CIT Hears Oral Argument on Validity of Trump's Decision to Ax de Minimis for Chinese Goods

In addition, the judges asked about the proper scope of a preliminary injunction, should the court agree to grant one, since Detroit Axle is asking for party-specific relief, and about the effect of the "One Big Beautiful Bill," since a provision of the bill will eliminate the de minimis exception for imports for all countries starting in 2027.

Detroit Axle filed suit last month to challenge Trump's executive order eliminating the de minimis threshold for Chinese products as a violation of 19 U.S.C.1321, the de minimis statute commonly known as Section 321 (see 2505220063). The importer said that if Trump wanted to scrap the exemption, which was done to address Chinese inaction on the flow of fentanyl into the U.S., he had to do it through notice-and-comment rulemaking.

During oral argument, Judge Katzmann centered on the word "privilege" as it exists in both IEEPA and the One Big Beautiful Bill. IEEPA lets the president "regulate" the "importation" of any property in which any foreign country or national has an interest or exercise any "right, power, or privilege with respect to" that property. Meanwhile, the One Big Beautiful Bill modifies Section 321 to say any person who imports an item into the U.S. using the "privilege" of the de minimis exception shall be subject to a civil penalty.

In response, Thomas Dupree, counsel for Detroit Axle, said when Congress passed IEEPA, it wasn't speaking to "statutory privileges," but rather to "privileges that arise either under state law or under common law." He added that if Congress "implicitly delegated to the executive branch the power to nullify duly enacted statutes," even if such action were constitutionally permissible, it surely would have done so with "greater specificity." The government "places far too much weight on the word 'privilege' in suggesting that any time something is labeled a 'privilege," the president can "unilaterally nullify" it.

"That can't possibly be the law," he said.

DOJ attorney Sarah Welch countered that the government isn't arguing that the president can "nullify or veto a statute writ large," though she argued that it's a "feature of emergency powers" that the president can "overrule privileges." While Welch illustrated this point by indicating to presidential action during the COVID-19 pandemic, Judge Reif noted that the privilege here is embodied in a statute and that the example Welch cited saw the president overrule a regulation, not a statute. In response, Welch said Section 321 imposes a "regulatory privilege," noting that the treasury secretary is merely "authorized" to implement the de minimis exemption and not mandated to.

The court also geared many of its questions toward the scope of injunctive relief, should it be warranted. While Detroit Axle is only asking for a preliminary injunction to cover itself, it's asking for the injunction to extend to companies that buy from it, since it doesn't directly act as the importer of record for those items, which are imported from the company's Mexican facility.

Restani homed in on the issue of injunctive relief, first asking Dupree how the injunction would work if it were to extend to Detroit Axle's customers. The judge then pressed Welch about the injunction issue, given that Welch argued that extending the injunction to Detroit Axle's buyers is not party-specific relief, which the Supreme Court recently championed in Trump v. CASA. Restani said it's an "easier case to make" that an injunction covering Detroit Axle's buyers is party-specific, since it's essential for their business model to be able to ship goods to these companies duty-free.

The judge said Welch's view of party-specific relief is "incredibly narrow" and "unsustainable," particularly since Detroit Axle's buyers may not have an incentive to join Detroit Axle's lawsuit, given that they can likely source their products elsewhere. "Party-specific does not mean importer-specific," Restani said, noting that this concept is something Welch "just invented."

Restani similarly engaged in a lengthy exchange with Welch regarding whether the court could sever the de minimis element of Trump's executive order from the rest of the EO should the court find it unlawful. Essentially, Welch argued that Trump's decision to end de minimis for Chinese products is separate from the question of whether the tariffs imposed under IEEPA are valid, which is currently on appeal before the U.S. Court of Appeals for the Federal Circuit. So should CAFC affirm the trade court's decision in V.O.S. Selections v. Donald J. Trump, vacating the EOs implementing the IEEPA tariffs, the end of de minimis for China could stay.

Dupree pushed back against this argument, and Restani appeared skeptical of this position. Dupree said even if the court could sever part of an EO, it's not easy for the court to "rewrite the president's order, nor" is it an "appropriate task." The issue of de minimis and the IEEPA tariffs are "intertwined," he said.

The court also asked Dupree about the status of the case now that the One Big Beautiful Bill had been signed into law and a provision of the bill axed the de minimis exemption for all countries. In response, Dupree noted that this provision doesn't take effect until 2027 and that this delay is essential for Detroit Axle to function. The importer has the next two years to reorient its business model, though if it has to keep paying the tariffs now, it will go out of business, the attorney said.