Late on August 6, 2020, the President signed two Executives Orders directing that sanctions be imposed with respect to TikTok and WeChat, citing national security concerns. The new E.O.s provide for sanctions to be implemented by the U.S. Department of Commerce following a 45-day implementation period and generally prohibit U.S. companies and individuals from transacting with ByteDance Ltd. (the parent company of TikTok) and Tencent Holdings Ltd. (the parent company of WeChat) with respect to WeChat, and each of the companies’ respective subsidiaries. These new sanctions represent a substantial escalation in U.S. foreign policy and could have a significant impact on U.S.-China relations, including U.S. investment in the region.
With respect to TikTok, the E.O. prohibits “any transaction” by a U.S. company or individual, or with respect to property that is subject to U.S. jurisdiction, with ByteDance Ltd. (a/k/a Zìjié Tiàodòng) or any of its subsidiaries. This provision appears to include a blanket prohibition on U.S. companies doing business with ByteDance Ltd. or any of its subsidiaries. The E.O. directs the Secretary of Commerce to identify the transactions subject to prohibition following the 45-day implementation period.
With respect to WeChat, the prohibition appears to be more targeted but further guidance could be necessary. Specifically, the E.O. prohibits “any transaction that is related to WeChat” by a U.S. company or individual, or with respect to property that is subject to U.S. jurisdiction, with Tencent Holdings Ltd. (a/k/a Téngxùn Kònggǔ Yǒuxiàn Gōngsī) or any of its subsidiaries. Similar to the TikTok E.O., the WeChat E.O. directs the Secretary of Commerce to identify the transactions subject to prohibition following the 45-day implementation period.
In short, the new sanctions regarding TikTok and WeChat could be far reaching, potentially impacting U.S. investments in the parent companies and their subsidiaries, unrelated to the applications. We will continue to closely monitor developments in this space. If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533) or Andrew S. Jacobson (212-574-1477) at Seward & Kissel’s Sanctions Practice Group.
