On August 6, 2020, the White House issued a pair of Executive Orders (EOs) (available here and here) under the International Emergency Economic Powers Act (IEEPA) that could limit US users’ access to mobile apps from China’s Tencent Holdings Ltd. (Tencent) and ByteDance Ltd. (ByteDance). The EOs, which direct the Commerce Department to identify prohibited transactions within 45 days, could also limit other transactions involving US-origin goods, technology, and software to the companies and certain subsidiaries.
The two EOs build on the IEEPA national emergency declared in EO 13873 of May 15, 2019, Securing the Information and Communications Technology and Services Supply Chain, which, among other things, directs the Commerce Department to restrict the “acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service” that is “designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.”
(Click here to read Steptoe’s earlier blog post on EO 13873.)
Overview of the new EOs
The two EOs will prohibit, beginning September 20, 2020 (45 days after the date of the EOs), certain transactions to be identified by the Commerce Department, by persons or related to property that are subject to the jurisdiction of the United States, with Tencent Holdings Ltd. and ByteDance Ltd. as well as their subsidiaries.
The prohibitions in the EO concerning Tencent are limited to transactions “related to WeChat,” the company’s popular social media and payment platform. Although the EO targeting ByteDance is not expressly limited to transactions related to its TikTok application, the EO indicates (in the title of the EO and elsewhere) that it is intended to “address the threat” posed by TikTok.
Section 1(c) of each EO directs the Secretary of Commerce to identify the transactions that will be prohibited under each EO within 45 days (i.e., on or before September 20, 2020).
Potential Impacts
The EOs follow the State Department’s announcement on August 5 of an expansion of the Trump administration’s “clean network” program to “protect America’s critical telecommunications and technology infrastructure.” Among other things, the announcement underscored the administration’s objective to “remove untrusted applications from U.S. mobile app stores.”
The EOs appear to provide the Commerce Department with substantial discretion in deciding which transactions with ByteDance, Tencent and their subsidiaries will be prohibited. As noted above, the EO appears to limit potential prohibitions involving Tencent to transactions that are “related to WeChat.” While the ultimate scope of the restrictions to be implemented by the Commerce Department is not known, the EOs could impact the ability of US persons to download or utilize the apps, or could restrict the transfer of certain US-origin goods, technology, or software to Tencent or ByteDance without Commerce Department authorization.
The EOs do not appear to contemplate SDN designations or other broad “blocking”/asset freezing sanctions of the type that are typically implemented by the US Treasury Department, Office of Foreign Assets Control (OFAC). The EOs delegate authorities to the Commerce Department, and they do not explicitly delegate authorities to the Treasury Department or other agencies.
Meanwhile, ByteDance is reported to be in negotiations to sell TikTok, under pressure from the US government due to the app’s reliance on a US-focused social media platform acquired by ByteDance in 2017 without approval from the Committee on Foreign Investments in the United States.
Steptoe will issue updates on this topic as warranted. If you have questions about how the EOs may impact your business, contact a member of Steptoe’s Economic Sanctions and Export Controls teams.