Take Two: Another Executive Order Addresses U.S. Personal Data Concerns by Prohibiting Business with Companies That Develop or Control Eight Specified Applications with Connections to China

Wilson Sonsini Goodrich & Rosati

On January 5, 2021, President Trump signed another executive order (EO) to address the threat to U.S. national security posed by access to personal data by the People's Republic of China and the Chinese Communist Party. This EO, which will not become effective until at least February 19, 2021, calls for a ban on all transactions with companies (including their subsidiaries) that develop or control the following eight Chinese-connected applications: Alipay, CamScanner, QQ Wallet, SHAREit, TencentQQ, VMate, WeChat Pay, and WPS Office.

The EO tasks the Department of Commerce (Commerce Department) with implementing it, including the implementation of rules and regulations necessary to enact the ban, and directs other Executive Branch agencies to provide the Commerce Department with the necessary resources, information, and assistance to implement the broad prohibitions. At this time, it is unclear whether the Commerce Department's National Telecommunications and Information Administration (NTIA) will be the sole Commerce Department agency to impose new rules and regulations or whether other agencies at the Commerce Department also will implement new controls in response to the EO, such as the Bureau of Industry and Security, which administers the dual use export control regulations, including the Entity List. The EO also directs the Secretary of Commerce to evaluate other software applications that may pose similar risks. This review may result in designating additional apps, thus possibly extending the reach of the EO to other Chinese companies.

It is unclear at this time whether President-elect Biden will modify or revoke the EO and others issued by President Trump. Because there is strong bipartisan support to combat the threats to U.S. national security related to China's attempts to gather personal data on U.S. persons, it would not be surprising to see a Biden administration implement new restrictions under the EO.

In addition, it is unclear whether this EO will fare better than the August 2020 orders that attempted to ban transactions related to the TikTok and WeChat apps. Both of those orders are tied up in legal battles in the courts and neither have been implemented. In September, federal courts issued injunctions against the implementation of both EOs and their application to both apps. The decisions were made on the grounds that the Commerce Department likely lacked such legal authority for acting "in an arbitrary and capricious manner by failing to consider obvious alternatives" and on constitutional grounds, as a potential violation of First Amendment rights. Because the new EO is tied to apps that provide payment and office utility functions, the ban on these apps may not sustain First Amendment challenges, as they arguably have limited impact on personal communications between users or create other protected expression. Further, users of the eight applications may be able to use alternative payment programs not prohibited by the order.

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Wilson Sonsini Goodrich & Rosati

Wilson Sonsini Goodrich & Rosati on:

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