In one of a series of lame-duck sanctions and export control actions rushed into place before the transition to the Biden Administration, on January 5, 2021, President Trump issued an Executive Order Addressing the Threat Posed by Applications and Other Software Developed or Controlled by Chinese Companies (the Executive Order) authorizing the Commerce Department to regulate or prohibit any transaction involving a U.S. person or within the jurisdiction of the United States with persons that develop or control the following Chinese connected software applications, or with their subsidiaries:
- QQ Wallet
- Tencent QQ
- WeChat Pay
- WPS Office
Contrary to some press reports, the Executive Order does not impose any restrictions itself, nor does it indicate a complete ban on transactions will be imposed. Instead, it authorizes the Commerce Department to implement restrictions on dealings with these companies, providing that “[n]ot earlier than 45 days after the date of this order, the Secretary shall identify the transactions and persons that develop or control the Chinese connected software applications subject to subsection (a) of this section [which contains the broad authority to prohibit].” Unless and until Commerce implements the Executive Order, no restrictions are in place and their precise future scope is unknown.
That being said, assuming the restrictions imposed under the Executive Order resemble the restrictions imposed under the similarly worded TikTok and WeChat orders from last year, the restricted transactions are likely to be on services supporting the apps on U.S. networks, such as app stores and local hosting services. In the case of TikTok and WeChat, the government was quite clear that they were not attempting to directly prevent U.S. persons from using the apps, even in the United States (much less in China). The government’s focus to date has been on U.S. network integrity, not prohibiting all business with the app providers. It therefore appears unlikely that use of the apps outside the United States will be prohibited.
Although Commerce is delegated expansive authority typical of sanctions designations, up to prohibiting all transactions touching U.S. jurisdiction directly or indirectly involving or benefiting persons that develop or control the identified apps and their subsidiaries, the delegation to Commerce (as opposed to the simple imposition of an OFAC blocking order) indicates that a more tailored restriction relying on Commerce’s technical expertise is likely. This is borne out by the prefatory language of the Executive Order, which (like the TikTok and WeChat orders) emphasizes “the pace and pervasiveness of the spread in the United States of certain connected mobile and desktop applications and other software developed or controlled by persons in the People’s Republic of China” and “access to Americans’ personal and proprietary information.” While there is no guarantee, it appears that the primary focus of the initiative is likely to be blocking support for and availability of the apps within the United States, rather than prohibiting use of the apps globally.
In addition to authorizing the imposition of restrictions on persons that develop or control the identified apps, the Executive Order also requires the Secretary of Commerce, in consultation with the Attorney General and the Director of National Intelligence, to provide the National Security Advisor with a report containing recommendations to prevent the sale or transfer of United States user data to, or access of such data by, foreign adversaries, including through the establishment of regulations and policies to identify, control, and license the export of such data, by February 19, 2021 (45 days after the Executive Order was issued). Given the impending change of administrations, it is unclear whether this deadline will be enforced and what approach the Biden Administration might take.
Implementation of the Executive Order will be administered by the incoming Secretary of Commerce (reportedly Gina Raimondo, the current Governor of Rhode Island). As a general matter, based on the identities of the transition staff, we anticipate the Biden Administration to be more focused on narrow targeting from a sanctions perspective.
If you have any questions about the above or sanctions issues generally, please do not hesitate to contact the listed authors or any of your regular Firm contacts.
 Executive Order 13971 on Addressing the Threat Posed by Applications and Other Software Developed or Controlled by Chinese Companies (Jan. 5, 2021).
 Executive Order, § 1(e). However, in an apparent drafting error, the Executive Order also provides that the Commerce Department’s restrictions will go into effect no later than 45 days after the Executive Order was issued, leaving the only possible date for both announcement and effectiveness February 19, 2021 (and leaving market participants with no advance notice of the restrictions). To address this, the Commerce Department may be able to define the prohibited transactions as those occurring after a specified future date.