Lawfare Daily: Two Courts Rule Against Trump’s IEEPA Tariffs, with Peter Harrell

[Intro]

Peter Harrell: I think what you see is all three of them sort of saying, well, look, Congress could not with IEEPA simply have delegated all of its tariff authority to the president to basically do any tariffs, at any rate, on any product in any country for any duration—which is essentially what the government is arguing IEEPA lets it do.

Scott R. Anderson: It's the Lawfare Podcast. I'm Senior Editor Scott R. Anderson, joined by Contributing Editor and leading sanctions expert Peter Harrell.

Peter Harrell: If I were gonna bet on this case, I would bet that the CIT's ultimate outcome is upheld. Like I, it'll be interesting to see if the Federal Circuit comes out a little bit different on the reasoning, even if it reaches the same, the same ultimate outcome. That'll be an interesting thing to, to, to watch, but it does seem to me more likely than not that the Federal Circuit will, will uphold the CIT's, you know, ultimate order.

Scott R. Anderson: Today we're talking about the not one but two recent federal court opinions that have enjoined the tariffs imposed by President Trump and where the litigation seems likely to go from here.

[Main podcast]

Well, Peter, callooh, callay, the day we have all been waiting for among sanctions nerds has come, we have not one, but two judicial opinions on President Trump's IEEPA based—that's the International Emergency Powers Act—based tariffs that we have been debating, had a couple of podcasts on, that you've been writing for us about at Lawfare and there are some pretty juicy opinions. So thank you for coming back on the podcast to talk them over with us for a bit of a deep dive for the other sanctions nerds out there.

Peter Harrell: It's, it's great to be back and I hope that some of the tariff nerds will find this interesting as well as the sanctions nerds.

Scott R. Anderson: You know, it's not entirely an overlapping Venn diagram, but it should be more so, you know, that, that that's what we do, we bridge divides here at Lawfare, and hopefully we can bring these two valued communities together.

So let's start with the second of the two opinions. Lemme—I'll, I'll tee this up for folks who may not have been following the news. We're recording this, I should say, on midday Friday, May 30. Folks watching this or listening to this a little bit later there may have been subsequent developments in this case; I suspect we may see a stay potentially coming from another court in the interim between when this comes out, at least in podcast form, although we'll see. We’ll talk about that a little later.

But of course, we received two opinions, both of which put barriers on and stopped—at least temporarily—President Trump's tariffs worldwide tariffs that he's imposed, sent, entering office using IEEPA, the International Emergency Economic Powers Act. One of those opinions awarded a preliminary junction in the D.C. District Court being this Learning Resources v. Trump. That has been appealed to the D.C. Circuit, but we don't yet have any decision on an administrative stay or other measures, so technically that is still a live preliminary injunction as of the time of recording,

The second case, which technically came out the day before, is VOS Selections v. Donald Trump. That is from the Court of International Trade, a little bit of an esoteric body that handles trade issues, but has received jurisdiction including being transferred several related matters or similar matters from several districts around the country. That, they issued a far reaching summary judgment on behalf of the plaintiffs, basically saying with finality, no, we don't think the president has the authority to implement these sorts of tariffs through IEEPA. That has been appealed to the court of the, to the Federal Circuit, excuse me, and they did issue an administrative stay. So that decision is currently on hold.

It's worth noting that while most other challenges to President Trump’s tariffs have been channeled through the Court of International Trade and presumably are gonna be following that VOS Selections line of argument—although some of them have little distinctions that maybe will land in a different zone—at least one case is still live in another federal district court, the Northern District of California. That's California v Trump. There may be other ones that I've missed. So it's possible we'll get a third decision from a third jurisdiction that's gonna have a third appellate track that, that ends in the Supreme Court. So that's to lay the land for people.

Let's talk about this first decision from Judge Contreras in federal court in D.C. And it's worth starting on this one 'cause it gets at this tricky jurisdictional issue that is central to a lot of the debate that's happened in these cases so far, which is, is this a sort of challenge that should be brought in a federal district court or specifically in the Court of International Trade?

Talk to us about that debate, Peter, and, and tell us where Judge Contreras came out on it and how persuasive you find it.

