Trade Court Vacates IEEPA Fentanyl, Reciprocal Tariffs; Government Appeals

Regarding the reciprocal tariffs, the three-judge panel said IEEPA doesn't provide the president with the authority to impose tariffs to address a trade imbalance. As for the tariffs on China, Canada and Mexico, the judges said the tariffs don't properly "deal with" the declared emergency, holding that creating leverage over another country to address a problem isn't a power conferred by IEEPA.

The court permanently enjoined the executive orders, giving the government 10 days to comply with the order. The U.S. appealed the case hours after the decision was issued. The invalidated executive orders also eliminated the de minimis threshold for goods from China, and provided for the end of de minimis for all other countries.

Notably, the trade court didn't rule that IEEPA doesn't convey tariff-setting authority to the president, merely holding that IEEPA's operative language, which lets the president "regulate ... importation," doesn't convey "unlimited tariff authority." In addition, the court said it can review whether presidential tariff orders comply with the elements of IEEPA, holding that such review isn't barred by the bar on judicial review of political questions.

The trade court's decision was issued concurrently in two cases challenging Trump's IEEPA tariff action: one brought on behalf of five importers by conservative advocacy group Liberty Justice Center and another brought by 12 U.S states, led by Oregon. While the cases challenged different tariff action, the court issued one decision for both cases, granting both groups of plaintiffs' motions for summary judgment and permanently enjoining all IEEPA tariff action taken thus far.

On the merits, the judges first grappled with the reciprocal tariffs. While the importers and U.S. states argued that IEEPA doesn't confer tariff power at all, the court merely said the statute "does not authorize anything as unbounded as the" reciprocal tariffs. The judges invoked the only precedential opinion to address this issue, Yoshida International v. U.S., which upheld President Richard Nixon's 10% duty surcharge imposed under the Trading With the Enemy Act, IEEPA's predecessor.

Katzmann, Reif and Restani noted that the Yoshida court, while permitting Nixon's move, suggested various limits on tariff action to be taken under TWEA, which contained the same operative language as IEEPA. As the Yoshida court held, the CIT judges said they aren't reading the words "regulate ... importation" in IEEPA "as authorizing the President to impose whatever tariff rates he deems desirable." Such a reading "would create an unconstitutional delegation of power," the court said.

The court also invoked IEEPA's legislative history, noting that Congress delegated "narrower authority" through IEEPA than it did in TWEA. One way that authority was narrowed was through the passage of Section 122 of the Trade Act of 1974, which specifically lets the president impose tariffs to address a balance of payments crisis.

The three-judge panel held that Section 122 shows that balance-of-payments problems don't require emergency authority. The statute "indicates that even 'large and serious United States balance-of-payments deficits'" don't require emergency powers, thus stripping the president of the power to address balance-of-payments issues through means outside of Section 122.

Since the reciprocal tariffs were imposed to respond to "an imbalance in trade -- a type of balance-of-payments deficit," they fall under the "narrower, non-emergency authorities in Section 122," the court said. Referring to Section 122's legislative history, the court said in no uncertain terms that the words "regulate ... importation" in IEEPA don't let the president "impose tariffs in response to balance-of-payments deficits."

Turning to the tariffs on China, Canada and Mexico, the three-judge panel ruled that the tariffs don't properly "deal with" the declared emergency.

First, the judges addressed whether they could even review this question. The government argued that the court couldn't review whether the tariffs meant to address fentanyl complied with IEEPA, since there's a "lack of judicially discoverable and manageable standards" for assessing the validity of the president's threat assessment and there's an inability to decide the issue without making an "initial policy determination" of a kind clearly not meant for the judiciary.

The court said these arguments are "misplaced," ruling that the court can "manage" the standards for applying IEEPA's requirement that presidential action taken under the statute "deal with an unusual and extraordinary threat." The court can't shirk its "characteristic roles" simply because the decision "may have significant political overtones," the court said.

The judges said this "principle is a common feature of statutory construction," even in the trade context, given that the court has to review if the U.S. is "threatened with material injury." The court doesn't find every injury determination from the ITC to be unreviewable on a lack-of-standards grounds just because the term "threatened with material injury" is an "imprecise term that sounds in foreign affairs."

The court added that IEEPA isn't a "symbolic festoon" but a "meaningful[] constrain[t] [on] the President's discretion." While DOJ attorney Eric Hamilton argued before the court that the statutory language, while unreviewable, binds the president, the court rhetorically asked what is to be done if the president doesn't "faithfully apply that statute." Even if Congress could "hypothetically undo the President's invocation of IEEPA," the legislature's power to legislate is "no substitute for the 'judicial function' of 'determining the limits of statutory grants of authority,'" the court said.

The judges said the tariffs addressing fentanyl rest on a construction of "deal with" that's "at odds with the ordinary meaning of the phrase."

This language "connotes a direct link between an act and the problem it purports to address," the court said. CBP's collection of tariffs on legal imports doesn't "evidently relate to foreign governments' efforts 'to arrest seize, detain, or otherwise intercept' bad actors within their respective jurisdictions,'" the court said. While the government said the tariffs "deal with" fentanyl by pressuring foreign governments to address the problem, this claim "effectively concedes that the direct effect of the country-specific tariffs is simply to burden the countries they target."

“If 'deal with' can mean 'impose a burden until someone else deals with,' then everything is permitted," the court said. It then means a president can use IEEPA to take whatever actions he wants just by declaring them leverage, the judges said. "Surely this is not what Congress meant when it clarified that IEEPA powers 'may not be exercised for any other purpose' than to 'deal with' a threat." If leverage were the only thing required to pass the Yoshida court's requirement that the action reasonably relate to the ends sought, this means-end test "would be trivially easy to pass."

(V.O.S. Selections v. United States, Slip Op. 25-66, CIT # 25-00066, dated 05/28/25; Judges: Gary Katzmann, Timothy Reif, Jane Restani; Attorneys: Jeffrey Schwab of Liberty Justice Center for plaintiffs led by V.O.S. Selections Inc.; Eric Hamiltion for defendant U.S. government)

(The State of Oregon v. U.S. Dep't of Homeland Security, Slip Op. 25-66, CIT # 25-00077, dated 05/28/25; Judges: Gary Katzmann, Timothy Reif, Jane Restani; Attorneys: Brian Marshall of Oregon Department of Justice for plaintiffs led by the State of Oregon; Brett Shumate for defendant U.S. government)