On September 24, 2020, the U.S. Department of Commerce published a Federal Register notice listing prohibited transactions with ByteDance Ltd. and its subsidiaries including TikTok, Inc., pursuant to President Trump’s August 6, 2020 Executive Order declaring TikTok a national security threat and directing Commerce to define the scope of prohibited “transactions” with TikTok by September 20, 2020. The notice was published after a myriad of legal activity that took place from September 18 through September 21, 2020, with respect to mobile applications, WeChat and TikTok including, but not limited to, actions taken by Commerce against WeChat and TikTok, announcements by Walmart and Oracle of their new deal with TikTok to form TikTok Global, and a federal court injunction enjoining Commerce’s intended action against WeChat. For more information on these issues, see update dated September 22, 2020.
In its September 24 notice, Commerce has reiterated that it would no longer allow certain transactions between U.S. parties and the Chinese parent company, ByteDance Ltd. or its subsidiaries, including TikTok, Inc. The notice does not include WeChat, as the federal injunction enjoining Commerce’s actions was specific to WeChat. Absent an interim injunction for TikTok, as of September 27, 2020, the following transactions will be prohibited:
Any provision of services to distribute or maintain the TikTok mobile application, constituent code, or application updates through an online mobile application store, or any online marketplace where mobile users within the land or maritime borders of the United States and its territories may download or update applications for use on their mobile devices.
As of November 12, 2020, the following transactions will also be prohibited:
- Any provision of internet hosting services enabling the functioning or optimization of the TikTok mobile application within the land and maritime borders of the United States and its territories;
- Any provision of content delivery network services enabling the functioning or optimization of the TikTok mobile application within the land and maritime borders of the United States and its territories;
- Any provision of directly contracted or arranged internet transit or peering services enabling the functioning or optimization of the TikTok mobile application within the land and maritime borders of the United States and its territories; and
- Any utilization of the TikTok mobile application’s constituent code, functions, or services in the functioning of software or services developed and/or accessible within the land and maritime borders of the United States and its territories.
The notice exempts the following transactions from the categories of prohibited activity, which will continue to be authorized:
- Payment of wages, salaries, and benefit packages to employees or contractors;
- The exchange between or among TikTok mobile application users of personal or business information using the TikTok mobile application;
- Activities related to mobile applications intended for distribution, installation or use outside of the United States by any person, including but not limited to any person subject to U.S. jurisdiction, and all ancillary activities, including activities performed by any U.S. person, which are ordinarily incident to, and necessary for, the distribution, installation, and use of mobile applications outside of the United States; and
- The storing of TikTok mobile application user data in the United States.
Finally, the notice goes on to identify a sixth category of transactions that may be prohibited at a later future date, specifically, “any other transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd., or its subsidiaries, including TikTok Inc., in which any such company has any interest.”