Peter Harrell: Yeah, no, and I think it, it's a really interesting question because this is a kind of interesting area of law where the jurisdictional question and the merits question are actually quite closely related. And I, I should—before digging into it—I should, I should mention that I I was involved as co-counsel in a amicus brief by 148 House members that was filed in one of the CIT cases, one of the Court of International Trade cases, so I do have some involvement, though not directly with any of the parties in the litigation.

The Court of International Trade is this specialty court that has been around in different forms for a number of decades. It has nationwide jurisdiction, a nationwide exclusive jurisdiction over essentially customs statutes. The, the current jurisdictional statute for it, which was passed in the 1980s, provides exclusive nationwide jurisdiction over a bunch of named custom statutes—you know, things like the Trade Act in 1974, you know, a whole bunch of different trade statutes as well as matters arising outta those statutes, as well as any other statute that provides for tariffs or customs matters. So it has a broad grant of jurisdiction and exclusive jurisdiction for matters related to customs and statues that provide for customs.

Now, the kind of core legal question on the merits in all of these cases is whether IEEPA—this 1977 emergency power statute—allows tariffs. Does it allow tariffs ever? Does it allows tariffs in, in some circumstances? And what we have seen is most of the plaintiffs bringing suit have been arguing, among other arguments, that actually IEEPA as a sort of textual matter, does not allow tariffs full stop.

Now, if that is your position, IEEPA does not allow tariffs full stop or if you were a court that found that IEEPA does not have to does not allow tariffs full, full stop, then the CIT would not have jurisdiction over it because it's not a custom statute.

And so what we have seen the government do across all of these cases is essentially argue, well now of course, IEEPA allows tariffs and all of these cases should be heard in the CIT, which can then determine whether it allows, you know, these particular tariffs or not. And so the government had moved to consolidate all of the cases or moved to transfer all of the cases to the CIT and has been successful so far in transferring one that was originally brought in Florida and one that was originally brought in Montana to the CIT.

It was not successful in transferring to the CIT the case in D.C., the Learning Resources case, Scott, that you just mentioned and that we got an opinion on yesterday. And in that opinion, Judge Contreras found that IEEPA in light of kind of its text and history, does not allow for tariffs. And so he is, you know, authorized to exercise jurisdiction, overhearing this case and issue a preliminary injunction.

One sort of point I would note actually in the preliminary injunction that i important, and you, you note that there's gonna be an appeal—actually the injunction in that case, in the D.C. case, is limited to the two named plaintiffs. So it is, there was neither a request nor a grant of a nationwide injunction in that case. So even if the D.C. Circuit does not stay the injunction, that injunction would only apply by its own terms to the two educational toy importers that brought that case.

Scott R. Anderson: So this is a really interesting question. I mean, we, we saw the district where Judge Contreras reached its conclusion that IEEPA cannot authorize tariffs period, and that's why the jurisdictional question became pretty easy. And we saw the Court of International Trade and VOS Selections reach the opposite conclusion that it, it does or can authorize tariffs and that's why it grants it jurisdiction.

But there's a big gap between those opinions. Like you could reach a conclusion where IEEPA could authorize some tariffs, but not all tariffs, or something that looks a lot like tariffs, plus a bunch of other stuff. I mean, IEEPA obviously is used for, among other things, economic sanctions, has been used for expert controls in the past, lots of potential applications, but depending on how you read the jurisdictional statute, which gives the CIT exclusive jurisdiction over matters arising from laws allowing for tariffs, in theory you could read that—and I, and I believe Judge Contreras even gets at this a little bit in his opinion—you could read that as saying, all IEEPA actions have to go through the CIT, because while it provides a lot of other things, it also provides for potentially tariffs.

How do you think that breaks down? I mean, that'd be a big departure. We’ve seen IEEPA challenges traditionally go through federal district courts around the country, and that's been happening for 50 years, since IEEPA has been passed at a pretty high volume. So that'd be a pretty big shift to shift all jurisdiction there. How do you think, you know, the Supreme Court, or the Northern, District of California, the next case, court that may have to wrestle with this issue, is gonna kind of split that issue, unless they come into one end, one end of the spectrum or the other in terms of what IEEPA authorizes on tariffs?

