China-based smartphone apps, TikTok and WeChat, have each received a reprieve from the respective bans, which were originally ordered by President Trump on August 6, 2020 against both parties and were scheduled to take effect on September 21, 2020. Please see our previous post covering the Executive Orders. Pursuant to the Executive Orders banning the apps on national security grounds, the U.S. Department of Commerce (“Commerce”) published final rules for implementing the bans on September 19, 2020, which were subsequently withdrawn. Commerce then delayed the order to withdraw TikTok from U.S. app stores until September 27, 2020 at 11:59pm. Meanwhile, Commerce’s order to withdraw WeChat has been suspended temporarily due to an injunction granted by the U.S. District Court for the Northern District of California.
In an effort to come into compliance with the Executive Order and avoid the ban, TikTok’s parent, ByteDance Ltd. (“ByteDance”), negotiated a deal with Oracle and Walmart to keep TikTok operating in the United States. Under the terms of the agreement, based on media reports, TikTok will be spun off into a U.S.-based company majority-owned by its Chinese parent ByteDance, while Oracle and Walmart will take up to a twenty (20) percent stake of the new U.S. company. ByteDance will maintain control over the app’s algorithm, while user data will be stored in the U.S. It is possible that the ban on TikTok may be formally lifted once the deal is finalized, since President Trump has given his personal approval of the agreement, though that is unclear at this time.
A judge from the U.S. District Court for the Northern District of California granted a nationwide injunction on September 19, 2020, temporarily suspending Commerce’s order for Apple and Google to remove WeChat from their app stores. Plaintiffs U.S. WeChat Users Alliance, et al. allege that the ban violates First Amendment rights, especially for Chinese Americans. Judge Beeler stated that the plaintiffs “have shown serious questions going to the merits of the First Amendment claim” and that “the balance of hardships tips in the plaintiffs’ favor”.
Husch Blackwell continues to monitor the TikTok and WeChat situations and will provide updates as more information becomes available. Should you have any questions or concerns regarding these potential restrictions, please contact Cortney Morgan or Grant Leach of our Export Controls & Economic Sanctions team.