Wuxi Apptec Co., Ltd. v. U.S. Department of Defense

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA WUXI APPTEC CO., LTD., Plaintiff, v. Civil Action No. 26-2069 (JEB) U.S. DEPARTMENT OF DEFENSE, also known as U.S. DEPARTMENT OF WAR, et al., Defendants. MEMORANDUM OPINION A scarlet letter sends a clear message: keep away. With that understanding, the Department of Defense — also known as the Department of War — publicly designated Plaintiff WuXi AppTec Co., Ltd., a “Chinese military company” under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021. Congress created the Section 1260H list in part to warn others away from listees, and it has stacked serious consequences atop designation: a bar on Department contracts, limits on certain federal funds, and the necessary predicate for treatment as a “biotechnology company of concern” under the BIOSECURE Act. Many have reacted accordingly. In the weeks since publication, WuXi’s customers and suppliers have canceled contracts, terminated longstanding relationships, and moved their business to competitors. Plaintiff responded with this suit and now seeks a preliminary injunction barring Defendants from enforcing or giving effect to the designation while this case proceeds. As the Department’s justifications stray from the record, the Court concludes that Plaintiff has 1 established a likelihood that the designation was arbitrary and capricious under the Administrative Procedure Act. The designation, meanwhile, is inflicting harm on WuXi that later relief cannot repair. Because the remaining injunction factors also favor Plaintiff, the Court will grant the Motion and preliminarily enjoin Defendants from enforcing or giving effect to the designation. I. Background A. Statutory Background Congress’s efforts to identify companies with close ties to the Chinese government are not new. Stretching back to 1998, Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 directed the Secretary of Defense to identify “Communist Chinese military companies” operating in the United States. That category included entities identified in Defense Intelligence Agency publications along with companies owned or controlled by the People’s Liberation Army (PLA) that engaged in commercial services, manufacturing, production, or exporting. See Pub. L. No. 105-261, § 1237(b)(1), (4), 112 Stat. 1920, 2160–61 (1998). By 2004, Congress concluded that the definition overlooked “a class of firms engaged in Chinese military modernization.” H.R. Rep. No. 108-491, at 367 (2004). It therefore expanded the statute to encompass companies linked to the PLA or Chinese government ministries, as well as companies owned or controlled by China’s defense-industrial base. See Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, § 1222, 118 Stat. 1811, 2089 (2004). The present regime took shape in 2021, when Congress enacted Section 1260H and created a new category of “Chinese military companies.” The term reached entities with specified ownership, control, beneficial-ownership, or agency relationships with the PLA or 2 organizations subordinate to the Central Military Commission, as well as “military-civil fusion contributor[s]” to China’s defense-industrial base. See William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283, § 1260H(d)(1)(B), 134 Stat. 3388, 3965–66 (2021) (codified as amended at 10 U.S.C. § 113 note). Congress broadened the former category in December 2024 by adding “affiliated with” as a qualifying relationship and expanding the roster of covered entities. See Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025, Pub. L. No. 118-159, § 1346(2)(B)–(C), 138 Stat. 1773, 2124 (2024). That history yields the present governing framework. Under Section 1260H, to be so designated, a “Chinese military company” must be “engaged in providing commercial services, manufacturing, producing, or exporting.” § 1260H(g)(2)(B)(ii). It must also satisfy one of two routes to designation. The first, and the one relevant here, includes an entity that is directly or indirectly owned by, controlled by, or beneficially owned by, affiliated with, or in an official or unofficial capacity acting as an agent of or on behalf of, the People’s Liberation Army, Chinese military and paramilitary elements, security forces, police, law enforcement, border control, the People’s Armed Police, the Ministry of State Security (MSS), or any other organization subordinate to the Central Military Commission of the Chinese Communist Party, the Chinese Ministry of Industry and Information Technology (MIIT), the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), or the State Administration of Science, Technology, and Industry for National Defense (SASTIND). § 1260H(g)(2)(B)(i)(I) (emphasis added). Three pieces of the governing language warrant elaboration. First, Congress defined “affiliated with” to mean “in close formal or informal association.” § 1260H(g)(1). Second, the “People’s Liberation Army” includes the “land, naval, and air military services, the People’s Armed Police, the Strategic Support Force, the Rocket Force, and any other related security or 3 intelligence element . . . Secretary deems appropriate.” § 1260H(g)(5). Third, the statute names SASAC and SASTIND without definitions. The record describes SASAC as a “ministerial-level organization” of the Chinese State Council that “supervises and manages the state-owned assets of enterprises under the supervision of the Central Government.” ECF No. 17-1 (Administrative Record) at AR4626–27. SASTIND oversees the science-and-technology component of China’s defense industry by “coordinating scientific research into weapons, nuclear equipment, aviation, and other military-industrial capabilities.” ECF No. 17 (Opp.) at 5. Separate provisions govern the listing process. The Secretary must identify each qualifying entity that, “based on the most recent information available,” operates directly or indirectly in the United States. See § 1260H(a). Each year, he must submit classified and unclassified versions of the list to the Armed Services Committees of the House and Senate and concurrently publish the unclassified list in the Federal Register. See § 1260H(b)(1)–(2). That publication must contain a justification for each company’s inclusion. See § 1260H(b)(2)(B). At least annually, the Secretary must revisit the list and add or remove companies as appropriate, supplying a justification for either action. See § 1260H(b)(1), (3). While Section 1260H began as a reporting regime, Congress has since made designation the trigger for restrictions that have bite. As of June 30, 2026, the Department “may not enter into, renew, or extend a contract for the procurement of goods, services, or technology” with a designated company. See National Defense Authorization Act for Fiscal Year 2024, Pub. L. No. 118-31, § 805(a)(1)(A), (b), 137 Stat. 136, 315–16 (2023). DoD also may not contract with an entity that retains a lobbyist who simultaneously represents a designated company. See 10 U.S.C. § 4663(a), (d)(1). For fiscal year 2026, the Department of Homeland Security operates under a comparable restriction. See Department of Homeland Security Appropriations Act, 4 2026, Pub. L. No. 119-86, § 535, 140 Stat. 773, 804 (2026). Designation also forecloses certain Department of Energy support and participation in specified federal research and manufacturing programs. See 42 U.S.C. § 18912(a)(2)–(3), (c)(1)–(2); id., § 19235. A further consequence may arise under Section 851 of the recently passed National Defense Authorization Act for Fiscal Year 2026, commonly called the BIOSECURE Act. That Act directs the Director of the Office of Management and Budget, acting in consultation with the Secretary of Defense and other agency heads, to publish by December 18, 2026, an initial list of “biotechnology companies of concern.” Pub. L. No. 119-60, § 851(f)(1), 139 Stat. 718, 984 (2025). To qualify as such, a company must both appear on the Section 1260H list and be “to any extent involved in the manufacturing, distribution, provision, or procurement of any biotechnology equipment or service.” Id., § 851(f)(2)(A), 139 Stat. at 984. A Section 1260H designation is therefore necessary, but not sufficient, for inclusion. Once the Act’s restrictions become operative, executive agencies may not procure equipment or services “produced or provided by a biotechnology company of concern,” nor may they contract with an entity that “uses” such equipment or services “in performance of [a] contract with [an] executive agency.” Id., § 851(a)(1)–(2), 139 Stat. at 981–82. Agencies likewise may not “obligate or expend” loan or grant funds for the procurement or use of such equipment or services. Id., § 851(b)(1), 139 Stat. at 982. The Act accordingly affects not only biotechnology companies of concern, but also customers that rely on their equipment or services in federally contracted or funded work. 5  B. Factual Background 1. WuXi AppTec Co., Ltd. Plaintiff WuXi AppTec (WXAT) “is a global provider of services to pharmaceutical and life science companies.” ECF No. 1 (Compl.), ¶ 18; see also ECF No. 13-22 (Declaration of Steve Qing Yang), ¶ 2 (describing WXAT as “Contract Research, Development, and Manufacturing Organization” or “CRDMO”). Founded in 2000, the company does not sell its own products but supports customers throughout the drug-development lifecycle — from discovery and testing through large-scale manufacturing — to advance projects addressing cancer, HIV, obesity, diabetes, and cardiovascular disease. See Yang Decl., ¶¶ 2, 10, 18. More than 4,000 customers across the globe, including leading pharmaceutical companies, use those services. See Compl., ¶¶ 3, 13; Yang Decl., ¶ 10. Although incorporated in China and traded on the Hong Kong and Shanghai stock exchanges, see Compl., ¶ 13, Plaintiff maintains U.S. ties that are far from de minimis. WXAT operates six facilities in the United States, employs roughly 450 people here, and serves more than 1,000 U.S. customers. See Yang Decl., ¶¶ 8, 17–19. A majority of the company’s Board of Directors and executive managers are U.S. citizens — among them is founder, Chairman, and Chief Executive Officer Dr. Ge Li, who stands as the company’s controlling shareholder. Id., ¶ 17; Compl., ¶ 21. Customers in the United States accounted for roughly 70% of WXAT’s 2025 revenue, compared with 15% from China and 11% from Europe. See Yang Decl., ¶ 13. The company’s recent domestic investment includes a 190-acre manufacturing site in Middletown, Delaware, built at a cost of approximately $600 million and scheduled for completion this year. Id., ¶ 18. 6  2. 1260H Designation WXAT’s appearance on the 1260H list followed years of exchanges with the Department of Defense. On August 26, 2024, Plaintiff briefed Department officials, presenting “information about the [c]ompany’s business,” advancing its position that it does not meet Section 1260H’s criteria, and disputing reports linking it to the PLA. Id., ¶ 25; Compl., ¶ 28. In response to a slew of follow-up questions from the Government, WXAT provided written responses stating that it had “never received financial sponsorship from the Chinese Communist Party (‘CCP’), PLA, or Chinese Academy of Sciences.” Yang Decl., ¶ 25. When the next 1260H list was published on January 7, 2025, Plaintiff’s name was absent. See Compl., ¶ 30. Whatever comfort WXAT drew from that omission soon evaporated. With amendments to Section 1260H changing the landscape for designation, the company reached out to the Department on August 25, 2025, to make its case anew. Id., ¶ 31. A meeting set for October was postponed to November given a lapse in appropriations. Id. In the interim, however, Deputy Secretary of Defense Steve Feinberg sent a letter to the House and Senate Armed Services Committees on October 7 indicating that several companies should be added to the 1260H list — WXAT included. Id.; see also ECF No. 13-6 (Bloomberg Article). Unaware of that letter, Plaintiff forged ahead with the November meeting, once again describing its business, governance, and ownership structures and denying any Chinese state or military ownership or affiliation. See Compl., ¶¶ 31, 33. An updated 1260H list eventually appeared, disappeared, and reappeared. On February 13, 2026, the Department made public a pre-publication version that included Plaintiff with a single-sentence justification: “WuXi AppTec is indirectly owned by SASAC and is indirectly affiliated with SASTIND and the PLA.” ECF No. 13-10 (Feb. 2026 Designation Notice) at ECF 7 p. 19. Roughly an hour later, the Federal Register removed the list at the Department’s request. See Compl., ¶ 42. Plaintiff sought the reasoning behind that brief listing through a Freedom of Information Act request on May 9, 2026, see ECF No. 13-12 (FOIA Request) at ECF pp. 2–5, but DoD replied only to say that it would not answer within the statutory period. See Compl., ¶ 46. On June 8, Plaintiff wrote to Deputy Secretary Feinberg to dispute each of the three characterizations and to offer, once more, answers to any questions. See ECF No. 13-25 (Connell Letter) at ECF pp. 2–4. Hours later, the Department posted an updated list naming Plaintiff, which the Federal Register published on June 10. See Compl., ¶ 48; ECF No. 13-14 (June 2026 Designation Notice); Notice of Availability of Designation of Chinese Military Companies, 91 Fed. Reg. 35189, 35189, 35194 (June 10, 2026). The justification remained the February sentence, unchanged. See 91 Fed. Reg. at 35194. Behind that sentence sits an internal Department report dated May 29, 2026, see Administrative Record at AR55–77, which Plaintiff first saw when excerpts of the administrative record were produced in this litigation. See