Peter Harrell: Yeah, I think it will be quite interesting. You know, if the government is ultimately successful as these cases are appealed through the courts, if the government is ultimately successful in its argument that IEEPA allows for tariffs, at least in some circumstances—whether or not all of the, the, you know, four executive orders have been challenged to date, at least in some circumstances—that that would as the plaintiffs and Learning Resources noted, and as we saw Judge Contreras get at, that would seem to mean that all the  sanctions-designated individuals who are bringing challenges against their sanctions or other sanctions-related challenges to sanctions-related actions would have to be brought in the CIT, which would be a, a bit of an odd outcome, because I, I've not done exhaustive research on this, but I suspect that no sanctions related challenges have been brought in the CIT to date because–

Scott R. Anderson: Not to my knowledge.

Peter Harrell: you know, they’ve all been brought—and there’s been hundreds of them over years—they’ve all been brought either in D.C. because that's where the relevant regulatory agencies sit, or in, you know, whatever district the plaintiff bringing the challenge resides. And so you've seen them in California, you've seen them in Ohio, you've seen them in New York and New Jersey, you've seen them, you've seen in D.C., you've seen 'em all over the place, but not, I think, in the in the CIT.

And it'd be interesting to see if the, you know, CIT under the sort of government's theory that IEEPA provides for tariffs, under the reading of the. CIT's jurisdictional statute, it would sort of seem to suggest that what we would would find is the CIT becomes the, you know, Court of International Trade and Sanctions challenges and that would be an interesting outcome.

I mean I suppose it's possible that somehow, you know, the Supreme Court or the appellate courts, would—I, I suppose it's at least possible as I think here—you know, would, would somehow split this and say that although the plain reading of the CIT's jurisdictional statute would suggest that it has exclusive jurisdiction overall matters arising out of statutes that provide for customs. Conceivably, maybe they'd read well, where, where there's a non-customs related challenge, that could still be brought elsewhere, but that would not be the natural reading of the statute.

Scott R. Anderson: Yeah. Let's go to the statutory arguments because they do blend together. I mean, the jurisdictional question kind of hinges on how you read the statute. And let's start with Judge Contreras ‘cause he reaches his conclusion based on one particular grounds of arguments. He does not reach other ones; he finds that adequate to grant a preliminary injunction.

And we should note we're gonna focus on the statutory arguments, which is for the purpose of preliminary injunction was the likelihood of success. So he's not, he didn't technically reach a final conclusion on these—as most attorneys and frequent listeners of Lawfare probably understand, by the standards of preliminary injunction that plaintiffs were likely to be successful on at least this argument, and also determined that you know, they were gonna face irreparable harm and other issues.

Those other elements that come down with the fact that these businesses were all facing real hardships because of these tariffs, or at least claim to be, is gonna be common across these cases. We're not gonna dig too much into those; we're gonna focus on the IEEPA based arguments. But just to get out there, we read the opinion, there are parts that folks can dig into if they want, but it is, it, it's not the most interesting part of this.

So let's focus on the statutory argument for Contreras really came down to, to the statute. He didn't get into the constitutional arguments. He really didn't get into the tariff program-specific sanctions because of course we have sanctions against Canada, against Mexico, against China, that have all been challenged, and then we have the worldwide tariffs. So there's kind of four different tariffs programs at least, that are being challenged under this set of litigation. He didn't get to any of those specifics. He said IEEPA itself just does not authorize tariffs. Talk to us about his argument and how persuasive you found it.

Peter Harrell: Yeah, so IEEPA—the statute was passed as an emergency powers statute in 1977—nowhere in its text references the word tariff, provides the president a broad range of authorities that are codified 50 U.S.C. 1702 to block property and prevent or prohibit kind of transactions.

And if you kind of read this dense paragraph in 50 U.S.C. 1702 that provides the governments with authorities, the government's argument was—the government’s argument is—that while IEEPA does not expressly use the word tariff or tax or levy duties or the kind of other phrases, you tend to see where there is a grant of taxing or tariff power to the government, IEEPA, if you, you read through the statute, does give the government the power to regulate the import or export of any property in which a foreign national has an interest. And so it's sort of undisputed and has been done many times that the government can use IEEPA to impose a ban on you know, imports of Russian oil, to give an example of something Biden did under IEEPA in, in 2022.

So, you know, IEEPA has been used, and the sort of plain language of the statue would suggest it can prohibit the importation of of various products from abroad, but the government's argument is that this phrase regulate the import or export of any property regulate in this context includes a power to tariff or to tax or to assess a fee. That's essentially the, the, the argument.

