A federal appeals court upheld a law mandating China-based internet company ByteDance to divest TikTok’s U.S. operations by Jan. 19, or face a nationwide ban.
Both Republican and Democratic lawmakers say TikTok poses a national security threat due to its connections to China, who could allegedly use the app to spy on Americans and harvest personal data.
The unanimous ruling by a three-judge panel of the U.S. Court of Appeals in Washington on Friday rejected TikTok’s argument that the law is unconstitutional and violates the First Amendment rights of the 170 million Americans who use the popular social media app.
TikTok said it will ask the U.S. Supreme Court to overturn the appeals court decision.
In a statement posted on its website Friday, TikTok said, “Unfortunately, the TikTok ban was conceived and pushed through based upon inaccurate, flawed and hypothetical information, resulting in outright censorship of the American people. The TikTok ban, unless stopped, will silence the voices of over 170 million Americans here in the US and around the world on January 19th, 2025.”
TikTok’s looming ban arrives as the app tripled its U.S. shopping sales to more than $100 million on Black Friday, the company said.
TikTok Shop, the app’s e-commerce feature, was launched in 2023. The company has 15 million e-commerce merchants worldwide, with around 500,000 of them based in the United States, according to recent data.
The company said it saw a 165% year-over-year increase in shoppers using TikTok Shop during its Black Friday and Cyber Monday holiday shopping campaign.
“A third of all purchases made on TikTok Shop during the campaign went to small and medium businesses,” TikTok said in a news release. “Some of the most popular categories during the campaign included makeup, skincare, fragrances, bath and body care, personal care items, menswear, indoor furniture, kitchen appliances, fitness items and sporting equipment.”
A ban on TikTok in the U.S. would be “devastating” to e-commerce retailers and the logistics industry, said Maggie Barnett, CEO of LVK.
LVK is the fulfillment division of parent company and warehouse management system ShipHero, a New York-based e-commerce software and fulfillment provider.
“It’s going to be devastating for these sellers to not have that channel,” Barnett told FreightWaves in an interview. “At LVK, we have seven warehouses, a million-square-feet of space. I have about 500 sellers that I represent. I’ve seen how a handful of those sellers have increased their sales by 30% once they went on Tik Tok, because the incentives were great. ShipHero has a native integration to TikTok. We invested money in creating that native integration directly from TikTok Shop to ShipHero, because we saw that people wanted it. Our integration does work. We’re seeing sellers’ sales go up 30% once they use that connection.”
Barnett said sellers using TikTok now face the possibility of a reduced e-commerce reach or needing to pivot to alternative platforms to survive.
LVK’s third-party logistics network runs on ShipHero’s WMS (warehouse management software) platform, with 50% of its customers being 3PLs and the other 50% are brands.
“What we’re seeing is, there’s some 3PLs, who just work with TikTok influencers and only provide 3PL services for that TikTok channel. Many of our brands on our WMS software, over 50% of their sales are all on TikTok,” Barnett said. “TikTok’s ability to convert shoppers was above and beyond any other sort of social commerce that we’ve seen.”
Another blow to TikTok retailers and the e-commerce market could be changes to Section 321 of the Trade Facilitation and Trade Enforcement Act, Barnett said.
The change could close a de minimis exemption for imports into the U.S. with a value of less than $800. The exemption allows goods to be imported with no duties applied and with less customs scrutiny.
“It’s going to hit these smaller e-commerce brands because of Section 321,” Barnett said. “If the sellers were purchasing things from China, those prices would go up as well. Now they have no channel to sell, and their cost of goods are going up.”
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