Opp. at 5 n.2. That report states that the Department relied on “the latest information available” and took into account its prior exchanges with WXAT. See Administrative Record at AR57, AR60. It sets out three independent grounds for designation, each said to satisfy either the ownership or affiliation prong. Id. at AR60–66. The first is indirect ownership by SASAC. The report finds that the Aviation Industry Corporation of China (AVIC) — a state-owned enterprise owned and overseen by SASAC and itself designated on the Section 1260H list — holds a 5.32% stake in WXAT through the AVIC Military-Civilian Integration Selected Fund. Id. at AR60–61, AR4554. It also cites reporting of an undisclosed investment from a similarly named fund likely tied to the same corporation. Id. at AR61, AR4581. The second is indirect affiliation with SASTIND, which the report grounds in 8 five studies, or sets of studies, that Plaintiff allegedly conducted with universities supervised by SASTIND. Id. at AR63–65. The third — indirect affiliation with the People’s Liberation Army — rests on a single study that a WXAT subsidiary in Shanghai conducted alongside the PLA General Hospital. Id. at AR65–66. C. Procedural Background Plaintiff filed this action on June 11, 2026, against the Department of Defense — also known as the Department of War — along with Secretary Pete Hegseth, Deputy Secretary Feinberg, and Assistant Secretary Michael Cadenazzi in their official capacities. See Compl., ¶¶ 14–17. Because the Government’s own briefing retains the name Department of Defense, the Court does the same. The Complaint pleads five counts. The first three arise under the Administrative Procedure Act, alleging that the Section 1260H designation (1) is arbitrary and capricious, in excess of statutory authority, and unsupported by substantial evidence, id., ¶¶ 65–72; (2) was made without observance of legally required procedure, id., ¶¶ 73–76; and (3) is contrary to constitutional right as a deprivation of protected liberty and property interests without adequate notice or an opportunity to be heard. Id., ¶¶ 77–83. The fourth count contends that the designation was ultra vires, id., ¶¶ 84–87, and the fifth that Section 1260H is void for vagueness as applied to Plaintiff or, in the alternative, on its face. Id., ¶¶ 88–91. WXAT moved for a preliminary injunction on June 29, seeking to “enjoin[] Defendants from enforcing, implementing, or otherwise giving effect to” Plaintiff’s designation as a Chinese military company. See ECF No. 13 (PI Mot.) at ECF p. 1. The Government opposed that motion, see generally Opp., and the Court heard oral argument on July 22. See Minute Entry of July 22, 2026. This Opinion now follows. 9 II. Legal Standard “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. NRDC, 555 U.S. 7, 24 (2008). “A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011) (alterations in original) (quoting Winter, 555 U.S. at 20). “[I]f the government is the opposing party,” the latter two factors “merge.” Glob. Health Council v. Trump, 153 F.4th 1, 12 (D.C. Cir. 2025). “The moving party bears the burden of persuasion and must demonstrate, ‘by a clear showing,’ that the requested relief is warranted.” Hosp. Staffing Sols., LLC v. Reyes, 736 F. Supp. 2d 192, 197 (D.D.C. 2010) (quoting Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006)). A court “may deny a motion for preliminary injunction, without further inquiry, upon finding that a plaintiff is unable to show either irreparable injury or a likelihood of success on the merits,” making those two factors “particularly crucial.” Luokung Tech. Corp. v. Dep’t of Def., 538 F. Supp. 3d 174, 182 (D.D.C. 2021) (quotation marks omitted). III. Analysis The Court addresses the four preliminary-injunction factors in turn. As “[t]he likelihood of success and irreparability of harm ‘are the most critical’ factors,” Trump v. Thompson, 20 F.4th 10, 31 (D.C. Cir. 2021) (quoting Nken v. Holder, 556 U.S. 418, 434 (2009)), they occupy the bulk of the discussion that follows. 10  A. Likelihood of Success on Merits Plaintiff’s Motion does not want for theories, pressing as bases for preliminary relief every count in its Complaint save for the claim that the Section 1260H designation was issued without observance of required procedure. See PI Mot. at 17, 23, 29; Opp. at 10 n.4. The Court, however, need not run each to ground. As WXAT is likely to succeed on its challenge that the designation was arbitrary and capricious, the analysis begins and ends there. The Department’s designation rests on three findings set out in the May 29 report: that WXAT is indirectly owned by SASAC, indirectly affiliated with SASTIND, and indirectly affiliated with the PLA. See Administrative Record at AR60. Because the Government asserts that each justification independently sustains the designation, WXAT must show that all three are likely infirm. See Opp. at 12 (“Defendants relied on substantial evidence for three independent findings, each sufficient to sustain the Department’s decision . . . .”). The Court first sets out the standards before applying them to those rationales. 