Judge Contreras—and I think it’s actually a strong argument—found that no, the power to regulate does not include the power to tariff or tax. And there are kind of a couple of, of arguments that he makes in the, the opinion, you know. One is kind of a plain language argument. You know, he looks at some dictionary definitions and those kind of things, and they does not have in the dictionary definitions, regulate does not appear to have the power to tax.

There is also obviously case law including some recent case law looking at some things the Biden administration had done that finds that the power to regulate and the power to tax are different under the law. And you can also think about that just in sort of a, a, a simplistic, without getting into the case law, a simplistic way, if the government's reading is correct that the power to regulate includes the power to tax, that would seem to suggest, at least on a plain language, reading that you know, any area where the government has the power to regulate would include the power to tax. So could the, you know, government tax pollution because it has the power to regulate pollution, could it tax stock trades because the SEC has the power to regulate stock trades.

Judge Contreras fundamentally concluded kind of given the textual nature, given the textual interpretation of IEEPA, and also looking at its history, that this phrase to regulate does not include the power to tax. It can include other things; you can prohibit importation—that's also separately provided in IEEPA—you could also envision non-tax kinds of regulation, right, you could have time, place or manner restrictions or something like that, but he just found that that's government's argument, that the power to regulate in this context includes the power to tax is not the correct reading of the statute.

And so Judge Contreras, because he simply finds a textual matter the statute does not include the power to tax, he then doesn't have to get into are there distinctions between the tariffs on Canada over fentanyl, the tariffs on China over opioid and fentanyl production, and the tariffs on kind of the whole world over the trade deficit that, that Trump had declared in April, because if IEEPA doesn't allow the power to tariff sort of full stop, it’s immaterial to assess the differences in the different tariffs or applied pursuant to IEEPA.

Scott R. Anderson: So I wanna compare how Contreras approach this to how we saw the Court of International Trade—which is a three judge panel, which why I'm not referring to a specific judge there—approached this and other statutory questions because they got into a deeper, more layered analysis because they kind of laid up a number of arguments, the alternatives since they were going to summary judgment.

But before I do that, let, let, let's address a bridging issue that they both has to wrestle that fit into Contreras here, and that is this Yoshida opinion, which is really the only directly on point opinion we have coming out of a court that, that no longer exists, was kind of a predecessor of the Court of International Trade, Court of Federal Claims, a different sort of statutory judicial body that fed up to the Federal Circuit at the time, though if I’m wrong feel free to correct me,  which sanctioned sort of tariff program imposed by the Nixon administration—with some caveats, not, not wholeheartedly necessarily with a little careful language, but nonetheless did say we're [inaudible] invalidate this at this particular point.

Talk to us about how Contreras deals with Yoshida and approaches Yoshida, which of course, it's in a different posture vis-a-vis, because it is under the D.C. Circuit for appeals, it's not necessarily bound by Federal Circuit precedent, although, you know, may well look to as persuasive. Talk to us about what it does with Yoshida, and that’s a good bridge to jump over to the Court of International Trade stuff.

Peter Harrell: So let me, let me, Scott, Scott, begin by talking a little bit about the history of the Yoshida case and how we got here. So 1971, President Nixon pulls the U.S. off the gold standard and is very worried about what is going to happen in currency markets and trade relations around the world. He pulls the U.S. off the gold standard.

So what he does sort of in, in the fall, late summer, early fall of 1970, when he pulls the U.S. off the gold standard, he announces that simultaneously, among other measures, he is going to impose a 10% tariff on most imports. It's not actually 10% across the board, it's a pretty complicated tariff regime. It often gets summarized as a 10% tariff, but it was quite nuanced and gave lots of different rates to lots of different products, none of which exceeded a 10% tariff surcharge.  And that tariff lasted four months. After four months, the global fiscal financial system had stabilized and he withdraws that tariff.

And a Japanese zipper company called Yoshida, really, it's U.S. subsidiary—actually if you have a zipper, a jacket or something with a zipper on it today, it almost certainly is made by Yoshida, Yoshida today, now called YKK, makes like 70% of the world zippers, so you probably have products that are made by the company at issue in this case—Yoshida brings a suit because it wants to get its tariffs back. You know, it's not while the tariffs are in place, the tariffs go away after four months, but they want a rebate of their of their tariffs.

