DC Court Hears Arguments on Bids for Transfer, PI in IEEPA Tariffs Case

DOJ attorney Brett Shumate argued that a preliminary injunction against the IEEPA tariffs would be "catastrophic" for U.S. national security, referring to recent declarations from all trade-related Cabinet officials that make this exact claim. Contreras pressed Shumate on the government's assertion that the two importers can't show irreparable harm, since pure economic harm is frequently not found to constitute irreparable harm, given that a court could simply order the government to pay the companies' refunds.

The judge asked if this reality still holds if companies are suffering irreparable harm via lost sales, since they can't afford to even bring goods into U.S. ports if tariffs are too high. Shumate repeated the claim that economic harm typically isn't a type of irreparable harm, adding that the need to impose tariffs is crucial to the president's ability to continue negotiating trade deals and address "urgent threats to our national security and economy."

The importers, Learning Resources and Hand2Mind, argued for a preliminary injunction only against tariffs applied to the two companies and not against the entire collection of IEEPA tariffs. During the hearing, Pratik Shah, counsel for the importers, said the government should combine the motion to transfer with the preliminary injunction bid and decide the case on its merits.

Contreras asked the government what steps he should take if he finds he has jurisdiction over the case and says IEEPA doesn't provide for tariffs. The government urged the judge to deny an injunction and issue declaratory judgment, setting up an appeal of the issue without stopping the president from collecting tariffs in the interim.

Shah said that the D.C. court has jurisdiction to hear the case, since the statute giving the trade court exclusive jurisdiction only covers disputes arising from laws that provide for tariffs. Since IEEPA doesn't provide for tariffs, the D.C. court can hear the case, he said.

In making this claim, Shah embraced an argument made by the State of California and various members of Congress regarding how the statute should be read (see 2505160011). IEEPA specifically gives the president the power to "regulate" the "importation" of property. California and the congresspeople, filing as amici, said the term "regulate" has to mean the same thing in how it's applied to all other actions in the statute, including the term "exportation." If "regulate" includes the power to impose a tariff, this must mean the statute allows for the power to tax exports, which is explicitly unconstitutional, Shah said.

Contreras specifically asked the government about this argument, pressing Shumate for a response. The DOJ attorney said the importers engaged in a "mischaracterization" of the government's argument. Shumate said the U.S. defense of IEEPA doesn't solely rest on the term "regulate" but on the phrase "regulate ... importation." The DOJ attorney argued that this phrase has a specific meaning, which Congress knew at the time it passed the statute. Similarly, Congress knew "regulate ... exportation" meant something different, such as imposing export controls, and not the unconstitutional act of imposing tariffs on exports, he said.

During the hearing, Shah repeatedly challenged the government's claim that IEEPA provides for tariffs, since President Richard Nixon used the Trading With the Enemy Act, IEEPA's predecessor that contains the same operative language as IEEPA, to impose a 10% duty surcharge in 1971. Shah said Nixon never invoked TWEA when implementing the 10% tariff, noting that it was DOJ lawyers who used TWEA as a defense after litigation began.

Shumate said a federal appellate court in Yoshida International v. U.S. held that TWEA provided for tariffs, though he said he didn't know if Nixon invoked TWEA when imposing the tariffs. During rebuttal, Shah said it's "quite stunning" that the government continues to say Nixon invoked TWEA, when the importers proved in "black and white" that Nixon never cited TWEA in his proclamation implementing the tariffs. "No president in the history of our country has ever invoked tariff power under IEEPA or TWEA," Shah said. "That counts for something, whether you want to consider this a major questions case or just a simple case for statutory interpretation."

In addressing whether CIT has exclusive jurisdiction to hear the case, Contreras now has to deal with a growing number of trial court decisions, including CIT rulings, finding the trade court to have jurisdiction. In addition, CIT judges hearing other IEEPA cases have made comments during hearings declaring they have exclusive jurisdiction. For instance, Judge Jane Restani said the trade court has exclusive jurisdiction on IEEPA cases, since the tariffs impact the Harmonized Tariff Schedule.

Shah said Restani was incorrect, since CIT's jurisdictional statute specifically says the court has exclusive jurisdiction over cases arising out of laws "providing for" tariffs. When looking at what law something arises out of, look to the "substantive legal theory" that provides for the tariff, which in this case is IEEPA and not the HTS, Shah said.

In concluding the hearing, Contreras said he will make a decision "as soon as possible."