1. Arbitrary-and-Capricious Review Three principles govern, beginning with the standard of review. The APA directs courts to “hold unlawful and set aside agency action” that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). Action earns those labels where an agency “relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, [or] offered an explanation for its decision that runs counter to the evidence before the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The inquiry is a narrow one, and a court may not “substitute its judgment for that of the agency.” Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971); see also 11 Trongone v. Comm’r, 179 F.4th 1, 6 (D.C. Cir. 2026). The task is instead to determine “whether the agency has articulated a rational connection between its factual judgments and its ultimate policy choice” and “whether the underlying factual judgments are supported by substantial evidence.” Ctr. for Auto Safety v. Fed. Highway Admin., 956 F.2d 309, 314 (D.C. Cir. 1992); see also Phoenix Herpetological Soc’y, Inc. v. U.S. Fish & Wildlife Serv., 998 F.3d 999, 1005 (D.C. Cir. 2021) (explaining that arbitrary-and-capricious review “does not substantively differ” from substantial-evidence review when “assuring factual support”) (quoting Ass’n of Data Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Rsrv. Sys., 745 F.2d 677, 683 (D.C. Cir. 1984)). The requirement is undemanding, asking only for “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Pham v. Nat’l Transp. Safety Bd., 33 F.4th 576, 581 (D.C. Cir. 2022) (quoting Chritton v. NTSB, 888 F.2d 854, 856 (D.C. Cir. 1989)). The second principle considers the materials under review. “[J]udicial review of agency action is limited to the grounds that the agency invoked when it took the action.” Dep’t of Homeland Sec. v. Regents of the Univ. of Cal., 591 U.S. 1, 20 (2020) (quotation marks omitted); see also Standing Rock Sioux Tribe v. U.S. Army Corps of Eng’rs, 985 F.3d 1032, 1048 (D.C. Cir. 2021) (applying principle to reject justification offered in brief but not considered during decision). The record in question is “the administrative record already in existence, not some new record made initially in the reviewing court.” Camp v. Pitts, 411 U.S. 138, 142 (1973). A court, moreover, “may not supply a reasoned basis for the agency’s action that the agency itself has not given.” State Farm, 463 U.S. at 43. If the stated rationale is insufficient, the cure is not a better one drafted from the bench. 12  The last looks at the subject area of this type of case. Where an agency acts at the intersection of national security and foreign affairs, review is “extremely deferential.” Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 734 (D.C. Cir. 2007). The Department’s assessments of the risks that China’s military-civil-fusion strategy poses, and of the significance of a company’s ties to the organs of the Chinese state, command considerable respect. Even so, “courts retain a role, and an important one, in ensuring that agencies have engaged in reasoned decisionmaking.” Judulang v. Holder, 565 U.S. 42, 53 (2011); see also Xiaomi Corp. v. Dep’t of Def., 2021 WL 950144, at *4 (D.D.C. Mar. 12, 2021) (applying that gatekeeping function to designation of Chinese military company). Taken together, these principles require the Court to ask, with appropriate deference, whether the report’s stated rationales accurately describe the record, rest on adequate evidentiary support, and rationally connect the facts found to the designation imposed. As the discussion below shows, the evidence falls short even under that deferential standard. 