When Nixon announced these 10% tariffs, he'd cited various inherent executive authorities that they realized in litigation aren't gonna be upheld. So the Nixon administration begins in litigation to cite this 1917 act called the Trading with the Enemy Act, which is IEEPA's predecessor statute, and which has language in it that's similar to IEEPA. And in 1975, you know, four years after the tariffs have come and gone, a federal court says, well, yes, this Trading with the Enemy Act, in that case, it has the same language about regulating importation of property, that language can be used to sustain this, this 10% tariff.

And the language in the Yoshida court says, well, although it, it could be used to sustain this 10% tariff, the Yoshida court also sort of expressly says things like that doesn't mean it could be used to sustain an unlimited tariff or other tariffs; we’re limiting it to this particular type of tariff.

So this Yoshida case where language that is substantively identical to the relevant language in IEEPA was used to uphold this 10% four month tariff is obviously relevant to the litigation we're seeing today and is core to the government's argument that regulating the importation of property includes the power to tariff.

The way in which the D.C. District Court, distinguishes this is by looking both kind of the plain language today, but also by looking at some of the history that happened after this Nixon tarif. And in particular by noting that in 1974, Congress enacted a separate statute—now known as Section 122, it’s Section 122 of the Trade Act in 1974—that gives the president the authority to impose tariffs for up to 150 days up to 15% to deal with balance of payments issues. So Congress in 1974 seemed to say without taking an opinion on, on the legality of what Nixon did at the time, enacts a separate statute that gives the president a kind of time-limited and rate limited authority to impose tariffs.

And so, so what, what Contreras found is essentially you look at what Congress did when it adopted IEEPA in 1977, knowing it had passed this separate statute in 1974 to deal with the Nixon tariffs—Contreras looks at is as well, looking at that history, when Congress adopted IEEPA language that looks the same as the TWEA language, we've had this other statutory intervention that doesn't mean that in IEEPA Congress adopted the power to tariff that the Yoshida court had upheld in 1975.

Scott R. Anderson: Yeah, that it would've been essentially reversing what it had just done to correct some of the TWEA action. Really interesting sequencing and statutory interpretation approach in that sort of thing.

So turning to the Court of International Trade, we see them embrace, I think, a similar line of argument, but among many others, in part because they are reaching summary judgment; they are deciding with finality, hey, we are getting rid of this case, or we're really bumping up to the appellate court, we think we can come out and reach final resolution on this.

They lay out a, a number of different arguments, statutory and otherwise as to why IEEPA doesn't authorize exactly what the president is reaching right now or can't authorize in, in terms of constitutional arguments. Talk to us a little bit about other statutory arguments that they toy with. What do they do that builds on the Contreras approach? To start there.

Peter Harrell: There is an important difference because I would say, you know, if you read the CIT opinion, the CIT holds open the possibility that IEEPA may endorse tariffs of some kind. It doesn't say what those are, but it clearly holds open the possibility that IEEPA may endorse tariffs of some kind.

Now, this is where the jurisdictional question, another way in which the jurisdictional question becomes interesting because if the CIT found that IEEPA never endorsed tariffs, presumably the CIT would've had to give up jurisdiction over this case because it’s not a statute that provides for customs. And so if CIT is going to render a substantive opinion in this case and not just say, we don't have jurisdiction here, it, it, it presumably would have to, given its jurisdictional statute, be of the view that at least in some circumstances, IEEPA would allow for tariffs.

And so the, the CIT doesn't come out in exactly the same place that Contreras does. Instead, it takes a slightly different approach. First of all, it differentiates between what it characterizes as kind of the Liberation Day or trade deficit tariffs—the tariffs that Trump announced on April d, that intended by their own terms to address the U.S.’s persistent trade deficit—and what the CIT characterizes as the trafficking tariffs.

These are the tariffs that are on Canada, Mexico, and China that are by their terms dealing with America's fentanyl and opioid crises. The Canada one is over fentanyl, China's over opium, there's some differences, but CIT kind ties them together as trafficking tariffs for those three executive orders. And the CIT comes to different conclusions for why the trade deficit tariffs and the trafficking tariffs are not authorized by IEEPA rather than one finding across two of them.

