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US-China tensions

TikTok has 2 more weeks to unload US operations, regulators say

Pressure mounts on video app as it now faces Nov. 27 deadline to complete deal with Oracle

TikTok is seeking court relief from President Donald Trump's order to sell its U.S. operations.   © Reuters

PALO ALTO, U.S. -- TikTok now has two more weeks, until Nov. 27, to reach an agreement with Oracle and Walmart and persuade the U.S. government to approve their proposed deal, a court filing Friday shows.

The Committee on Foreign Investment in the United States, or CFIUS, told TikTok on Thursday -- the original deadline for the company to complete a deal -- that the widely popular short-video app will have an additional 15 days to divest U.S. operations.

The reprieve came two days after TikTok and Chinese parent ByteDance petitioned in federal court to annul the deal review deadline. They said Tuesday that they had requested a 30-day extension to complete the sale but had not heard back from the government in weeks.

Meanwhile, the Commerce Department also said on Thursday -- the effective date for the app to be barred in the U.S. -- that it would not immediately force the video-sharing app to shut down, since a federal judge has blocked President Donald Trump's TikTok ban.

But even with this room to breathe, TikTok's future in the U.S. remains far from assured.

TikTok and ByteDance are contending with two executive orders. The first, issued by Trump on Aug. 6, would have removed TikTok from app stores and effectively shut it down in the U.S. But that order was temporarily blocked by a Philadelphia federal judge in late October at the request of three social media influencers who claimed that their livelihoods would be destroyed if the app were no longer available.

The second order, issued Aug. 14, ordered ByteDance to divest TikTok's American operations by Thursday. The company has asked a court in Washington to review that order, but a ruling has not yet been made.

After the U.S. Commerce Department said Thursday that it was complying with the court order and not forcing TikTok to shut down immediately, TikTok is apparently free to continue operating in the U.S. -- at least for now. But a big question remains: What will happen to the Oracle deal?

Trump gave his blessing for the sale in late September, but he soon retracted that preliminary approval after ByteDance and the two U.S. companies made contrasting statements about ownership and control of TikTok Global -- a new entity that would be created under the deal. The Chinese company said it would retain an 80% stake in the new company, but Trump said he would not approve a deal if Oracle and Walmart did not have "total control."

Trump's Aug. 14 executive order specifically called out ByteDance's acquisition of Musical.ly, the U.S. company which later merged into TikTok, in 2017, and ordered the Chinese company to divest its U.S. operations -- including any asset acquired as part of the Musical.ly deal.

The order set Nov. 12 as the deadline for ByteDance to complete the divestiture of TikTok's U.S. operations and secure approval for the deal from CFIUS, an inter-agency panel under the Treasury Department that reviews certain transactions involving foreign investment on national security grounds.

However, the order also stipulates that the deadline could be extended for up to 30 days if CFIUS deemed necessary. TikTok said it requested such an extension but did not hear from the agency for weeks. With the deadline looming and no clarity in sight, the company filed a motion earlier this week in a Washington court to overrule the Trump order.

"For a year, TikTok has actively engaged with CFIUS in good faith to address its national security concerns, even as we disagree with its assessment," TikTok said in a statement on Tuesday. "In the nearly two months since the President gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement -- but have received no substantive feedback on our extensive data privacy and security framework."

TikTok is asking the court to "hold unlawful, vacate, enjoin, and set aside" Trump's Aug. 14 executive order and related actions by CFIUS, according to the court filing.

"We remain committed to working with the Administration -- as we have all along -- to resolve the issues it has raised, but our legal challenge today is a protection to ensure these discussions can take place," TikTok said on a Tuesday statement.

On Wednesday night, the day after TikTok filed its petition, the Treasury Department said it "remains focused on reaching a resolution of the national security risks arising from ByteDance's acquisition of Musical.ly."

"We have been clear with ByteDance regarding the steps necessary to achieve that resolution," Treasury Department spokeswoman Monica Crowley said in a statement.

The Treasury Department did not respond to Nikkei Asia's request for further clarification on the review process of the TikTok deal.

"We remain focused on continuing to engage CFIUS and look forward to reaching a resolution that addresses their security concerns, even as we disagree with them," a TikTok spokesperson told Nikkei Asia on Thursday.

Meanwhile, the Washington appeals court on Thursday ordered TikTok and relevant U.S. government agencies to file supporting documents by Dec. 14 before it can proceed with the case.

With a 15-day extension in hand, TikTok's future in the U.S., however, remains uncertain.

It is unclear whether ByteDance has reached an agreement with Oracle and Walmart on the ownership of TikTok's U.S. operations. In September, the two American companies had said they would take up to a 20% cumulative stake in TikTok Global. As a part of this agreement, TikTok would run on the Oracle Cloud system, and Oracle would be able to review the app's algorithms to ensure the security of U.S. users' data.

But while ByteDance had claimed that it would retain an 80% stake in the new company, Oracle had said that "Americans will be the majority and ByteDance will have no ownership in TikTok Global."

If the three companies cannot reach agreement by the new deadline, or if U.S. regulators rule that the terms of the proposed deal do not address the administration's national security concerns, ByteDance and TikTok could face a less-favorable outcome and being taken to court by CFIUS, according to James Lewis, senior vice president and director of the Strategic Technologies Program at the Washington-based Center for Strategic and International Studies think tank.

The CFIUS committee, he said, has the authority to order ByteDance to "completely divest" TikTok. CFIUS previously forced China's Kunlun Tech to sell its ownership of Grindr, the world's largest LGBTQ dating app, after it deemed Chinese ownership posed a national security threat.

If CFIUS does take ByteDance to court and forces a sale, the Chinese company would not have much negotiating power to decide which asset they'd like to keep and what to sell in the U.S., except selling all its operations in the country.

"But that's not the deal that Oracle and Walmart would like to have, so it would be in effect, blowing up the whole thing, which doesn't make any sense," Lewis said.

Walmart declined to comment. Oracle did not respond to Nikkei's request for comment.

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