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President Trump Orders TikTok Parent Company to Divest from U.S. Assets

keith.gerver@cwt.com's picture
Commentary by Keith Gerver

President Donald J. Trump issued an Executive Order ("EO") directing ByteDance Ltd. ("ByteDance"), the Chinese-owned parent company of social networking application TikTok, to divest its U.S. assets within 90 days. The EO cited "credible evidence" that ByteDance's operations may threaten U.S. national security. As previously covered here and here, President Trump had informed reporters that he intended to "ban" the U.S. availability of TikTok unless ByteDance found an acceptable buyer.

In addition to mandating the divestiture, the EO directs ByteDance to (i) inform the Committee on Foreign Investment in the United States ("CFIUS") of the intended buyer of any of its U.S. assets, (ii) provide CFIUS with a certification that it has destroyed all data "obtained or derived from TikTok application or Musical.​ly application users in the United States;" and (iii) certify to CFIUS, on a weekly basis, that it is in compliance with the EO. The EO also permits CFIUS to extend the deadline to divest by 30 days.

President Trump directed CFIUS to audit ByteDance for verification of its compliance, and to ensure that TikTok's operations are "carried out in such a manner as to ensure protection of the national security interests of the United States." As part of the audit, CFIUS is authorized to (i) examine and copy any documents belonging to ByteDance, (ii) audit any of ByteDance's information systems or technology, and (iii) interview any officers or employees of ByteDance. President Trump also authorized Attorney General William Barr to take any action necessary to enforce the EO.

Commentary

The President's most recent Executive Order provides a degree of finality to the TikTok saga; within at most 120 days of its signing, ByteDance will be required to divest its U.S. operations to a buyer suitable to CFIUS. The issuance of the order also offers some confidence that the Secretary of Commerce will not authorize a blanket prohibition on transactions with ByteDance next month, as then the company would be unable to complete the required divestment. This action - taken under the President's well-established CFIUS authorities - also could be seen as an effort by the Executive Branch to hedge against any potential legal action by ByteDance to challenge the August 6th order.

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