2. Indirect Ownership by SASAC The report’s first and leading rationale is ownership. DoD concluded that Plaintiff is indirectly owned by SASAC because AVIC — recall, an enterprise owned and overseen by SASAC, and itself a designated Chinese military company — invested in WXAT through the AVIC Military-Civilian Integration Selected Fund. See Administrative Record at AR60–61; see also 91 Fed. Reg. at 35190 (AVIC designation). The report identifies two pieces of support. First, it reads a 2019 web post as demonstrating that AVIC held a 5.32% stake in WXAT. See Administrative Record at AR61, AR4554. Second, it cites a 2024 article as reporting an “undisclosed investment” by AVIC. Id. at AR61, AR4581–82. From those sources, the 13 Department concluded that an entity owned by SASAC “itself owns more than 5 percent of WuXi’s equity.” Opp. at 14. This is flat-out wrong. Start with the supposed 5.32% stake. The report mistakes the share of the AVIC fund’s portfolio invested in WXAT for the share of WXAT owned by the fund. The 2019 post does not say that AVIC owned 5.32% of WXAT. It lists WXAT among the fund’s “top holdings” at “5.32%” — that is, as a share of the fund’s portfolio. See Administrative Record at AR4554. The 2024 post makes that express: WXAT “was the sixth largest heavy stock in the product” during the second quarter of 2019, “accounting for 5.32% of the fund’s net asset value.” Id. at AR4582. Both sources thus describe how much of the fund’s assets were invested in WXAT stock, not how much of WXAT the fund owned. That is a surprising mistake. If a household puts 5% of its modest savings into a blue- chip stock, that does not mean it owns 5% of the company. Working from AVIC’s own public reports, WXAT makes the point clear. Plaintiff calculates that a 5.32% ownership interest in WXAT would have been worth roughly $850 million in 2019, or more than 40 times the fund’s total assets at the end of that year. See ECF No. 19 (Reply) at 4. The position that the sources actually describe, by contrast, was AVIC’s purchase on the open market of publicly traded WXAT shares worth approximately $200,000, representing about 0.001% of the company’s equity. Id.; see also ECF No. 19-8 (Supplemental Declaration of Steve Qing Yang), ¶ 5. While those figures draw on data outside the record, the Court need not adopt them. On any accounting, the percentage of a fund invested in a company is not the percentage of the company the fund owns. The report’s reliance on an “undisclosed investment” by AVIC breathes no new life into the determination. See Administrative Record at AR61. The cited 2024 post describes the very 14 same 2019 investment by the AVIC Military-Civilian Integration Selected Fund: WXAT shares comprising 5.32% of the fund’s net asset value. Id. at AR4581–82. It does not, for example, reveal some additional holding that the quarterly report left undisclosed. The Department thus skimmed not one but two web pieces reporting where AVIC’s Military-Civilian Integration Fund parked 5.32% of its portfolio and nonetheless concluded that the fund owned 5.32% of WXAT. “These errors do not inspire confidence in the fastidiousness of the agency’s decision-making process.” Xiaomi Corp., 2021 WL 950144, at *5 (assessing error in Chinese-military-company designation). Defendants nonetheless scaffold the report with doctrines built for other fights. See Opp. at 12. They invoke the rules that an agency’s factual findings may stand “even though a plausible alternative interpretation of the evidence would support a contrary view,” Archer W. Contractors, LLC v. U.S. Dep’t of Transp., 45 F.4th 1, 6 (D.C. Cir. 2022) (quoting W. Air Lines, Inc. v. Civ. Aeronautics Bd., 495 F.2d 145, 152 (D.C. Cir. 1974)), and that an agency need not “draw the inferences” that a plaintiff “might wish.” Crooks v. Mabus, 845 F.3d 412, 424 (D.C. Cir. 2016). Those principles are sound but have little purchase here. Reading 5.32% of the fund’s net asset value to mean 5.32% of WXAT is not a plausible alternative interpretation, nor is it an inference from the evidence — it is a misstatement of the evidence. Cf. Code v. McCarthy, 959 F.3d 406, 409 (D.C. Cir. 2020) (“[A] basic mistake of fact renders the [agency’s] decision arbitrary and capricious . . . .”). Defendants also fault WXAT for failing “to point to a direct contradiction in the evidence before the agency.” Opp. at 14 (quoting Hesai Tech. Co. v. U.S. Dep’t of Def., 792 F. Supp. 3d 22, 47 (D.D.C. 2025)). Yet Plaintiff has identified one as direct as they come: the report says AVIC has a 5.32% ownership stake in WXAT, while the sources say that WXAT stock accounted for 5.32% of the fund’s net asset value. 