governance structure, direction, control, or operates on behalf of the government of a foreign adversary; (ii) is to any extent involved in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service; and (iii) poses a risk to the national security of the United States” based on statutorily defined criteria.¹²

The OMB Director is expected to release the initial list of BCCs by December 18, 2026. If WuXi is ultimately included on the BCC list through either of the BIOSECURE Act’s pathways, federal agencies and entities that are federal contractors or receive federal grant or loan funding will be prohibited from procuring biotechnology equipment or services provided by WuXi in the course of performance of federal contracts or in relation to received federal grants or loans. Such prohibition would likely begin around August 2028, though the Act provides a five-year grandfathering provision for existing contracts.

The BIOSECURE Act also includes a provision allowing entities designated as BCCs to request removal from the BCC list by submitting information and arguments to the OMB Director, who must respond within 90 days.¹³ As WuXi publicly stated its intent to “pursue all available remedies” for removal from the 1260H List upon its designation in June, it may well pursue this pathway in the event that it is ultimately listed as a BCC.

Other Federal Laws

Beyond the BIOSECURE Act, the preliminary injunction prevents WuXi from facing several additional and more immediate consequences of inclusion on the 1260H List. For example, § 805 of the 2024 National Defense Authorization Act prohibits the DoD from entering into, renewing, or extending contracts for goods, services, or technology with entities on the 1260H List.¹⁴ Beginning June 30, 2027, that prohibition extends to goods or services procured through DoD contractors.¹⁵ Additionally, in March 2026, the Office of the Undersecretary of Defense released an updated version of its Component Decision Matrix to Inform Fundamental Research Proposal Mitigation Decisions, which states that “funds appropriated for the DoW may not be used for grants, contracts, other transactions or other assistance to an institution of higher education if the purpose is to conduct fundamental research in collaboration with, or using equipment from, any entity named on any of the ‘Prohibited Entity Lists’”—the “Prohibited Entity Lists” construct was introduced this year and includes the 1260H List.¹⁶

Next Steps

Companies and institutions that are federal government contractors or grant or loan recipients should continue actively to monitor their supply chains and vendor lists, as it is possible that other companies that have been designated to the 1260H List may pursue litigation to challenge such designation under theories similar to those advanced by WuXi, or may challenge their designation as BCCs under the BIOSECURE Act’s removal provision after OMB releases the initial list of BCCs later this year. Though such challenges inject a level of uncertainty into which entities will ultimately be subject to the BIOSECURE Act and other federal law provisions that rely on the 1260H List, consistent monitoring will provide companies and institutions flexibility to consider changes in procurement strategy with regard to biotechnology products and services.