|The Trump Administration ups the ante again with the PRC through the issuance of directives to ban TikTok and WeChat.|
President Donald Trump and the White House acted against two popular applications from the People’s Republic of China (PRC) on account of purported national security issues created by Americans downloading and using them. The White House issued an “Executive Order on Addressing the Threat Posed by TikTok” and an “Executive Order on Addressing the Threat Posed by WeChat” that bar any transactions with the companies that made, distribute, and operate TikTok and WeChat respectively, the former being much more popular in the United States (U.S.) than the latter. These bans are also of a piece with the Trump Administration’s narrative that the PRC is responsible for COVID-19 and poses an existential threat to western democracy. In response, the PRC is likely to increase pressure on U.S. and foreign firms operating in that nation or with supply chains rooted in the PRC. In any event, it is not clear how effective these directives will be and the companies being targeted are almost certain to sue to stop enforcement.
These executive orders (EO) are the first of its kind whereby the U.S. government is acting against an application developer. Recently, the Congress and a federal agency barred the use of Kaspersky services and products from federal systems after questions were raised about the Russian Federation’s access to and control over the Russian firm. However, in that case, action was limited to government systems and networks and those of federal contractors. A nationwide ban on transactions is a new use of presidential power that may not be legal.
The President relied on his inherent powers under the U.S. Constitution and a few acts of Congress that provide the executive branch with power to act in emergencies or to manage trade. The Trump White House has pushed beyond previous uses of these powers making a more expansive argument about the reach, breadth, and scope of authority afforded to the President under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.).
Moreover, these EOs rely on a previously issued EO that has until now not been used. In May 2019, Trump signed Executive Order 13873 “Securing the Information and Communications Technology and Services Supply Chain” intended “to protect the security, integrity, and reliability of information and communications technology and services provided and used in the United States” through the declaration of a national emergency. The EO would bar U.S. entities from buying or using the information and communications technology and services (ICT) from “foreign adversaries” if a determination is made that doing so would sabotage or subvert U.S. ICT, place U.S. critical infrastructure or its digital economy at “undue risk,” or “poses an unacceptable risk” to national security or safety.
In the TikTok EO, the White House claimed
TikTok, a video-sharing mobile application owned by the Chinese company ByteDance Ltd., has reportedly been downloaded over 175 million times in the United States and over one billion times globally. TikTok automatically captures vast swaths of information from its users, including Internet and other network activity information such as location data and browsing and search histories. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.
The White House continued
The Department of Homeland Security, Transportation Security Administration, and the United States Armed Forces have already banned the use of TikTok on Federal Government phones. The Government of India recently banned the use of TikTok and other Chinese mobile applications throughout the country; in a statement, India’s Ministry of Electronics and Information Technology asserted that they were “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.” American companies and organizations have begun banning TikTok on their devices. The United States must take aggressive action against the owners of TikTok to protect our national security.
In the WeChat EO, the Administration asserted
WeChat, a messaging, social media, and electronic payment application owned by the Chinese company Tencent Holdings Ltd., reportedly has over one billion users worldwide, including users in the United States. Like TikTok, WeChat automatically captures vast swaths of information from its users. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information. In addition, the application captures the personal and proprietary information of Chinese nationals visiting the United States, thereby allowing the Chinese Communist Party a mechanism for keeping tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives.
Both EOs bar all transactions between U.S. entities and people, starting 45 days after issuance of the EO, with TikTok, WeChat, and their subsidiaries. Specifically, “to the extent permitted under applicable law: any transaction [is prohibited] by any person, or with respect to any property, subject to the jurisdiction of the United States, with [ByteDance and Tencent], or its subsidiaries, in which any such company has any interest…”
The legal basis for the EOs is questionable. Ordinarily, the President may direct the Department of Commerce to sanction entities or use the Committee on Foreign Investment in the United States (CFIUS) process to target foreign entities that pose national security risks as the Trump Administration has used the former against Huawei and ZTE and the latter in ultimately pressuring PRC firm Kunlun in selling the LGTBQ dating app Grindr. There is no preceden for merely banning transactions with foreign entities. The normal course of action is targeting individuals, assets, or funds.
In terms of practical effects, it is not yet clear whether U.S. stockholders or investors in ByteDance or Tencent would have to sell their stock or stake, but presumably, owning or buying the company’s stock or investing would be considered a property transaction. For people with TikTok or Wechat on their phones, is using these apps a transaction with the company? One does share content and one’s data with the companies, which could be construed as a transaction. Moreover, would non-U.S. nationals travelling to the U.S. would be violating this EO by having the app on their device. Will U.S. Customs and Border Patrol start asking if people have TikTok or WeChat?
Coincident with the EO against TikTok was news that Microsoft is in talks to buy part of the company’s worldwide operations, a move seemingly blessed by Trump who suggested the U.S. government may deserve a “finder’s fee” of sorts. Microsoft is said to be discussing taking over the U.S., Canadian, Australian, and New Zealander operations of TikTok. If Microsoft were to buy part or all of TikTok and then pay the U.S. Department of the Treasury, it would be the first time a company has paid the U.S. a fee for acquiring another firm.
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