CAFC Judges Press IEEPA Tariff Litigants in Marquee Argument

Much of the argument centered on whether IEEPA, which permits the president to "regulate ... importation" of property in which a foreign party has an interest in response to an unusual and extraordinary threat, allows the president to impose tariffs at all. Judge Jimmie Reyna emphasized to DOJ attorney Brett Shumate that there are several laws that delegate the power to impose tariffs to the president that all either specifically use the word "tariff" or "duty," but IEEPA doesn't.

Shumate pointed to Yoshida International v. U.S., a case from the Federal Circuit's predecessor upholding President Richard Nixon's 10% duty surcharge under identical language present in the Trading With the Enemy Act. Shumate said the Yoshida court found "regulate ... importation" to include the power to tariff and that Congress was legislating "against the backdrop of Yoshida" when it passed IEEPA and took TWEA's identical language.

Judge Alan Lourie questioned Shumate's defense, invoking the "noscitur a sociis" canon of statutory interpretation, which the judge said is a statute, term or provision that is "known by its friends." Here, "tariff seems to have no friends in the statute," Lourie said, asking why the court would read tariffs into the law. Shumate emphasized that two other statutes, sections 232 and 122, also don't use the word tariffs.

In response, Neal Katyal, counsel for the five importers challenging the tariffs, noted that both of these statutes use the word "duty," which is synonymous with the word "tariff." Katyal also picked up on Lourie's point, saying the word "regulate" has long been construed to convey a separate power than the power to tax. Katyal said the "best" the government has is IEEPA's "legislative history" that seemingly adopts Yoshida, though he quipped that legislative history is like "looking out to a crowd to pick out your friends," but here, "they can't even find any friends to wave back."

Judges Todd Hughes and Timothy Dyk probed Shumate on the extent to which the court should apply Yoshida and the apparent limits the Yoshida court placed on the use of TWEA to impose tariffs. Hughes said he didn't believe the phrase "regulate ... importation" on its own is enough to include tariffs, noting the law would have to allow for tariffs "some other way," which is congressional ratification of Yoshida.

Katyal and Oregon Solicitor General Benjamin Gutman emphasized the limits appearing in Yoshida, with Katyal telling the judges that if the government wants to "live by the sword of Yoshida," they're going to "die by the sword of Yoshida." The decision upholding Nixon's duty surcharge stressed that TWEA doesn't contain an unlimited power to tariff and imposed three limits: Nixon capped the tariffs at rates set by Congress, the surcharge was a "temporary measure," and the tariffs didn't apply to all imports but just those already subject to tariffs.

Meanwhile, Shumate argued that these limits don't apply, since the court can only review the president's actions for specific violations of the statute, also emphasizing the final paragraph of Yoshida, which identified the broad nature of the president's authority under TWEA. Shumate also insisted that IEEPA itself contains limits, though he argued that none of those limits is judicially reviewable.

In response, Dyk said those limits, which include the requirement that action taken under IEEPA respond to an unusual and extraordinary threat, have "nothing to do with the scope and duration of the tariffs." The judge said Shumate is "just discarding the holdings of Yoshida that you don't like," emphasizing the Yoshida court's specific warning that TWEA doesn't let the president throw out the tariff schedule "wholesale." Dyk asked Shumate how he can "read Yoshida to allow the wholesale rewriting of the tariff schedule," as Trump has done.

Picking up the discussion on IEEPA's limits and whether the court can review them, Judge Kimberly Moore asked about the requirement that the action "deal with" the declared emergency. Moore responded to Shumate's claim that the president can impose tariffs solely as a bargaining chip as a means of dealing with the declared emergency, telling the DOJ attorney that this would read the "deals with" requirement out of the statute.

Throughout his time, Katyal repeatedly stressed that the Supreme Court's major questions doctrine, which says the executive can only regulate on issues of major economic or political significance upon explicit delegation from Congress, requires a finding that the IEEPA doesn't confer sweeping tariff authority. The government is "asserting as sweeping a power as imaginable" with "no judicial limits." If the government is going to have that power, Congress has to give it to them clearly."

"This is not an elephant in a mouse hole," Katyal said, referring to the Supreme Court's standard for major questions doctrine issues, "this is a galaxy in a keyhole."

During the argument, Judge Richard Taranto pressed both Katyal and Gutman on their claim that trade deficits aren't "unusual and extraordinary." Taranto noted that Trump's executive order identified many negative effects of prolonged trade deficits and didn't just summarily declare the emergency to be trade deficits themselves. The judge noted that the importers and states' argument at the Court of International Trade and before the Federal Circuit is just that trade deficits are ordinary.

"I don't see you having said anything at all about the usualness or ordinariness of" the negative effects of trade deficits, as outlined by the president, including "manufacturing deficiencies," Taranto noted. Gutman initially said that in the EO, the only identified threat was the prolonged trade deficits, though he walked this remark back after intense questioning from Taranto and Moore, who both emphasized the president's discussion of the negative effects of sustained trade deficits in his EO.

Judge Leonard Stark also questioned Gutman on whether he was limited to reviewing the tariffs on China, Canada and Mexico under the trade court's ruling, which said the tariffs don't properly "deal with" the declared emergency of fentanyl trafficking. Gutman said if the judge didn't buy that argument, he said the court could adopt the states' claim that "regulate" only connotes modest modifications.

Thomas Berry, director of the Cato Institute, a libertarian think tank that filed an amicus on behalf of the importers and states, said in a statement that "it appears that the challengers have the better odds of prevailing" based on the "tenor and questions of the arguments." Berry said it "appears that the Federal Circuit may be leaning toward" categorically ruling that IEEPA doesn't provide for tariffs.

Notably, the judges didn't address the issue of whether universal injunctive relief is available in light of the Supreme Court's decision in Trump v. CASA, which limited the availability of universal injunctions. However, Katyal, speaking to the media after the argument, said not to read into this lack of questioning "one way or the other," since judges often tend to focus on the substance, when there are "such meaty merits issues."

The appeal comes from the Court of International Trade's decision to vacate all of the EOs implementing tariffs under IEEPA (see 2505280068). While CIT didn't categorically say IEEPA doesn't provide for tariffs, the trade court said IEEPA can't be used for reciprocal tariffs in light of Section 122's specific authority to impose tariffs to address a balance-of-payments issue. CIT also vacated the fentanyl tariffs on China, Canada and Mexico after finding the duties don't properly "deal with" the declared emergency, since creating leverage over another country to address a problem isn't a power conferred by IEEPA.