The Trump Administration has encountered further setbacks in its efforts to prevent Chinese company ByteDance Ltd. (“ByteDance”) from providing its popular social media app TikTok in the U.S. For background:
On August 6, 2020, President Trump issued Executive Order 13942 (“EO 13942”) which: (i) determined that ByteDance’s ownership of TikTok threatened U.S. national security, and (ii) imposed a prohibition which was originally scheduled to go into effect on September 20, 2020, and would have prohibited U.S. persons from transacting with ByteDance pursuant to forthcoming rules to be adopted by the U.S. Secretary of Commerce.
On August 14, 2020, President Trump issued a separate Administrative Order which formally initiated the Committee on Foreign Investment in the United States (“CFIUS”) process forcing ByteDance to divest its ownership of TikTok. ByteDance’s original deadline for completing this CFIUS divestment was November 12, 2020.
On September 24, 2020, the U.S. Commerce Department (“Commerce”) published a Federal Register notice to implement EO 13942’s required rules. Specifically, Commerce’s rules prohibited U.S. app stores from distributing TikTok as of September 27, 2020, and also prohibited U.S. persons from providing internet hosting services to TikTok effective November 12, 2020.
On September 27, 2020, the U.S. District Court for the District of Columbia granted a nationwide preliminary injunction to prohibit the enforcement of the portion of the Commerce rules which would have prohibited U.S. app stores from distributing TikTok. In response, Commerce issued a statement confirming that it would comply with this injunction (see our previous post here).
On October 30, 2020, the U.S. District Court for the Eastern District of Pennsylvania considered separate litigation initiated by three TikTok content creators and issued its own separate injunction to prohibit Commerce from enforcing the entirety of proposed EO 13942 rules (including the additional prohibitions which were scheduled to take effect on November 12, 2020).
Late last week, Commerce issued a notice confirming that it would not be implementing the proposed rules for EO 13942 “pending further legal developments.” ByteDance continues to negotiate its proposed divestment of TikTok to Oracle in order to comply with President Trump’s CFIUS Administrative Order. Although ByteDance did not complete this divestment by the November 12, 2020 deadline, recent filings by TikTok with the U.S. District Court for the District of Columbia indicate that CFIUS has agreed to extend the divestment deadline until November 27, 2020.
For the time being, U.S. app stores may continue to distribute TikTok and U.S. service providers may continue to provide TikTok with internet hosting and other services while the injunctions issued by the U.S. District Courts for the District of Columbia and the Eastern District of Pennsylvania remain outstanding.
Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.
Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.
Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.