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Are these drones too Chinese to pass the American test in an anti-China moment?| GuyWhoKnowsThings

A one-man startup believes it has an answer to the US government's concerns about Chinese-made drones dominating commercial sales in the US market.

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

There's just one problem: Anzu has multiple close ties to China and to DJI, the Shenzhen-based company that is the target of legislative and regulatory efforts to curb sales of Chinese drones in the United States.

About half of Anzu's pieces come from China. Much of his software originated there. Anzu licensed its drone design from DJI, which receives payment for each drone Anzu orders from its manufacturer in Malaysia.

That crossover raises questions about whether Anzu is truly independent of DJI, China's leading drone maker, or simply a rebranded version of it.

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

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

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

If moving manufacturing out of China and distributing your products through a company with a U.S. ZIP code can help you avoid being blacklisted by federal agencies or effectively banned by Congress, the formula Anzu has established could work. not only for DJI but also for other Chinese companies whose business in the United States is under scrutiny.

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

Randall Warnas, CEO and sole employee of Anzu, said in an interview that in exchange for giving Anzu a commercial license, DJI receives a cut of every dollar Anzu pays its Malaysian manufacturer to make its drones.

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

Early last year, he recalled, a DJI representative who said she was speaking on behalf of the company's senior management approached a group of U.S. drone industry executives with the question: “What would be the desire to deal with to get us to take our technology (DJI technology) and make it suitable for long-term use in the United States?

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

Their goal, he said, “was to somehow cleanse the Chinese character of their technology so that there would still be a way tofor sales in the United States.

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 the United States, to discuss Anzu's efforts and how to comply with U.S. regulations. But Stefanik was apparently unmoved by the hour-long question-and-answer session Warnas said he had with one of her staff members on Thursday.

“This desperate attempt to evade tariffs and sanctions is futile,” Stefanik said in a statement Friday. “DJI and all its shell companies will be held accountable.”

DJI spokesperson Regina Lin said in a statement that her company's licensing partnership with Anzu “was established with the goal of improving the accessibility of capable and cost-effective drones in the market.” She said DJI had no other financial ties to Anzu and called Anzu “a completely independent company.”

Some analysts said that while Anzu's tactic may be successful in the short term, its business model could soon be threatened by the stricter barriers that Congress and regulators are considering imposing on Chinese companies and their affiliates in the United States. .

“It's a Band-Aid on a bullet 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 looming 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, Arkansas, who has fielded inquiries about Anzu drones from users wary of purchasing Chinese products in the current regulatory environment. . but you can't afford to buy American-made drones.

Anzu officially launched in April, four months after receiving the equipment. approvals of the Federal Communications Commission in Washington. Anzu has already received thousands of inquiries about the drone from him, Warnas said. He estimated that those inquiries had led to at least 400 orders, all of which were referred to outside brokers in the United States like Mr. Fink.

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

Mr. Warnas, a U.S. citizen, lives outside Salt Lake City, Utah. But Anzu picks up mail at a corporate office complex in Austin, Texas, and lists that address as his official headquarters.

Austin “is going to be where the long-term future of Anzu Robotics is,” Warnas said, “but right now there's just no reason to go that deep.”

Anzu parts are manufactured in both China and Malaysia. They are assembled at a plant in Malaysia, according to Warnas and documents reviewed by The New York Times.

The product assembled there: a forest-green commercial drone known as the Raptor that drone experts say It looks a lot like some of DJI's Mavic 3 models. – ships to U.S. fulfillment centers. The drones are operated by flight control software and a user app that originated with DJI but has been modified by Anzu's data security partner Aloft, a company of Syracuse, New York, whose servers are located in Virginia, to ensure that user data remains in the United States. and is not collected by third parties without the user's permission, according to Warnas.

Anzu's founders considered this complex system necessary because of Washington's antagonism toward China.

According to a bill approved by Congress at the end of April that was signed quickly According to President Biden, the social network TikTok could be effectively banned in the United States unless it is soon sold to domestic owners.

Congress is weighing a variety of other bills aimed at restricting Chinese technologies and products, including the CCP's Countering Drones Act, a bill sponsored by Ms. Stefanik that essentially aims to reduce DJI's presence in USA. And both Congress and Mr. Biden they are adopting new rates on Chinese products, continuing an effort to shore up American manufacturing that began during the Trump administration.

The difficulties domestic drone makers face in competing with DJI, along with a host of national security concerns, have prompted moves to crack down on DJI, a trend that is also impacting other Chinese tech companies and leaving them scrambling to find alternative solutions.

“Chinese companies are thinking creatively and using every tool at their disposal to find those divides and exploit all the legal and regulatory loopholes,” Singleton said. His hope, he added, is that “it will take years for Washington to detect and close those loopholes.”

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

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