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New Executive Order targets Chinese connected software applications

By Wendy Wysong, Ali Burney, Meredith Rathbone, Hena Schommer, Jack Hayes & Peter Jeydel on January 7, 2021
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In another attempt to impose restrictions on Chinese technology companies in the final days of his presidency, on January 5, 2021, Trump issued a new Executive Order (EO) “Addressing the Threat Posed By Applications and Other Software Developed or Controlled By Chinese Companies.”  The EO, which was issued pursuant to the International Emergency Economic Powers Act, authorizes the imposition of restrictions, on or after February 19, 2021, against eight popular Chinese connected software applications.

The new EO declares that “additional steps must be taken to deal with the national emergency with respect to the information and communications technology and services supply chain declared in [EO 13873].”  The new EO alleges that “a number of Chinese connected software applications automatically capture vast amounts of information from millions of users in the United States,” including sensitive “personally identifiable information.”  It cites to “the continuing activity” of China and the Chinese Communist Party “to steal or otherwise obtain United States persons’ data” as “mak[ing] clear that there is an intent to use bulk data collection to advance China’s economic and national security agenda.”  The new EO states that the United States “must take aggressive action against those who develop or control Chinese connected software applications to protect our national security.”

In relevant part, Section 1(a) of the new EO prohibits certain transactions “by any person, or with respect to any property, subject to the jurisdiction of the United States” with: (i) persons that develop or control listed Chinese connected software applications; or (ii) with subsidiaries of such persons.  The EO lists the following Chinese connected software applications: Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay, and WPS Office.

The new EO does not identify specific transactions to be prohibited, nor do any prohibitions take place immediately.  Instead, Section 1(e) requires the Secretary of Commerce to identify the scope of prohibited transactions not earlier than 45 days after the date of the new EO, i.e., not earlier than February 19, 2021, which will be after the change in administration to President-Elect Biden.

As was the case with EOs 13942 and 13943 of August 6, 2020 targeting TikTok and WeChat and noted in our prior blog post, the Commerce Department will play the key role in defining the scope and coverage of the prohibitions in this EO.

Photo of Meredith Rathbone Meredith Rathbone

Meredith Rathbone focuses on export controls and economic sanctions, and has assisted clients in the energy, manufacturing, telecommunications, information security, banking, insurance, pharmaceutical, and service industries, among many others, in navigating the requirements of the Export Administration Regulations (EAR), International Traffic in Arms…

Meredith Rathbone focuses on export controls and economic sanctions, and has assisted clients in the energy, manufacturing, telecommunications, information security, banking, insurance, pharmaceutical, and service industries, among many others, in navigating the requirements of the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR) and US sanctions regulations administered by the Office of Foreign Assets Control (OFAC) and US Department of State. She regularly assists companies in developing compliance policies, conducting internal investigations, performing training, and conducting due diligence in M&A transactions. She has represented individuals and companies facing civil and criminal investigations in this area, and has also represented clients in their efforts to be removed from OFAC’s list of Specially Designated Nationals (SDNs). She is a frequent writer and speaker on export controls and sanctions topics. She is the co-chair of the American Bar Association’s Export Controls and Economic Sanctions Committee, and also serves on the Sanctions Subcommittee of the State Department’s Advisory Committee on International Economic Policy.

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Photo of Jack Hayes Jack Hayes

Jack Hayes has extensive experience providing clients with advice and assistance under ITAR and EAR, as well as US economic sanctions and anti-boycott regulations. Jack frequently handles complex export control matters, including voluntary disclosures, internal investigations of apparent export control violations, pre-closing and…

Jack Hayes has extensive experience providing clients with advice and assistance under ITAR and EAR, as well as US economic sanctions and anti-boycott regulations. Jack frequently handles complex export control matters, including voluntary disclosures, internal investigations of apparent export control violations, pre-closing and post-closing acquisition export compliance due diligence, export control audits, and assessments of compliance obligations and risks in accordance with relevant international trade regulations. He also provides guidance on brokering requirements and reporting obligations for certain fees, commissions, and political contributions related to sales of defense articles and defense services, prepares export and reexport license and agreement applications for submission, undertakes commodity jurisdiction and export classification analyses of items and services under the ITAR and EAR, drafts registration material change notifications, and develops compliance policies, programs, and training materials.

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Photo of Peter Jeydel Peter Jeydel

Peter Jeydel‘s practice focuses on US export controls and economic sanctions, including the Commerce Department’s Export Administration Regulations (EAR), the State Department’s International Traffic in Arms Regulations (ITAR), and sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC)…

Peter Jeydel‘s practice focuses on US export controls and economic sanctions, including the Commerce Department’s Export Administration Regulations (EAR), the State Department’s International Traffic in Arms Regulations (ITAR), and sanctions regulations administered by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the State Department. His practice spans all aspects of these regimes, including counseling, compliance, transactional advice, licensing and opinions, disclosures, and enforcement actions. He has also represented companies and individuals seeking de-listing from OFAC’s sanctions list. In addition, Pete has assisted clients in anti-corruption matters, including under the US Foreign Corrupt Practices Act (FCPA), and has experience handling reviews and investigations by the Committee on Foreign Investment in the United States (CFIUS).

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  • Posted in:
    Corporate & Commercial, International
  • Blog:
    International Compliance Blog
  • Organization:
    Steptoe & Johnson LLP
  • Article: View Original Source

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