15  The remaining question — whether the position the sources actually describe could itself amount to indirect ownership by SASAC — is not the Court’s to answer. Another court in this district has read Section 1260H to require “some level of control, not just mere possession of . . . equity” before ownership attaches. SZ DJI Tech. Co. v. U.S. Dep’t of Def., 2025 WL 2761210, at *19–20 (D.D.C. Sept. 26, 2025). Whether the far smaller position the sources reflect clears that bar, or any other, is a determination the Department never made: it found ownership on the premise of a 5.32% stake not supported by the record. The Court may not make the determination in its place. See State Farm, 463 U.S. at 43. The first ground therefore cannot sustain the designation. 3. Affiliation with SASTIND Defendants’ second rationale, that WXAT is “[i]ndirectly [a]ffiliated with SASTIND,” Administrative Record at AR62, fares no better. At the outset, it is questionable whether “indirect affiliation” tracks the statute at all. Section 1260H identifies three distinct relationships: being “directly or indirectly owned by, controlled by, or beneficially owned by”; being “affiliated with”; or acting “in an official or unofficial capacity” as an agent of one of the listed entities. See § 1260H(g)(2)(B)(i)(I). As a grammatical matter, “directly or indirectly” most naturally modifies only the first cluster of ownership and control terms. Reading it to sweep across the entire series would produce awkward results, such as “indirectly . . . in an official or unofficial capacity acting as an agent.” The idea of “indirect affiliation,” furthermore, seems redundant with the definition of affiliation itself, which includes “close formal or informal association.” Id., § 1260H(g)(1). The Court need not resolve that question, however, because the Department’s rationale fails even on its own terms. 16  The report based its determination of indirect affiliation on five sets of scientific studies. It describes them as “conducted by WuXi AppTec in partnership with SASTIND-supervised universities” and states, repeatedly, that WXAT’s subsidiary “received approval from MOST” for them. See Administrative Record at AR63–65. The universities are Peking, Xiamen, Shanghai Jiao Tong, Jilin, and Sichuan. Id. All five findings derive from a single source: a compilation of approvals that China’s Ministry of Science and Technology (MOST) issued in October 2022 for the use of human genetic material in clinical drug studies. Id. at AR4799–861. The compilation contradicts the first assertion and does not substantiate the second. For each study, the compilation separately identifies an applicant, a medical institution, a contract research organization, and a third-party laboratory. The applicants — the entities that sought MOST’s approval — are largely global pharmaceutical companies, some headquartered in the United States and Europe; the medical institutions are hospitals affiliated with the named universities. See, e.g., id. at AR4808–11, AR4850–51. WXAT or one of its subsidiaries appears in only one of the four roles: the far-right column titled “Third-Party Laboratory.” The report’s assertion that Plaintiff “received approval from MOST” thus finds no footing in the source it cites. The table entries assign that role to others — the applicants. As for partnership, the compilation does not identify one. No entry describes any agreement, dealing, or relationship between WXAT and the universities. The only role assigned to WXAT is “Third- Party Laboratory,” separately listed from the applicant, medical institution, and contract research organization. Whatever relationship may have existed among those actors, the table does not describe WXAT as conducting the research project, much less as doing so “in partnership with” the universities. The report nevertheless transforms WXAT’s listing in that discrete, expressly 17 third-party role into MOST-approved research that WXAT conducted with SASTIND institutions, without explaining the connection. Plaintiff’s account of the research process crystallizes the error. According to WXAT’s CEO, the applicant for each study selects both the hospital where it will occur and the laboratory that will process its samples, contracts separately with each, and applies to MOST for authorization to use human genetic material. See Yang Suppl. Decl., ¶¶ 20–22. WXAT’s contractual relationship in each study runs to the applicant alone, and the company’s work — performed at its own facilities — involves no interaction, collaboration, or joint project with any university or hospital. Id., ¶ 21. That account lies outside the administrative record, and the Court does not adopt it as the definitive account of the studies. But the materially different arrangement it describes illustrates why the Department erred in using a few table headings to characterize