On August 6, 2020, President Donald Trump signed two Executive Orders (EOs) targeting the TikTok and WeChat applications and their parent companies. Specifically, President Trump invoked the International Emergency Economic Powers Act (IEEPA) and other related statutes, as well as the national emergency he previously declared under these laws in Executive Order 13873 (Securing the Information and Communications Technology and Services Supply Chain of May 15, 2019), to prohibit transactions by US persons that will be specified by the Commerce Department in 45 days.

Beginning in 45 days, any persons subject to US jurisdiction – including individuals and companies – will be prohibited from engaging in the transactions with Bytedance Ltd. (TikTok’s parent company) and Tencent Holdings (WeChat’s parent company) specified by the Secretary of Commerce within 45 days.  The Secretary of Commerce is also authorized to specify additional subsidiaries of Bytedance and Tencent that are subject to these prohibitions.  The WeChat EO is notably limited to transactions related to WeChat.  Also applicable to the WeChat EO only, the EO further states that actions taken pursuant to the list of prohibited transactions and additional subsidiaries should not be noticed ahead of time, given that actors can transfer funds or other assets “instantaneously” and render action ineffective.  Thus, that EO cautions that there will be no prior notice of transactions or subsidiaries that will fall under the EOs. This language is notably absent from the TikTok EO.

The IEEPA gives the president broad authority to respond to threats, but the August 6 action represents a unique response.  The president has effectively made firm his deadline for Bytedance to divest the TikTok platform, adding urgency to negotiations already underway.  WeChat is a similarly enormous platform, and its parent company Tencent has made investments in major video game platforms like Fortnite and League of Legends.  The reach of these actions will not be known until the Commerce Secretary releases the lists of targeted transactions, but release of these EOs will trigger flurry of divestment and other compliance activities.  Violations of the EOs carry significant financial, and potentially criminal penalties, suggesting urgent review of existing business relationships.

Please contact us with any questions.