US Replies to IEEPA Tariff Challenges at Supreme Court

The U.S. opened the brief by ringing the alarm bells on what would happen should the high court vacate President Donald Trump's reciprocal tariffs and tariffs on China, Canada and Mexico meant to combat fentanyl trafficking. The government said an adverse ruling "would effectively disarm the President in the highly competitive arena of international trade," upend trade talks, "expose America to the 'risk of retaliation' without adequate defenses," and "thwart measures to address the fentanyl crisis."

On the merits, the brief began with the ordinary meaning of the IEEPA, which lets the president "regulate ... importation" of property in which a foreign party has an interest. The U.S. responded to a claim from the plaintiffs, which included two groups of importers and a group of 12 U.S. states (see 2510210033 and 2510200050), that if "regulate" is found to confer tariff authority, every other statute letting the executive "regulate" something "would include the power to tax it."

Other laws that use "regulate" in different contexts, such as to "regulate the trading" of securities, "do not carry the same inference or pedigree," the U.S. claimed. "A farmer may raise crops, raise livestock, and raise children, but the verb 'raise' naturally encompasses a different set of actions as to each of those objects, even though its general meaning is fixed across all three," the brief said. "So too with 'regulate.'"

The government argued that the rest of the IEEPA, which gives the president the power to nullify, prohibit and compel covered transactions, "reinforces" the statute's "breadth" in conferring tariff authority. The statute's "broad language makes it implausible that 'regulate ... importation' alone should be read so narrowly as to exclude a traditional method of regulating importation," the brief said.

The administration repeatedly stressed the fact that the importers and U.S. states conceded that "regulate ... importation" in the IEEPA includes the power to impose quotas on imports. The importers and states never explain why Congress would have authorized quotas but not tariffs, "which can achieve similar results through price-demand curves (especially given that tariffs are payable to the government, whereas quota-driven price increases may enrich foreign exporters)," the brief said. The government also noted the challengers' claim that some of the tariffs have been so high as to "effectively prevent importation" of certain goods, arguing that this shows "tariffs can be economically equivalent to total prohibitions on imports," which is allowed under the IEEPA.

The importers and states "draw the wrong inference" in claiming "regulate" must exclude tariffs when read along with the other powers given to the president, since none of the other actions involves taxes. Rather, the nine powers given to the president all "are broad means to control a capacious string of (at least) eleven property transactions, without detailing the specific means of control," the brief said. This combination shows that Congress meant to give the president "the full range of tools available to act during international crises," including tariffs, which "lies between" the "poles" of prohibiting and regulating imports, the U.S. said.

Addressing the history of the IEEPA and the president's wartime power to impose tariffs, the U.S. leaned heavily on an amicus brief filed by University of Virginia Law School Professor Aditya Bamzai, which discussed the history of wartime tariff power at length (see 2509240056).

The government noted that importers and states argued that the IEEPA doesn't authorize tariffs, since all other IEEPA authorities "originally applied only in wartime," while tariffs "tax Americans." In response, the U.S. said that claim "falsely conflates domestic revenue-raising taxes and regulatory tariffs on foreign imports," and, in any case, "tariffs on foreign imports have been a traditional wartime tool," the brief said.

Citing Bamzai's brief, the government argued that the Supreme Court "has long held that the President has inherent wartime authority to impose tariffs." The U.S. cited three instances of the high court allowing wartime tariff powers: President James Polk's allowance of trade with blockaded Mexican ports "subject to duties levied and collected by the U.S. military," President Abraham Lincoln's four cents per pound duty on cotton imports from Confederate States during the Civil War, and President William McKinley's "imposition of duties on certain activities in the Philippines."

The U.S. said the Trading With the Enemy Act, the IEEPA's predecessor, incorporated these precedents, and that the IEEPA's operative language was "directly drawn" from the TWEA. While the challengers said "wartime precedents do not govern peacetime," Congress "modeled IEEPA on TWEA precisely so that the President could exercise wartime authorities during peacetime emergencies," the government argued.

