Lawyers Question Whether Foreign Parties Have 'Interest' in Certain Imports Under IEEPA
The inaugural use of the International Emergency Economic Powers Act to impose tariffs, which saw President Donald Trump set a 10% duty on all goods from China (see 2502030044), has sparked plenty of speculation as to how these tariffs could be challenged in court. One such argument is a statutory claim rooted in the text of IEEPA.
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The statute allows the president to regulate, prevent or prohibit the "importation or exportation of" any "property in which any foreign country or a national thereof has any interest." The question then becomes whether a foreign party actually has an interest in an import that was entered by a U.S. company and paid for prior to importation.
John Peterson, partner at Neville Peterson, said in an email that it "wouldn't seem" that an import of this type would be one in which a foreign party has an interest.
Others were less optimistic about this argument, including Thomas Beline of Cassidy Levy, who suggested that a court may find that a foreign party has an "interest" in the imports, since "money is changing hands" and the parties are "making the sale for consideration." Beline questioned how courts interpret this provision in a sanctions and export control context, noting that there's an inherent risk in using what has exclusively been a sanctions authority in the world of tariffs.
Devin Sikes, partner at Akin Gump, also expressed skepticism about this claim, though he drew a natural connection between a foreign party's "interest" in imports regulated by IEEPA and its ability to establish standing in federal court when challenging the tariffs. "If a party sufficiently demonstrates standing, probably pretty likely also going to demonstrate they have a sufficient interest in the property itself," he said.
If the case law on this issue in the sanctions context is any indication, any claim along these lines may fail before the Court of International Trade. For instance, the U.S. Court of Appeals for the 7th Circuit in 2002 spoke directly on this claim, finding that IEEPA covers property that a foreign national doesn't have legal title to.
In the case, the Global Relief Foundation argued that the word "interest" in IEEPA refers to a "legal interest" and not "beneficial interests." The court rejected this claim, holding that the "function of the IEEPA strongly suggests that beneficial rather than legal interests matter. The statute is designed to give the President means to control assets that could be used by enemy aliens. When an enemy holds the beneficial interest in property, that is a real risk even if a U.S. citizen is the legal owner."
The court framed the discussion in a national security context, posing an example of how Osama bin Laden could potentially evade the scope of IEEPA authority by placing his assets in a trust under Illinois law, administered by a national bank. If the "trust instrument directed the trustee to make the funds available for purchases of weapons to be used by al-Qaeda," the "foreign enemies" would have an "interest" in these funds despite the fact that legal ownership "would be vested in the bank."
The court said nothing in IEEPA's test "suggests that the United States' ability to respond to an external threat can be defeated so easily," making the focus "how assets could be controlled and used, not on bare legal ownership."