WXAT as receiving MOST approval to conduct studies with SASTIND-supervised universities. That error matters because the pertinent question is close association. A third-party laboratory’s role in a study involving a SASTIND-supervised university might, depending on the actual relationship, bear on affiliation. But whether that more attenuated connection establishes a “close formal or informal association” is the Department’s question to answer in the first instance. The report did not examine the nature of WXAT’s relationship with the universities or explain why the role reflected in the compilation sufficed. It relied instead on approvals the compilation attributes to others and partnerships the cited source does not identify. The Court cannot reconstruct the relationship, decide whether it is close enough, and supply the missing rationale on the Department’s behalf. See Env’t Health Tr. v. FCC, 9 F.4th 893, 914 (D.C. Cir. 18 2021) (courts “cannot supply reasoning in the agency’s stead”) (citing SEC v. Chenery Corp., 318 U.S. 80, 87–88 (1943)). The need for that analysis becomes clear from another entry in the compilation. It lists the University of Michigan as the applicant for a study conducted at a hospital affiliated with Peking University, the same SASTIND-supervised institution that the report invokes against WXAT. See Administrative Record at AR4817. Michigan thus occupies the role directly connected to the study’s approval. If WXAT’s more remote role suffices to establish a close association with SASTIND, the report’s logic would make a member of the Big Ten a Chinese military company. In short, the designation rested on approvals the cited source attributes to others and partnerships it does not identify. A laboratory’s role in these studies may bear on affiliation, but the Department must accurately characterize that role and explain why the resulting relationship is sufficiently close. Upon even a fairly cursory review, the second rationale falls apart. 4. Affiliation with PLA Defendants’ final justification rests on the same error as the second, just in miniature. The Department’s report found that WXAT is indirectly affiliated with the PLA based on one additional entry in the same MOST compilation: an October 2022 approval for a drug study at the Chinese People’s Liberation Army General Hospital, a facility the report treats as affiliated with the PLA. Id. at AR65–66, AR4810. According to the Government, a Shanghai-based WXAT subsidiary “received approval to conduct a drug study” with the hospital. See Opp. at 16. The entry itself, however, describes the now-familiar arrangement. It identifies a European pharmaceutical company (Novo Nordisk) as the applicant, the PLA General Hospital as the study institution, and the WXAT subsidiary as a selected third-party laboratory (along with two 19 others). See Administrative Record at AR4810. The entry thus assigns the application to Novo Nordisk and lists WXAT’s subsidiary only in the column reserved for third parties. For the reasons just explained, it shows neither an approval WXAT received nor a study it conducted with the PLA hospital. See supra Section III.A.3. The report also notes that nothing indicates that the study has concluded. See Administrative Record at AR66. Yet the possible continuation of Plaintiff’s laboratory work does not convert that role into WXAT’s receiving MOST approval to run a study at a PLA hospital. One entry, resting on the same mischaracterization as the five before it, is the entirety of the evidence connecting Plaintiff to the PLA. The third rationale therefore falls with the second. * * * Congress charged the Department with identifying companies that serve Chinese military modernization, and weighty judgments of that kind lie beyond the Court’s ken. Even so, “[a]n agency acts arbitrarily and capriciously when it offers inaccurate or unreasoned justifications” for a decision. Env’t Def. Fund v. EPA, 922 F.3d 446, 454 (D.C. Cir. 2019). Here, the Department’s justifications each rested on a misreading: a stake in a fund reported as a stake in the company, and third-party laboratory work reported as studies WXAT conducted in partnership with SASTIND- and PLA-affiliated institutions. Plaintiff is therefore likely to succeed on the merits of its claim that the Section 1260H designation was arbitrary and capricious. On now to irreparable harm. B. Irreparable Harm A likely unlawful designation does not by itself unlock preliminary relief. WXAT must also show that the designation is inflicting injury that no eventual judgment can repair. Alpine