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U.S. Treasury seeks 'resolution' with ByteDance on security concerns

[November 12, 2020] By David Shepardson

WASHINGTON (Reuters) - The U.S. Treasury Department said on Wednesday it wants a resolution of national security concerns it has raised over China-based ByteDance's acquisition of U.S. social media app Musical.ly, which it then merged into video-sharing app TikTok.

The statement came a day after China-based ByteDance filed a petition with the U.S. Court of Appeals in Washington challenging a Trump administration order set to take effect on Thursday requiring it to divest TikTok unless it can reach agreement with U.S. regulators or win an extension.

"The Treasury Department remains focused on reaching a resolution of the national security risks arising from ByteDance’s acquisition of Musical.ly," Treasury spokeswoman Monica Crowley said. "We have been clear with ByteDance regarding the steps necessary to achieve that resolution."

The divestiture order was based on a government review of ByteDance's acquisition of Musical.ly in 2017. The Trump administration contends the merged entity poses national security concerns as the personal data of U.S. users could be obtained by China's government. TikTok, which has over 100 million U.S. users, denies the allegations.

ByteDance's petition named President Donald Trump, Attorney General William Barr, Treasury Secretary Steven Mnuchin and the Committee on Foreign Investment in the United States (CFIUS), the inter-agency panel that reviews certain transactions involving foreign investment on national security concerns.

"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," TikTok said in a statement on Wednesday.

Trump directed ByteDance, which owns 100% of TikTok, in an Aug. 14 order to divest the app within 90 days, which falls on Thursday.

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U.S. flags are seen near a Bytedance logo in this illustration picture taken September 18, 2020. REUTERS/Florence Lo/Illustration

ByteDance has been in talks for a deal with Walmart Inc <WMT.N> and Oracle Corp <ORCL.N> to shift TikTok's U.S. assets into a new entity called TikTok Global. It said on Tuesday it was requesting a 30-day extension so that it can finalize terms. Trump said in September the deal had his "blessing."

"Facing continual new requests and no clarity on whether our proposed solutions would be accepted, we requested the 30-day extension that is expressly permitted in the August 14 order," TikTok said in a statement.

ByteDance said a fourth proposal submitted on Friday sought to address U.S. security concerns "by creating a new entity, wholly owned by Oracle, Walmart and existing U.S. investors in ByteDance, that would be responsible for handling TikTok's U.S. user data and content moderation."

Separate restrictions on TikTok from the U.S. Commerce Department have been blocked by federal courts, including restrictions on transactions that were scheduled to take effect Thursday that TikTok warned could effectively ban the app's use in the United States.

A ban on Apple Inc <AAPL.O> and Alphabet Inc's Google <GOOGL.O> offering TikTok for download for new U.S. users that had been set to take effect Sept. 27 has also been blocked by federal judges.

(Reporting by David Shepardson; Editing by Leslie Adler, Tom Brown and Sonya Hepinstall)

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