WASHINGTON, Oct 19 — China-based DJI sued the US Defense Department yesterday for adding the drone maker to a list of companies allegedly working with Beijing's military, saying the designation is wrong and has caused the company significant financial harm.

DJI, the world's largest drone manufacturer that sells more than half of all US commercial drones, asked a US District Judge in Washington to order its removal from the Pentagon list designating it as a "Chinese military company,” saying it "is neither owned nor controlled by the Chinese military.”

Being placed on the list represents a warning to US entities and companies about the national security risks of conducting business with them.

DJI's lawsuit says because of the Defense Department's "unlawful and misguided decision” it has "lost business deals, been stigmatized as a national security threat, and been banned from contracting with multiple federal government agencies."

The company added "US and international customers have terminated existing contracts with DJI and refuse to enter into new ones.”

The Defense Department did not immediately respond to a request for comment.

DJI said yesterday it filed the lawsuit after the Defense Department did not engage with the company over the designation for more than 16 months, saying it "had no alternative other than to seek relief in federal court.”

Amid strained ties between the world's two biggest economies, the updated list is one of numerous actions Washington has taken in recent years to highlight and restrict Chinese companies that it says may strengthen Beijing's military.

Many major Chinese firms are on the list, including aviation company AVIC, memory chip maker YMTC, China Mobile , and energy company CNOOC.

In May, lidar manufacturer Hesai Group (ZN80y.F), opens new tab filed a suit challenging the Pentagon's Chinese military designation for the company. On Wednesday, the Pentagon removed Hesai from the list but said it will immediately relist the China-based firm on national security grounds. — Reuters