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The US Commerce Department releases scope of bans on Tiktok and WeChat | 美国商务部发布对抖音和微信的禁令范围
This past August, our China Team reported on President Trump's Executive Order 13942, which placed restrictions on any transactions with two of the most popular Chinese social media apps used in the world, TikTok and WeChat. The term "transaction" was undefined in the Executive Order at that time, but the President requested the Department of Commerce ("DOC") establish rules to enforce the President’s intent within 45 days. Since then, TikTok’s parent company, ByteDance Ltd., was forced into negotiations with various U.S. companies to placate the Administration’s Executive Order. Within the last few days, ByteDance announced that it had reached an agreement in principle with Oracle and Wal-mart. On Saturday, the President apparently agreed in “concept” to Oracle and Wal-mart taking a 20% stake in TikTok (the details of such a deal and whether the President will get his previous ballyhooed contribution to the Treasury Department remain unclear). Earlier in the day, the President had incorrectly stated that TikTok would be “totally controlled by Oracle and Wal-mart,” but as some details emerged, it appears more like a partnership in which Oracle will host data and Wal-mart will receive some commercial rights. In addition, the President insisted that the transaction included a $5billion contribution to support a fund to “educate people” about the “real history of our country.” ByteDance was unable to confirm the accuracy of this claim by the President.
In contrast, WeChat’s parent, Tencent Holding, Ltd remained relatively quiet in its response to the President’s Executive Order. While it did create a new application known as WeCom, setting it up as a potential alternative to the current WeChat application, and several users initiated litigation challenging the Executive Order, Tencent does not seem ready to sell its U.S. assets.
Apparently wanting to continue applying pressure on these two Chinese powerhouses, the DOC announced on Friday that it was implementing specific rules to enforce the President’s Executive Order, prohibiting certain transactions related to these two mobile applications in order to safeguard the “national security” of the United States.
Specifically, as of September 20, 2020, the following transactions are prohibited:
- Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S.;
- Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S.
In addition, as of September 20, 2020, for WeChat and as of November 12, 2020, for TikTok, the following transactions are prohibited:
- Any provision of internet hosting services enabling the functioning or optimization of the mobile application in the U.S.;
- Any provision of content delivery network services enabling the functioning or optimization of the mobile application in the U.S.;
- Any provision directly contracted or arranged of internet transit or peering services enabling the function or optimization of the mobile application within the U.S.;
- Any utilization of the mobile application’s constituent code, functions, or services in the functioning of software or services developed and/or accessible within the U.S.
The DOC’s official actions were posted in two Notices, which appear in the Federal Register. The Notices further describe the Prohibited Transactions, define key terms, and importantly describe what is not covered by the DOC’s actions. For example, the Notices clarify that the Prohibited Transactions only apply to business-to-business transactions. Notably, the Notices also set out exceptions to the Prohibitions, one of which addresses the concerns that most WeChat users have related to personal communication through WeChat. The Notices explain, "[t]hese identified prohibitions do not apply to the exchange between or among WeChat mobile application users of personal or business information using the WeChat mobile application, to include the transferring and receiving of funds." WeChat mobile applications include WeChat Apps running on any mobile device, including a phone, tablet or watch. Interestingly, but perhaps not surprising in light of the Administration’s forcing ByteDance’s hand to sell to Oracle, the Prohibitions also do not apply to “[t]he storing of WeChat mobile application user data in the United States.” This likely is an indication that if WeChat were to store user data in the U.S., the Prohibitions would not apply.
In the meanwhile, the DOC indicated that other prohibitive transactions relating to WeChat or TikTok might be identified at a future date. Provided the U.S. Government determines that WeChat’s or TikTok’s illicit behavior is being replicated by another app outside of the current scope of ban, the President has the authority to consider whether additional orders may be appropriate to address such activities.
In the DOC’s Press Release announcing the actions, Commerce Secretary Wilbur Ross stated: “At the President’s direction, we have taken significant action to combat China’s malicious collection of American citizens’ personal data, which promoting our national values, democratic rules-based norms, and aggressive enforcement of U.S. laws and regulations.” The Press Release goes on to claim that each App collects vast swaths of data from users, including network activity, location data, and browsing and search histories, and each is “subject to” mandatory cooperation with the intelligence services of the Chinese Communist Party. Ironically, one might wonder why the U.S. government has not taken a similar interest in the collection activities of major U.S. tech companies like Facebook and Google. Each of these companies collect similar kinds of user data, and each frequently surrenders this information to the U.S. government. In fact, during the first half of 2019, Facebook reported that the number of government demands for user data increased to 128,616 in the first half of the year. The U.S. government led the way with 50,741 demands for user data resulting in some information being shared in 88% of the requests. Reportedly, two-thirds of those requests came with a gag order, preventing the company from telling users about the request for their data. Facebook tracks and reports these government requests in an online report that you can obtain at https://transparency.facebook.com/. With TikTok and WeChat historically outside ofits jurisdiction, the U.S. government did not enjoy those same privileges. Now, as Tiktok commits to storing such data in the U.S., this situation is likely to change. How WeChat responds shall be interesting to observe. But, for now, users in the U.S. can continue to use the voice and messenger services offered by WeChat for personal and business reasons.
As of the writing of this Alert, a federal judge has temporarily blocked the President’s Executive Order banning downloads of WeChat. In the Preliminary Injunction, the court found that WeChat users’ First Amendment rights may be threatened by the President’s Order and the government had not shown how the Order was narrowly tailored to resolve the Administration’s national security concerns. While the preliminary injunction only temporarily suspends the President's ban on downloading the WeChat App, the court order has no impact on using WeChat for personal and business communications, as that was already permitted by the DOC’s rules.
This remains a fluid situation. We will continue to follow and report any new developments.
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