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The Impact of WeChat Ban on Your U.S.-China Business Operations

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In response to President Trump's Executive Orders signed on August 6, 2020, the Department of Commerce announced on September 18, 2020 prohibitions on transactions in connection with the mobile app WeChat, citing the concerns about national security. WeChat is a multi-purpose messaging, social media and mobile payment app developed by the Chinese tech giant Tencent. According to Tencent, WeChat has more than 1.15 billion monthly active users globally. For many American companies doing business in China and Chinese companies doing business in the U.S., WeChat serves as a crucial link to family, friends, clients and business partners in both the U.S. and China.

Effective September 20, 2020, the WeChat ban prohibits the following transactions:

  • Any provision of services to distribute or maintain the WeChat mobile application, constituent code, or application updates through an online mobile application store or online marketplace where mobile users within the U.S. may download or update WeChat applications
     
  • Any provision of internet hosting services enabling the functioning or optimization of the WeChat mobile application within the U.S.
     
  • Any provision of paid content delivery services enabling the functioning or optimization of the WeChat mobile application within the U.S.
     
  • Any provision of directly contracted or arranged internet transit or peering services enabling the functioning or optimization of the WeChat mobile application within the U.S.
     
  • Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments to or from parties within the U.S.
     
  • Any utilization of the WeChat mobile application's constituent code, functions or services in the functioning of software or services developed and/or accessible within the U.S.

The WeChat ban only applies to parties in business-to-business transactions and targets businesses facilitating the use and support of WeChat in the U.S. It does not prohibit "the exchange between or among WeChat users of personal or business information using the WeChat mobile application, to include the transferring and receiving of funds." According to a document filed by the DOJ on September 16, 2020 in a lawsuit challenging the WeChat ban1, the Commerce Department "does not intend to take actions that would target persons or groups whose only connection to WeChat is their use or downloading of the app to convey personal or business information between users, or otherwise define the relevant transaction in such a way that would impose criminal or civil liability on such users." Nevertheless, the WeChat ban is quite vague and ambiguous on details.

After an unusual Saturday hearing in San Francisco, U.S. Magistrate Judge Laurel Beeler entered a preliminary injunction barring enforcement of the WeChat ban. In issuing the preliminary injunction order, the judge wrote that the plaintiffs had shown "serious questions" in their claim that the WeChat ban threatens the users' First Amendment rights and "there are obvious alternatives to a complete ban."

Since the WeChat ban was announced, we have received many questions from both our China- and U.S.-based clients regarding the ban and its implementation. Here are the five most commonly asked questions, as well as our brief answers. This is a rapidly developing situation, and we encourage our readers to subscribe to our alerts for updates.

Five Most Commonly Asked Questions

1. Can I still use WeChat to talk to my employees/customers/suppliers/business partners/contacts in China from the U.S.?

A: The WeChat ban only applies to business-to-business transactions which facilitate the support, use or distribution of WeChat in the U.S. Although U.S. persons, as individual users, can still use the app, it is very likely that the ban might make WeChat unusable in the U.S. because the ban prohibits any internet hosting service from enabling the functioning or optimization of the mobile app in the U.S.

2. Can I still use WeChat to talk to my employees/customers/suppliers/business partners/contacts in the U.S. from China?

A: The WeChat ban only prohibits certain transaction activities related to support, distribution and use of WeChat within the land and maritime borders of the United States and its territories. However, as mentioned above, the ban might make WeChat unusable in the U.S., so your contacts in the U.S. might not be able to access WeChat.

3. Can I still send funds to China/receive funds from China via WeChat in the U.S.?

A: The WeChat ban will not prohibit the exchange between or among WeChat users of personal or business information using the WeChat mobile application, including the transfer and receipt of funds. However, as stated above, the ban might make WeChat and the payment functions unusable in the U.S.

4. Can I use WeChat to pay the wages for my employees in the U.S./China?

A: Yes, the WeChat ban does not prohibit payment of wages, salaries and benefit packages to employees or contractors. However, as stated above, the ban might make WeChat and the payment functions unusable in the U.S.

5. We are a U.S.-based company. Can we still use WeChat to advertise and sell our products in China?

A: Yes, the WeChat ban does not prohibit U.S. businesses from engaging in business transactions by using the WeChat application in China. However, as stated above, the ban might make WeChat and the payment functions unusable in the U.S.

For more information please contact Frank Xue, John Scannapieco, Alan Enslen, or any member of Baker Donelson's Global Business China team.

1 A group of WeChat users is suing the Trump administration over the WeChat ban in the federal court of California.

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