Are these drones too Chinese to pass by the United States in an anti-Chinese moment?

One individual startup thinks it has an answer to the U.S. government's concerns about Chinese-made drones dominating commercial sales in the U.S. market.

The CEO and founding partners of Anzu Robotics are all American, and the company's headquarters is in Texas. The company's drones, which are expected to be used by law enforcement, utilities, architects and others, are assembled in Malaysia and run on servers located in Virginia.

There's just one problem: Anzu has many close ties to China and to DJI, the Shenzhen-based company targeted by legislative and regulatory efforts to curb Chinese drone sales in the United States.

About half of Anzus's pieces come from China. Much of its software comes from there. Anzu has licensed its drone designs to DJI, which receives payment for each drone ordered by Anzu from its manufacturer in Malaysia.

This crossover raises the question of whether Anzu is truly independent of DJI, China's leading drone maker, or simply a rebranded version of it.

Despite accounting for 58% of commercial drones sold in the United States, according to a 2022 analyst report, DJI's business has recently been overshadowed by federal and state regulations intended to protect against potential Chinese access to drones. information collected by drones in America.

The company now faces a major threat from a bipartisan bill in the House that would significantly restrict its future access to the U.S. communications infrastructure on which its products run.

Given its ties to DJI, Anzu serves as something of a litmus test for Chinese companies facing an increasingly hostile regulatory environment in the United States.

While moving manufacturing out of China and distributing its products through a company with a U.S. zip code can help avoid being blacklisted by federal agencies or effectively banned by Congress, The formula established by Anzu could work not only for DJI but also for other Chinese companies whose activities in the United States are under scrutiny.

If those efforts fail, it would be another setback for Chinese companies trying to deal with growing suspicion and animosity toward China in Washington.

Randall Warnas, chief executive and sole employee of Anzus, said in an interview that in exchange for granting Anzu a business license, DJI receives a share of every dollar Anzu pays its Malaysian manufacturer for the manufacturing of its drones.

Still, he acknowledged that Anzu was essentially DJI's idea.

Early last year, he recalls, a DJI representative who said she spoke on behalf of the company's senior management approached a group of U.S. drone industry executives to ask: what would be the appetite to try to make sure that we can use our technology? DJI technology and does it make it suitable for long-term use in the United States?

The DJI concept, which Warnas said was also started by several other DJI employees, was adopted by Anzus' founders: himself and three partners who he said are U.S. citizens.

Their goal, he said, was to somehow cleanse the Chineseness of their technology to ensure that there was still an opportunity for sale to the United States.

Mr. Warnas has been in contact with the office of Rep. Elise Stefanik, the New York Republican who spearheaded new legislation to effectively ban future DJI drone operations in America, to discuss Anzu's efforts and the way to comply with American regulations. But Ms. Stefanik was apparently unmoved by the hour-plus question-and-answer session that Mr. Warnas said he had with one of his aides on Thursday.

This desperate attempt to evade customs duties and sanctions is in vain, Stefanik said in a statement on Friday. DJI and all of its front companies will be held responsible.

Regina Lin, a spokesperson for DJI, said in a statement that her company's licensing partnership with Anzu was established with the aim of improving the accessibility of high-performance and cost-effective drones in the market. She said DJI had no other financial ties to Anzu, calling Anzu a completely independent company.

Some analysts said that while Anzu's strategy could succeed in the short term, its business model could soon be threatened by the stricter safeguards that Congress and regulators plan to impose on Chinese companies and their subsidiaries in the UNITED STATES.

It's a bandage on a gunshot wound, said Craig Singleton, director of the China program at the nonpartisan Foundation for Defense of Democracies.

Still, some lawyers and drone industry veterans said they admired Anzu's creative strategy and saw no imminent regulatory risks to its business model.

Anzu Robotics is doing what many in our industry have been asking for, said Chris Fink, a drone dealer in Fayetteville, Ark., who has fielded inquiries about Anzu drones from users who are hesitant to buy Chinese products in the current regulatory environment but cannot do so. afford to buy drones made in America.

Anzu officially launched in April, four months after receiving equipment approvals from the Federal Communications Commission in Washington. Anzu has already received thousands of inquiries about its drones, Warnas said. He estimated that those investigations resulted in at least 400 orders, all to third-party brokers in the United States, like Mr. Fink.

The company is run from the headquarters of Mr. Warnas, a longtime drone salesman who worked for DJI earlier in his career and briefly served as chief executive of Autel, another Chinese drone maker, in 2021. He resigned after just nine weeks. blaming his lack of autonomy for the short stint.

Mr. Warnas, a United States citizen, lives outside Salt Lake City, Utah. But Anzu collects mail at an office complex in Austin, Texas, and lists that address as its official headquarters.

Austin will be where Anzu Robotics' long-term future lies, Mr. Warnas said, but right now there's no reason to delve that deep into it.

Anzus parts are manufactured in China and Malaysia. They are assembled at a factory in Malaysia, according to Mr. Warnas and documents reviewed by The New York Times.

The product assembled there is a forest green commercial drone known as the Raptor, which drone experts say looks a lot like some of DJI's Mavic 3 models and is being shipped to U.S. logistics centers. The drones are controlled by flight control software and a user application created by DJI but modified by Aloft, the data security partner of Anzus, a Syracuse, N.Y., company whose Servers are located in Virginia, to ensure that user data remains in the United States. and are not collected by third parties without users' permission, according to Mr. Warnas.

This complex configuration seemed necessary to the founders of Anzus because of Washington's antagonism towards China.

Under a bill passed by Congress in late April and quickly signed by President Biden, the social network TikTok could be effectively banned in the United States unless it is soon sold to domestic owners.

Congress is considering various other bills intended to restrict Chinese technologies and products, including the CCP's Counter-Drone Act, a bill sponsored by Ms. Stefanik that essentially aims to end DJI's presence in the UNITED STATES. And Congress and Mr. Biden are passing new tariffs on Chinese goods, continuing efforts to support U.S. manufacturing started under the Trump administration.

The difficulties faced by domestic drone makers in competing with DJI, as well as a series of national security concerns, have prompted moves to crack down on DJI, a trend that is also affecting other Chinese technology companies and forcing them to scrambling to find workarounds.

Chinese companies are getting creative and using every tool at their disposal to find these divides and exploit any legal and regulatory loopholes, Singleton said. Their hope, he added, is that it will take years for Washington to detect and close these loopholes.

David Montgomery contributed reporting from Austin. Tashny Sukumaran contributed reporting from Kuala Lumpur, Malaysia.

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