What's more is that Congress knew a federal court upheld President Richard Nixon's use of the TWEA to impose a tariff in Yoshida International v. U.S. when it used the same language in the IEEPA, the brief said. And while the Yoshida court "viewed the Nixon tariffs as limited and temporary," the challengers "offer no response" to the point that "TWEA itself did not impose those limits, making it implausible that IEEPA incorporated them sub silentio," the brief said.

Throughout the brief, the government countered the challengers' equivalence of tariffs and taxes, arguing that "the imposition of regulatory tariffs on foreign imports to deal with foreign threats" differs from "domestic taxation." The U.S. cited Supreme Court precedent, which said the taxing authority is a "distinct power and embraces the power to lay duties," but it doesn't follow that “duties may not be imposed in the exercise of the power to regulate commerce.” While the challengers say the "key question here is how Congress delegates that special taxing power," the U.S. said this claim "rehashes the argument this Court recently rejected even in the domestic context" in FCC v. Consumers' Research that "special rules apply when Congress delegates authority to impose monetary exactions."

In their briefs, the importers and states said the IEEPA doesn't confer tariff authority, since if "regulate" includes tariffs, it would allow for tariffs on exports, which is explicitly unconstitutional, given that regulate also applies to the word "exportation" in the statute. In response, the U.S. said "where a broad statute contains long lists of verbs and objects, each term should be given its ordinary meaning with the understanding that certain permutations might be unenforceable as applied." The government added that it "would make little sense to adopt narrowing constructions of all nine verbs and all eleven direct objects" in the statute "in a quixotic effort to make all 99 permutations work."

Illustrating this point, the U.S. said the authority to "'nullify ... transportation' makes little sense, but that does not justify an unduly narrow interpretation of 'nullify' as applied to the other ten objects."

The challengers also claimed that the IEEPA can't be used to cover many of the tariffs, since the statute only covers property in which a foreign party has an interest, and in many instances, no foreign party has a direct interest in imports into the U.S. In response, the U.S. said the phrase "any interest" in the statute "extends beyond current possessory or ownership interests." A foreign party that sells its goods in the U.S. has an obvious "interest" in "whether tariffs will be imposed" even if the firm doesn't formally own the items at the point the tariffs are imposed. Lower courts have "uniformly held that 'any interest' in the IEEPA extends beyond current possessory interests," the government noted.

In addition, parties could easily skirt the IEEPA by transferring "formal title to the property before its importation into the United States," the brief said, emphasizing the court's guidance that courts "should avoid interpretations of a statute that would facilitate 'evasion of the law' or 'enable offenders to elude its provisions in the most easy manner.'"

Regarding the IEEPA's other requirements, namely that the president act to address an "unusual and extraordinary" threat, the U.S. argued that courts shouldn't be in the business of reviewing the president's fact findings on whether something constitutes an unusual and extraordinary threat. The government said "such determinations are generally unreviewable because judges lack institutional competence to determine when foreign threats are unusual or extraordinary."

Subjecting a presidential declaration of a national emergency to judicial review "would improperly second-guess the President in the exercise of core constitutional authority, as supplemented by congressional authorization," the U.S. said. In practice, this review would "effectively require the President (contrary to longstanding practice) to provide detailed explanations for his emergency declarations, as if he were an agency," which is the "antithesis of how statutes delegating emergency powers to Presidents have been understood."

The government added that any attempt to challenge the declared unusual and extraordinary threats is "legally and factually meritless." Contrary to the challengers' claims, unusual and extraordinary threats can be "longstanding or persistent," and persistent trade deficits pose a grave threat to the U.S. economy, the brief said, pointing to insufficient "domestic manufacturing capacity" as a consequence of that threat.

Other issues addressed in the brief include the role of Section 122, which lets the president impose tariffs to address a balance-of-payments issue; the major questions doctrine; the non-delegation doctrine; and whether the tariffs "deal with" the declared emergencies. Oral argument in the cases is set for Nov. 5.