A federal appeals court on Thursday heard arguments in a case challenging the Trump administration’s tariff regime.
The arguments in V.O.S. Selection, Inc. v. Trump focused on whether President Donald Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) by issuing tariffs to prevent human and drug trafficking and to remedy international trade imbalances.
IEEPA authorizes the president to “to deal with any unusual and extraordinary threat” by giving him the authority to “regulate . . . importation.” Oral argument focused on whether IEEPA, which does not expressly mention tariffs, impliedly confers the authority to impose tariffs under the guise of “regulat[ing] . . . importation.”
The Liberty Justice Center represents several small “businesses who have been severely harmed by the tariffs and highlights the human and economic toll of unchecked executive power.” The businesses argue Trump exceeded his authority by imposing the “Liberation Day” tariffs.
The administration appealed to the U.S. Court of Appeals for the Federal Circuit after a three-judge panel of the U.S. Court of International Trade (CIT) unanimously ruled that Trump exceeded his authority by imposing the tariffs.
Judges of the Federal Circuit questioned the parties about the Trading with the Enemy Act (TWEA), a law predating IEEPA from which IEEPA borrowed the “regulate . . . importation” language.
In U.S. v. Yoshida Int’l. Inc. (1975), the U.S. Court of Customs and Patent Appeals—the Federal Circuit’s predecessor court—held that TWEA allowed President Richard Nixon to impose limited tariffs to address a monetary crisis in 1971.
Nixon limited the tariffs to those authorized by the Harmonized Tariff Schedule of the United States at the time. The Yoshida court upheld the tariffs because Nixon “imposed a limited surcharge, as a temporary measure calculated to help meet a particular national emergency, which is quite different from imposing whatever tariff rates he deems desirable.”
After Yoshida, Congress enacted IEEPA.
An attorney for the administration noted Congress was aware of Yoshida when it enacted IEEPA by copying language from TWEA. This, he contended, meant Congress intended to “ratify” Yoshida and grant the president tariff authority during an emergency.
The judges repeatedly pushed back, arguing that if Congress ratified Yoshida with IEEPA, then Congress must also have ratified the limits in Yoshida. The administration’s attorney contended that IEEPA did not necessarily ratify the limits of Yoshida since IEEPA contains its own list of limitations, including a presidential declaration of a national emergency.
Oral argument also focused on what constitutes an “unusual and extraordinary threat,” with several judges and the challengers questioning whether a longstanding issue like a trade imbalance was “unusual” or “extraordinary.”
The Tariffs
Trump imposed the Worldwide and Retaliatory Tariffs (EO 14257) to remedy persistent trade deficits between the United States and other nations. EO 14257 imposed a 10% ad valorem duty on “all imports from all trading partners,” except a few nations expressly excluded.
China responded by increasing tariffs on U.S. goods, leading Trump to impose retaliatory tariffs of 84% to 125% on Chinese goods. China later took “a significant step . . . toward remedying non-reciprocal trade agreements,” after which Trump reduced tariffs on the nation to the original 10%.
Trump imposed the Trafficking Tariffs (EO 14193, EO 14194, EO 14195) to induce Canada, Mexico, and China to stem the flow of trafficking in people and narcotics. The tariffs imposed a 25% ad valorem duty on articles from Canada and Mexico, a 10% (later 20%) ad valorem duty on articles from China, and a further 10% ad valorem duty on Canadian energy and energy resources.
After finding Mexico and Canada acted “to alleviate the illegal migration and illicit drug crisis through cooperative actions,” Trump paused the tariffs.
Meaning of “regulate . . . importation”
The CIT’s decision interpreted the meaning of “regulate . . . importation” found in §1702 of IEEPA, which the administration relied on to support its tariffs.
The plaintiffs argued that the authority to “regulate . . . importation” did not extend to imposing tariffs. Interpreting the phrase otherwise, the plaintiffs argued, would violate the non-delegation and major questions doctrines.
The non-delegation doctrine stems from the constitutional mandate that legislative powers are vested in Congress. When Congress delegates some of its powers to another branch—like the Executive—the delegation must come with “an intelligible principle” governing the exercise of that power and the scope of the delegation. Such a principle must place a meaningful constraint on the president’s authority.
The major questions doctrine also governs the delegation of legislative power where matters of far-reaching economic and political significance are concerned. The doctrine requires that when Congress wishes to delegate the power to deal with these matters, Congress must unambiguously delegate that power.
The administration countered that “regulate . . . importation” should “have the same meaning” it did in TWEA, which allowed the president to impose tariffs.
The administration disagreed that IEEPA contained no limiting “intelligible principle” since it requires the president to declare a national emergency, which expires after a year. IEEPA further requires that the emergency must pertain to an “unusual and extraordinary threat” and that the power to “regulate . . . importation” extends only to a foreign country’s property or property in which a non-American has an interest.
The CIT agreed with the plaintiffs that “regulate . . . importation” could not encompass tariffs as far-reaching as the Worldwide and Retaliatory Tariffs without running afoul of the non-delegation and major questions doctrines.
The CIT held that IEEPA confers a narrow authority to “regulate . . . importation.” Looking to the congressional record, the CIT found that Congress intended to restrict the president’s tariff power:
In enacting reform legislation including IEEPA, Representative John Bingham, Chair of the House International Relations Committee’s Subcommittee on Economic Policy, described TWEA as conferring “on the president what could have been dictatorial powers that he could have used without any restraint by the Congress.” Similarly, the House report on the reform legislation called TWEA “essentially an unlimited grant of authority for the President to exercise, at his discretion, broad powers in both the domestic and international economic arena, without congressional review.” (citations omitted)
“Congress,” the CIT determined, “reformed the President’s emergency powers in part by enacting IEEPA to provide the President a new set of authorities for use in time of national emergency which are both more limited in scope than those of the Trading with the Enemy Act and subject to various procedural limitations, including those of the National Emergencies Act.” (cleaned up)
The president’s authority to impose tariffs to address trade imbalances, the CIT reasoned, is cabined to the more limited statutes that impose limits on the percentage and duration of tariffs.
How to “deal with” a threat?
The CIT also addressed whether the Trafficking Tariffs “deal with any unusual and extraordinary threat” as required by §1701 of IEEPA. The three-judge panel held those tariffs did not fit the ordinary meaning of “deal with”:
“Deal with” connotes a direct link between an act and the problem it purports to address. A tax deals with a budget deficit by raising revenue. A dam deals with flooding by holding back a river. But there is no such association between the act of imposing a tariff and the “unusual and extraordinary threat[s]” that the Trafficking Orders purport to combat. Customs’s collection of tariffs on lawful imports does not evidently relate to foreign governments’ efforts “to arrest, seize, detain, or otherwise intercept” bad actors within their respective jurisdictions.. (citation omitted)
The CIT, in a footnote, expounded on the lack of a direct link: “The Trafficking Tariffs, of course, do not change the effective rate of duty (zero percent ad valorem) for smuggled drugs themselves.”
The CIT opinion:
CLICK HERE FOR FULL VERSION OF THIS STORY