CIT Holds 2nd Hearing on Legality of IEEPA Tariffs

Last week, the three judges heard a case challenging the reciprocal IEEPA tariffs brought by the Liberty Justice Center, a conservative legal advocacy group, sharply questioning many of the arguments presented, including the U.S. claim that many of the elements of the case are unreviewable political questions (see 2505130052). The lawsuit filed by the 12 U.S. states, led by Oregon, is broader, challenging the reciprocal tariffs and the tariffs on China, Canada and Mexico imposed to address the flow of fentanyl into the U.S.

One of the claims made in Oregon's case but not in Liberty Justice Center's suit concerned whether the tariffs on China, Canada and Mexico can reasonably "deal with" the declared crisis, which in this case is the flow of fentanyl. Brian Marshall, senior assistant attorney general for the state of Oregon, argued before the court that there must be a "reasonable relationship between the threat confronted and the action imposed." The tariffs on China, Canada and Mexico, by the government's admission, exist solely to create leverage over these countries to get them to do what the U.S. government wants in addressing the flow of fentanyl.

When the tariffs are being used "purely as leverage, there's not a mechanical action that addresses the particular issue," Marshall said. He sought to distinguish past IEEPA action, including a 2021 Executive Order signed to address fentanyl that froze the assets of actual drug traffickers. Marshall said this action actually works to address the declared crisis, whereas tariffs on all products doesn't, and bears no relationship to actions meant to combat the emergency.

Brett Shumate, principal deputy assistant attorney general for DOJ's civil division, argued the case for the government and responded to this point by arguing that how the president chooses to address a declared emergency is an unreviewable political question. In response, Restani said that the president's attempt to put pressure on other countries "may be a dandy plan" but still has to "meet the statute."

Throughout the argument, Shumate repeatedly argued that the court can only review whether the statute provides for tariffs but that all other elements are unreviewable.

Restani also pressed Marshall during his initial remarks and on rebuttal on whether Section 122 of the Trade Act of 1974 actually precludes using IEEPA for imposing the reciprocal tariffs, as the 12 states claim. The states argued that after President Richard Nixon used the Trading With the Enemy Act, IEEPA's predecessor, to impose a 10% duty surcharge to address a balance of payments crisis, Congress passed Section 122, indicating that TWEA, and later IEEPA, cannot be used to address future balance of payments issues. Restani repeatedly asked whether a balance of payments issue actually exists here, which would make the reciprocal tariffs more akin to tariffs imposed under Section 122.

On rebuttal, Marshall said the states' claim is not that there is a balance of payments problem but that President Donald Trump is seeking a "balance of trade solution," which specifically falls under the power granted in Section 122 with all its limitations.

Reif went on to question Shumate on the power of the statute itself, asking if there are any other statutes Congress has passed that delegate the power to tax to the president without the explicit authorization to impose a tax. In response, Shumate cited the Yoshida decision along with the Supreme Court's decision in FEA v. Algonquin, which allowed the president to impose tariffs under Section 232. The DOJ attorney noted that Section 232's language merely lets the president "adjust" imports.

Restani pressed Shumate on the applicability of Yoshida, noting that the U.S. only wants the court to adopt Yoshida's holding that the term "regulate" in the statute provides for tariffs but ignore the limits imposed on TWEA's tariff power by the court. The judge noted that these limits include the fact that the tariffs have to be "rationally related" to the declared emergency and that Nixon's tariffs were less than the duty rates set by Congress and didn't rewrite the tariff schedule.

The judge said "the problem" for the government is that, since Yoshida, "a lot of water has gone under the bridge," including the development of the major questions doctrine and a Supreme Court decision eliminating the legislative veto, which would have worked to constrain the president's power under IEEPA. "So why should we keep one little piece of Yoshida and nothing else?" Restani asked.

In response, Shumate said the words in the statute haven't changed since Yoshida and that the doctrines embraced by the Supreme Court, such as the major questions doctrine and the elimination of the Chevron deference standard, don't apply to the president. Restani pushed the DOJ attorney on this point, noting that a federal agency has an "organic statute" that limits its discretion but that the president isn't bound by such a limit. The president is only bound by the limits of what constitutes "national security," but tariffs "are not national security," she said.

Shumate replied that the president isn't filling gaps in the statutes, as is at issue in cases decided under the major questions doctrine or Chevron deference, adding that the delegation of authority in IEEPA is clear. "You're having a lot of argument about something that's clear," Restani quipped in reply, noting that "if it was clear to everybody, we wouldn't be here." The judge later questioned why so many different tariff statutes exist if the president can take such drastic unilateral tariff action.

Reif then invoked IEEPA's legislative history, noting that the history says that emergencies, by their nature, are "rare and brief" and aren't to be "equated with ongoing problems." Nixon himself said his 10% tariff was going to be brief, but Trump has yet to characterize any of his tariff measures as brief, the judge noted. Shumate stressed the one-year statutory limitation for a declared emergency as evidence of how this action is brief, though he noted that the emergencies can be extended.

Toward the end of the government's argument, Restani said that under the U.S. interpretation of the president's power and the unreviewability of his determinations, "nothing is so crazy that it can't be stopped by the courts." Any declaration or remedy under IEEPA is permissible, since the courts can't do anything to stop it or review it, the judge noted.