Importers Defend CIT Ruling Enjoining IEEPA Tariffs at Federal Circuit

In May, the trade court enjoined President Donald Trump's executive orders implementing the reciprocal tariffs and tariffs on China, Canada and Mexico meant to combat the flow of fentanyl (see 2505280068).CIT didn't say IEEPA categorically doesn't provide for tariffs, though the court said IEEPA doesn't allow for tariffs to address trade deficits issues in light of the specific authority to address these issues under Section 122, and that the fentanyl tariffs don't "deal with" the declared emergency, since IEEPA can't be used to create leverage over another country to address a problem.

In its appeal to the Federal Circuit, the U.S. said IEEPA's text and history confirm the statute lets the president impose tariffs to address declared emergencies (see 2506250037). In so arguing, the government said tariffs are allowed under the statute, since the law allows the president to "regulate ... importation," which includes the power to impose tariffs.

In response, the Liberty Justice Center, aided by attorneys at Wilson Sonsini -- Ilya Somin, a professor at the Antonin Scalia Law School at George Mason University, and Neal Katyal, former acting U.S. solicitor general and current Milbank partner -- said the government's "extraordinary view" of the word "regulate" finds "no support in dictionaries or precedent, and it would have intolerable implications." The importers said the U.S. Code has hundreds of statutes letting agencies "regulate" various things, adding that it would be especially problematic if this gave the agencies the power to tax.

"IEEPA is thus properly understood as a sanctions and embargo law, not a blank check for the President to rewrite tariff schedules," the brief said.

Regarding the trade court's finding that Section 122 bars IEEPA from being used to address trade deficits, the U.S. said there's a "strong presumption" that statutes can be read in harmony. The government argued that Section 122 lets the president impose tariffs to address trade deficits in the ordinary course but that IEEPA allows for such action in times of emergency.

The importers responded that the government's interpretation of the laws "does not harmonize IEEPA with Section 122; it allows IEEPA to swallow Section 122 whole, by granting the President power to impose tariffs that flout Section 122’s limits." The U.S. claim "puts the two statutes on a collision course, and in the face of such a conflict, the more specific statute -- Section 122 -- necessarily governs," the brief said.

While the U.S. said it's common for Congress to enact overlapping tariff authorities, Congress has in "no way" displaced Section 122's regulatory scheme with another scheme. For instance, the U.S. invoked Section 338 as another "overlapping" statute, but the importers replied that this statute didn't displace "the scheme applicable to balance-of-payment crises."

Section 338 instead "provided limited retaliatory tariff authority where a country imposes a non-uniform tariff that '[d]iscriminates' against U.S. exports." In any event, the law has been "superseded" by a new scheme passed by Congress for tariffs "in response to 'unjustifiable' burdens on 'United States commerce,'" the brief said.

The importers also responded to a claim from a Trump-aligned legal group, filing as an amicus, that said the tariffs are also valid under Section 338 (see 2506240060). Trump didn't invoke Section 338 in imposing the tariffs, and for good reason: the tariffs don't conform to the statute's requirements. Section 338 only allows tariffs "when the President finds 'as a fact' that a country satisfies two statutory conditions, including that the country '[d]iscriminates' against U.S. exports," the brief said. Trump never made such findings, nor could he, since the retaliatory tariffs cover countries with which the U.S. has a trade surplus, the importers argued.

And while the U.S. also said Section 122 doesn't apply here, since the retaliatory tariffs address more than trade deficits, the importers said this claim is irrelevant. Section 122 applies whenever "'large and serious United States balance-of-payments deficits' are at issue, regardless of whether there might also be related underlying conditions (which there always will be)."

The Liberty Justice Center also defended the trade court's decision to issue injunctive relief, which the U.S. challenged on the grounds that CIT didn't discuss the four equitable factors required for such relief before permanently enjoining the tariffs. The trade court only discussed the four factors in a separate order issued after its primary merits decision.

It's "undisputed" that the court addressed all four factors "just a few days later," and it's "neither unusual nor improper for courts to explain their reasoning in two separate orders, especially when operating under time pressures," the brief said. In any case, the Federal Circuit can affirm the CIT decision "on any grounds supported by the record," the importers argued.

And the importers countered the government's claim that CIT shouldn't have issued an injunction, since such relief weakens the president's negotiating position in ongoing trade talks. While there are "often policy objections to requiring the executive to follow the law," such objections don't warrant letting the president break the law, "even when 'foreign affairs are at issue,'" the brief said. In addition, the public has an "overriding interest" in ensuring the government follows the law.

The U.S. "cites no case -- presumably because there is none -- where the public interest factor allowed the government to keep violating the law," the brief said. No matter how compelling the president's interest is in needing negotiating leverage, no established equitable principle "allows the President to engage in ultra vires conduct" or allows courts "'to set aside first principles.'” Otherwise, this need "would always justify dispensing with statutes, based on the President's say-so," the importers said. “The CIT’s injunction ensures that Congress’s judgment will 'be understood and respected.'”