U.S. Government Sues Chinese Firm to Force Sale

Why It Matters

A landmark lawsuit is rewriting the rules of foreign investment enforcement. For nearly four decades, the federal government has held a powerful but largely untested weapon. It can force a foreign company to sell a U.S. business and drag that company into court if it refuses. Until this year, no administration had ever pulled that trigger.

That changed in February when the Department of Justice filed the first judicial enforcement action in the history of the Defense Production Act's Section 721. It's the cornerstone statute governing foreign investment reviews by the Committee on Foreign Investment in the United States, known as CFIUS. The target was Suirui International, a Hong Kong-based subsidiary of the Chinese firm Suirui Group Co., Ltd., which in 2020 quietly purchased Jupiter Systems LLC, a California company whose video display technology is woven into U.S. military systems and critical infrastructure.

A Chinese-linked company is involved in American defense technology. The President ordered the company sold. It didn't comply. And now, for the first time in history, a federal court is being asked to decide what happens next, with consequences that will ripple across every future foreign acquisition of sensitive U.S. technology.

The Big Picture

The legal framework behind this fight dates to 1988, when Congress added Section 721 to the Defense Production Act, codifying the President's authority to investigate, block or unwind foreign acquisitions of U.S. businesses that threaten national security. Congress has amended the statute several times since, most significantly through the Foreign Investment Risk Review Modernization Act of 2018, which expanded CFIUS's jurisdiction and sharpened its enforcement tools.

What makes Section 721 unusual is its reach across time. Unlike most regulatory regimes, it imposes no statute of limitations. A foreign company that buys a U.S. business today and never notifies CFIUS remains subject to presidential review permanently. That design is intentional, and it is precisely what snared Suirui.

When Suirui acquired Jupiter from Foxconn in 2020, it did not file a voluntary notice with CFIUS. That decision, which may have seemed like a routine business choice at the time, left the transaction permanently exposed. In 2024, during the Biden Administration, CFIUS exercised its authority to unilaterally initiate a review. Investigators found that a Chinese entity listed as a military company operating in the United States indirectly held an interest in Suirui, and held the right to appoint one of its directors. CFIUS concluded the national security risks could not be mitigated short of a full unwind of the deal.

On July 8, 2025, President Trump issued a presidential order prohibiting the acquisition and giving Suirui 120 days to divest all interests in Jupiter. The order also imposed immediate interim measures, including barring Suirui personnel from accessing nonpublic Jupiter information without CFIUS approval. CFIUS subsequently extended the divestiture deadline. Suirui still did not comply.

That noncompliance set in motion the first judicial enforcement action under the DPA's Section 721 in the statute's nearly 40-year history. DOJ filed suit on February 9, seeking a declaratory judgment that Suirui had violated the presidential order; an injunction barring Suirui from continuing to own or control Jupiter; and the appointment of a court-supervised receiver to manage the company while litigation proceeds.

On May 26, just days before the Congressional Research Service published its analysis, the U.S. District Court for the District of Columbia granted DOJ's request for a preliminary injunction, ruling that placing Jupiter into receivership was the only remedy capable of addressing the national security risks while the case moves forward.

Political Stakes

For the Administration

This lawsuit is a signal to Beijing, to American allies, and to foreign investors worldwide that presidential divestiture orders will be enforced, by litigation if necessary. The administration's decision to pursue a first-ever DOJ presidential order enforcement action against a Chinese-linked firm fits squarely within its broader posture on economic competition with China. CFIUS foreign investment review has become one of Washington's most consequential tools in that competition, and the Jupiter case expands the definition of what counts as sensitive technology. Jupiter makes video display systems, not missiles or semiconductors, yet CFIUS determined that its integration into U.S. military and infrastructure systems made it a national security asset worth fighting over in federal court.

For Republicans

It allows the majority to point to concrete executive action against Chinese penetration of U.S. defense supply chains. It's a message with broad bipartisan appeal, even if the underlying CFIUS review was initiated under the Biden Administration.

For Democrats

The Biden-era CFIUS investigation that identified the national security risks is central to the government's legal case, which means Democrats can credibly claim credit for initiating the review, while also raising legitimate questions about due process and the scope of executive authority. Suirui and Jupiter argued in court that CFIUS failed to disclose sufficient unclassified evidence to satisfy due process requirements, a constitutional concern that cuts across party lines. The district court rejected that argument, finding that CFIUS's disclosures during the investigation were adequate. But the issue is unlikely to disappear as the case proceeds.

For the Public

Jupiter's technology operates inside the visual display systems used by U.S. military command centers and critical infrastructure operators. Who controls that technology, and who can access the source code and nonpublic data behind it, raises the question of whether a company with documented ties to the Chinese military apparatus has a window into American defense systems.

Congress Faces a Legal Gap It Helped Create

The CRS report points out that Congress has never specified what happens when a company simply refuses to comply with a presidential divestiture order. Section 721 authorizes the Attorney General to seek "appropriate relief, including divestment relief" in court, but it says nothing about receiverships, timelines, or the procedural rights of defendants in enforcement proceedings. Those gaps are now being filled by a federal judge for the first time, in real time, with national security on the line.

The jurisdictional dispute at the heart of the case illustrates the problem. DOJ argued that Section 721's requirement that challenges to presidential orders be filed in the D.C. Circuit also strips district courts of jurisdiction to hear due process defenses raised in enforcement proceedings. The district court disagreed, ruling that defendants in enforcement actions retain the right to raise constitutional defenses. That ruling has significant implications because it means that every future Section 721 enforcement action could become a venue for defendants to relitigate the adequacy of CFIUS procedures, potentially slowing enforcement and creating unpredictability.

The CRS report identifies several options. For example, lawmakers could specify additional remedies for non-compliance with divestiture orders, clarify the jurisdictional question, or simply wait for the courts to develop a body of case law through the Suirui litigation and any future enforcement actions. The report also notes that barring constitutional defenses in enforcement proceedings raises its own due process concerns, meaning any legislative fix would need to navigate a narrow constitutional path.

The Bottom Line

Two things are now unambiguously true. First, the U.S. government will go to court to enforce presidential divestiture orders under the Defense Production Act's Section 721 and it's likely to win, at least at the preliminary injunction stage. Second, the courts are now active participants in shaping the legal framework for CFIUS enforcement, filling statutory gaps that Congress left open for nearly four decades.

For foreign companies operating in the United States, failing to voluntarily notify CFIUS of a transaction involving sensitive technology is a gamble with no expiration date, and noncompliance with a presidential order is no longer a viable strategy. The government has now demonstrated, with a court order in hand, that it will pursue receivership rather than allow a Chinese-linked company to run out the clock.

Lawmakers built the legal framework that made this enforcement action possible. They also left enough ambiguity in the statute that a federal judge had to improvise the procedural rules for a proceeding that had never occurred before.