Attorneys Revisit 'Yoshida' in Light of Expected IEEPA Tariff Action

The case was decided in 1975 by the now-defunct U.S. Court of Customs and Patent Appeals, with Judge Howard Markey upholding President Richard Nixon's decision to impose a 10% duty surcharge to address a declared balance of payments crisis, a move the lower U.S. Customs Court had rejected. Nixon's action was taken under existing trade laws and the Trading With the Enemy Act (TWEA), the precursor to IEEPA, but was found to be a valid means to address the declared emergency only under TWEA.

When assessing the relevance of Yoshida to any future trade action, one question is how much of a difference exists between IEEPA and TWEA regarding presidential authority. Not much, according to Warren Maruyama, former general counsel at the Office of the U.S. Trade Representative.

"The language of IEEPA pretty much tracks TWEA," said Maruyama, now at Hogan Lovells. "There's no specific authority for tariffs, but there's authority to deal with transactions and also to put restrictions on importation or exportation." Maruyama noted IEEPA's extensive use as source of authority for sanctions and export controls and its origins as a "stop gap measure when Congress didn't pass reauthorization for U.S. export controls."

The statutes share nearly identical language regarding presidential powers, with both declaring that the president has the authority to "regulate, direct and compel, nullify, void, prevent or prohibit" any "importation or exportation of" any property in which any foreign country or a national thereof has any interest, "subject to the jurisdiction of the United States."

Lawrence Friedman, partner at Barnes Richardson, said that compared with TWEA, IEEPA has more procedural remedies in that it "doesn't allow for continued unreviewed remedies." Unlike its predecessor, IEEPA requires a declaration of the emergency and consultation with Congress before the powers are expressed, Friedman said, noting that the extent of the consultation that's required is an open question.

After reviewing this broad delegation of authority, the Yoshida court said it "appears incontestable" that TWEA grants the president the power to "regulate importation" for use during "war or during national emergency only." The judge found the delegation to be "broad and extensive."

However, Yoshida wasn't a rubber-stamp for tariff action, suggesting there may be limits on the president's use of this power. While Markey dismissed a challenge to the president's judgment in declaring an emergency to exist, the judge said a court is free to "review his acts arising from that judgment."

As a result, Markey reviewed whether the 10% surcharge was a proper tool to address the balance of payments crisis, ultimately concluding that it was. The judge said the surcharge clearly had the "primary purpose" of curtailing imports to offset actions of U.S. trading partners that led to the loss of a "favorable balance of trade" and a "serious negative balance." The judge said that it is "purpose, not form, which should govern judicial characterization of charge of imports."

The judge added that the president's "choice of means of execution must also bear a reasonable relation to the particular emergency confronted." Markey concluded that the surcharge cleared this hurdle by, unlike quotas and other restrictions, not being discriminatory among affected nations and being "administratively less complex." The surcharge also had a "direct effect on our nation's balance of trade," granting it an "eminently reasonable relationship to the emergency confronted."

Asked whether this language could be used to impose an outer limit on IEEPA tariff action taken by Trump, Friedman appeared skeptical. He said tariffs imposed on Mexico and Canada for the purpose of addressing the emergency of the flow of migrants and fentanyl "seem to be rationally related" to the emergency. However, should those tariffs extend to countries that aren't involved in either of those two concerns, "I think there's language in Yoshida that would indicate that should be reviewed as not meeting the emergency."

Alan Wolff, senior fellow at the Peterson Institute for International Economics and original drafter of the Nixon 10% duty surcharge, agreed, finding it unlikely this limit may result in a curb to the president's power. Wolff noted that the 10% duty surcharge "wasn't applied as a cure, it was applied as leverage" to get trading partners to deal with the U.S. balance of payments issue. The result was the Smithsonian Agreement in 1971, which gathered together global economies in an ultimately unsuccessful bid to spare the Bretton Woods monetary system.

Wolff said, similarly, "Trump is issuing these tariffs as leverage [to negotiate a solution], not to cure a problem." He added that Trump could potentially make a strong showing that tariffs on Mexico and Canada could reasonably be related to the goal of preventing the flow of fentanyl if, for instance, it's established that fentanyl is being smuggled through de minimis shipments and, as a result, the administration ends the use of de minimis. "But that's not what he did," Wolff noted. "He said 'I'm putting 25% tariff on Mexico,' and that could be on automobiles or whatever is coming in from Mexico, which has nothing to do with fentanyl. It's a hammer."

Maruyama seemed less concerned with this theory of judicial review, saying that he doesn't think it would necessarily lead to courts "measuring whether this was in line with a finding" of an emergency. Instead, Maruyama said any case resulting from tariff action taken under IEEPA would present a myriad of constitutional questions, particularly in light of the U.S. Supreme Court's recent string of decisions reshaping the balance between the executive and legislative branches.

For instance, in West Virginia v. EPA, the high court championed the "major questions" doctrine, which says a federal agency can act on issues affecting a major part of the economy only where such authority has been explicitly delegated by Congress. "A case like this is very likely going to the Supreme Court, and this court has been prepared to revisit previous precedents," Maruyama said, noting the Supreme Court's decision in Algonquin v. FEA, in which trade action was upheld under the nondelegation doctrine.

Friedman added that the "Supreme Court actually might look carefully at whether Congress has either delegated too much authority to the president or if the president has exceeded his authority, regardless of the statute, because of the constitutional requirements and the major question doctrine, if it can be applied to the president."

Wolff said the issue of nondelegation seems primed for Trump's lawyers to come into court and say that while tariff laws are on the books, "this was true emergency." Trump's argument would likely say "the borders were porous" and "fentanyl was wiping out the health of many of our citizens" and "it had to be dealt with." Wolff rhetorically asked if the Supreme Court would second guess a president "who's in charge of the well-being of the United States, in his view anyway, and has an argument under the Constitution" that he was responding to a national emergency.

Maruyama also noted another key legal development since Yoshida was decided -- the Trade Act of 1974. Section 132 vests specific authority in the president to impose temporary import surcharges and quotas on imports to address balance of payments issues, though such duties are limited to 150 days. In Yoshida, Markey noted that tariff action couldn't be taken under IEEPA if another statute spoke to the president's specific authority to take such action, likely barring present IEEPA tariffs to address a balance of payments issue.