Chinese Authorities Revise Export Restrictions, ByteDance’s US Sale Possibly Suspended
China’s Ministry of Commerce and the Ministry of Science and Technology announced on Aug. 28 that a revision has been made on the catalog of China’s Export Restrictions on technology products. A directory for China’s technology export, this is the first time the catalog has been revised since 2008. Xinhua News Agency, China’s state-owned media, pointed out that the revised catalog may restrict TikTok from selling its US operations because the deal must be approved by China.
Based on the 2008 edition of the catalog, the revision involved 53 technical items: nine items of prohibited or restricted categories were deleted, 23 new restriction category entries were added, while key phrases and technical parameters of 21 items were modified.
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Cui Fan, a professor at the University of International Business and Economics, explained to Xinhua that the revised regulation is a reflection of the change of international trade dynamics and technology advancement. Cui also pointed out that technology trade is special because cutting-edge technologies may have a significant impact on national security, social and public interests or public morality, and as a result, need to be regulated.
Cui specifically mentioned ByteDance and its product TikTok, which is currently under President Donald Trump’s executive order to be banned if not sold in the US.
ByteDance said in an official statement on late Sunday that the company is fully aware of the revised restrictions and would strictly comply with Chinese regulations on technology exports.
“Technology exporters who have not completed trading when the new catalog comes into effect and who are preparing to export restricted technologies in the adjusted catalog are advised to suspend the consultation and trade process and fulfill the relevant application procedures,” Cui said. “If ByteDance plans to export its related technology, it should fulfill the process of applying for a license.”
Cui said ByteDance’s international business has been able to achieve rapid growth thanks to its strong domestic technology support, and its constant supply of the latest core algorithm services to foreign companies is a typical technology service export. If its international business is to continue to operate smoothly, whoever its new owner and operator is will likely need to transfer the software code or its usage rights from China to offshore, and may also need to provide technical services from China to offshore.
“Therefore, ByteDance is advised to carefully study the adjusted catalog and seriously and prudently consider whether it is necessary to suspend substantive negotiations on relevant transactions and fulfill the statutory filing procedures, while taking further action,” Cui said.
*With translation contributions of Jiajun Zeng