CAFC Says Reciprocal, Fentanyl Tariffs Violate IEEPA, Sends Case Back for CIT to Rethink Injunctive Relief

However, the court sent the case back to the Court of International Trade, so the trade court could reconsider its injunction against the tariffs in light of the Supreme Court's decision in Trump v. CASA limiting the availability of nationwide injunctions.

In an accompanying order, the court said it's withholding the issuance of its mandate until Oct. 14 to give the government time to appeal the ruling to the Supreme Court.

Seven of the 11 judges that heard the case -- Judges Alan Lourie, Timothy Dyk, Jimmie Reyna, Todd Hughes, Kara Stoll, Tiffany Cunningham and Leonard Stark -- ruled against the IEEPA tariffs. Of these judges, Cunningham, joined by Lourie, Reyna and Stark, wrote separately to say that she believes IEEPA doesn't allow the president to impose tariffs of any kind.

Four of the judges, Judges Richard Taranto, Kimberly Moore, Sharon Prost and Raymond Chen, dissented from the ruling. The lengthy dissent, penned by Taranto, a President Barack Obama appointee, disagreed with the majority's statutory and constitutional conclusions, and said it would find Trump's use of the apparent tariff authority found in IEEPA a valid use of the statute.

Jurisdiction

Prior to diving into the substance of the case, the majority first said that it has jurisdiction to hear the case, adopting the trade court's view of its jurisdiction. CIT said it had exclusive jurisdiction under Section 1581(i), which says only the trade court will hear any civil action that "arises out of" any law of the U.S. providing for tariffs. The trade court said the case arises out of the executive orders implementing the tariffs, since the executive orders modify the Harmonized Tariff Schedule, and a provision of the law implementing the HTS says presidential modifications to the HTS are laws of the U.S. (see 2505280068).

Plaintiffs in other suits challenging the IEEPA tariffs have argued that the case "arises out of" the IEEPA and that the IEEPA doesn't provide for tariffs. The majority first clarified that when it's determining jurisdiction under an "arising out of" provision, the court doesn't "have to decide whether the statute does in fact confer such authority," since jurisdiction doesn't depend on the claim's success.

The court then said that while executive orders aren't ordinarily laws of the U.S., the orders here would modify the HTS and are "thus purported laws of the United States." A suit challenging tariffs "effectuated by such a modification" arises out of a law of the U.S. providing for tariffs, the court said. The majority added that finding that CIT has exclusive jurisdiction is "consistent with the reason why Congress established this exclusive jurisdiction in the first place."

Statutory Text

The majority then said it's not deciding whether the IEEPA authorizes any tariffs, as the concurring judges would have done, though it went on to all but say the statute doesn't provide for tariffs.

The government claimed the authority under the IEEPA to impose tariffs under the law's language letting the president "regulate ... importation." The majority highlighted the fact that no other statutes conveying tariff authority use this language, adding that all of them specifically include the word "tariff" or "duty."

The U.S. argued that Section 232 is an exception, since that statute merely lets the president "adjust the imports," which the Supreme Court said includes tariffs. The majority didn't bite, clarifying that the term "adjust" is "in the context of a provision dealing with the imports and duties, making it far more plausible that the adjustment ... includes an adjustment to tariff rates." Also, the Supreme Court, in interpreting the term, relied heavily on the statute's statutory history, which included explicit references to duties -- something absent from IEEPA's history, the court said.

The majority then noted that in each other tariff statute, "Congress has provided specific substantive limitations and procedural guidelines to be followed in imposing any such tariffs." It appears "unlikely" Congress meant to depart from this practice in passing the IEEPA "and grant the President unlimited authority to impose tariffs," the brief decision said.

The word "regulate" by itself also doesn't imply the authority to impose tariffs, as the government claims, the court said. The power to "regulate" has "long been understood to be distinct" from the power to "tax," and the Constitution itself distinguishes between these powers, the majority said. The term "regulate" must be read in the context of the IEEPA's other verbs, "none of which involve monetary actions or suggest the power to tax or impose tariffs."

Major Questions Doctrine

The majority then said Trump's use of the IEEPA "runs afoul of the major questions doctrine," which says the executive can only regulate on issues of massive political or economic significance upon explicit delegation from Congress. No president has ever used the IEEPA to impose tariffs, and the statute has almost always been used only to "freeze assets, block financial transfers, place embargoes, or impose targeted sanctions on hostile regimes and individuals," the court noted.

Using the law to now "impose tariffs on nearly every country in the world is undoubtedly a significant departure from these previous invocations," the court said. The lack of precedent and breadth of claimed power may be a "telling indication" the government's reading of the statute is "incorrect," the majority said.

And while the U.S. said it's "particularly inappropriate to construe narrowly a delegation of power in the arena of foreign affairs and national security," the "power of the purse (including the power to tax) belongs to Congress." Thus, the IEEPA didn't give the president "wide-ranging authority to impose tariffs of the nature of the Trafficking and Reciprocal Tariffs" simply by using the term "regulate ... importation," the court said.

Congressional Ratification of Yoshida

In its defense of the tariffs, the government heavily relied on Yoshida International v. U.S., which is a decision from the CAFC's predecessor court that upheld President Richard Nixon's 10% duty surcharge imposed under the Trading With the Enemy Act (TWEA). This statute, like the IEEPA, also let the president "regulate ... importation."

The Yoshida court said this language includes the authority to impose tariffs, though the court said this delegation of power "could not constitutionally have been of the full and all-inclusive power to regulate foreign commerce." In upholding Nixon's 10% duty, the court centered on the limited nature "in time, scope, and amount" of the duty, since it was lower than the amount set by Congress, for a short period of time and applied to articles "which had been the subject of prior tariff concessions."

The U.S. said Congress ratified the holding that the term "regulate ... importation" includes the power to tariff when it passed the IEEPA. The majority said that if that holding was ratified by the statute, so were the limits found in the statute. Given that the Yoshida decision was "explicit in its view that an unbounded tariff authority would not be permitted, that understanding must be attributed to Congress as well," the decision said.

The majority said that even if it accepts the Yoshida holding as correct, the challenged tariffs violate the power conferred in the IEEPA. Both the fentanyl and reciprocal tariffs "are unbounded in scope, amount, and duration." They apply to "nearly all articles imported into the United States," set ever-changing high rates that exceed those found in the HTS and aren't limited in duration.

“The Trafficking and Reciprocal Tariffs assert an expansive authority that is beyond the express limitations of Yoshida II’s holding and, thus, beyond the authority delegated to the President by [the] IEEPA,” the court said.

Injunctive Relief

In issuing its decision, the trade court vacated the executive orders implementing the tariffs, providing nationwide relief. While CIT didn't discuss any of the four factors that predicate injunctive relief in its initial decision, it did so in an order a few days after issuing its initial decision.

The majority said it didn't need to get into whether the trade court "abused its discretion by only articulating its analysis" of these factors days after issuing the original decision, since the landscape underlying nationwide injunctive relief changed following the CASA decision.

In CASA, the Supreme Court greatly pared back the availability of nationwide injunctions, finding they "likely exceed the equitable authority Congress has granted to federal courts." The high court declined to decide the "permissible scope of injunctive relief" in the first instance. The Federal Circuit said it was following the Supreme Court's lead, leaving the question of the scope of available relief in light of CASA to the trade court for a first ruling.

In a Truth Social post the evening of Aug. 29, Trump decried the ruling as coming from a "Highly Partisan Appeals Court," adding that it would be a "total disaster for the Country" if the tariffs ever were to go away.