So what, what the CIT finds—and this is where you see the bridging between the district court opinion and the CIT opinion—with respect to the trade deficit tariffs, what the CIT basically does is it looks at this Section 122, this thing that Congress had passed in 1974 after the Nixon tariffs, and the CIT basically holds that given the history of 122 and Congress creating this provision of 122 to deal with balance payments, type issues, the CIT concludes that given 122, IEEPA tariffs can't be used to address the trade deficit or balance of payments issues. If the president wants to address, use tariffs to address trade deficit or balance of payments, he has to use section 122, which puts limits both on the duration of the tariffs–150 days—and also a rate of 15%. So it, it, it finds the trade deficit tariffs are unlawful because IEEPA does not allow tariffs for the purposes of the trade deficit.

Then it looks at the trafficking tariffs, and it kind of has several different concerns with the trafficking tariffs. But one of them that I think as a sanctions practitioner is quite interesting is IEEPA has a requirement that the measures imposed be designed to deal with the threat that IEEPA action is intended to do.

And, and where this relevant—so, IEEPA requires a president declare a national emergency, and then he can deploy various powers to deal with an unusual or emergency, an unusual or extraordinary threat for which a national emergency has been declared. It has to declare a national emergency, and then the powers have to be deployed to deal with this unusual emergency or extraordinary threat.

And the trafficking tariffs are to deal with the drug sort of the drug crisis, and the court basically held that tariffs on, you know, basically all Canadian and Mexican and Chinese imports are not designed to deal with the drug threat. So it sort of seems to imply if you'd had, you know, tariffs on packages that contain drugs, presumably that would've been upheld, but where you're tariffing, you know, lumber or whatever else is coming in from Canada or Mexico, avocados, like that doesn't deal with the declared threat, which is a sort of drug trafficking threat. So it finds all three of those executive orders unlawful.

Scott R. Anderson: So that's obviously a holding, particularly on those trafficking executive orders that has potential implications for other application of IEEPA. And I wanna circle back to that because that's one of those points that I think is gonna give some sanctions practitioners heartburn potentially, particularly on the government side.

Before we do that though, let's go to a dog that didn't bark. So, so as you noted, the Court of International Trade based part of its analysis on the fact that there was an adequate nexus between the national emergency being declared and the actions being undertaken here, the tariffs—specifically for the trafficking statutes, didn't have to get there for the worldwide tariffs.

The other thing that we didn't see happen, although it, it was on our kind of theoretical matrix of possibilities, is a challenge to the national emergency itself. The idea that these are national emergencies are of the sort anticipated by the National Emergencies Act. And that is something we see, I've seen commentators take issue with, including in some of the writings in Lawfare on this issue over the last few months, particularly in the regard to the worldwide tariffs, because there was this idea that this balance of, this trade imbalance is something that's been with us for decades, and has actually by some measures has gotten better in recent years than it was just a few years ago, among other arguments why it's, it's not, doesn't really qualify as an emergency of the sort, the National Emergencies Act that IEEPA anticipates.

Why didn't that dog bark? Like why didn't we get it that addressed or, or was there more being talked about this than I read on my, on my initially fairly fast read of this opinion before you got a chance to talk about it. I didn't see it in there, and, and is there more potential for that to be an issue either when we get to the actual merits in Learning Resources, the D.C. case, or the Northern District of California case that is still forthcoming?

Peter Harrell: In some sense, a simple reason that you didn't get much of a ruling on this matter, which is that in the CIT case—which was actually an opinion that was both in the VOS Selections case and also a case brought by the state of Oregon and 11 other state attorneys general—the parties in that case didn’t make much of a deal about whether the trade deficit counts it can be a national emergency, a national emergency for the purposes of the National Emergencies Act. And indeed, at least the Oregon plaintiffs expressly said they were not challenging the declaration of the national emergency at, at oral arguments when they were asked that.

Now, the reason that the plaintiffs have not made much of a deal of of that is that there is quite a bit of case law out of a couple of different appellate courts holding that declarations of a national emergency pursuant to the National Emergencies Act are non-justiciable political questions. And I suspect—I don't know exactly what the parties here thought in their argumentation—but I suspect, and had I been advising one of the parties, I would've said, look overcoming that precedent that the declaration itself is a national is, is a non-reviewable political question is gonna be very hard, and so you're not gonna find a very fruitful line of argument there.

I do think there's another kind of closely related dog that didn't bark that I think, you know, particularly with the trade deficit might be, might be something we see in appeals, in which the parties did argue in the case, it just didn't come out much in the opinion. As I said, IEEPA requires that the threat, in addition to a declaration of a, of a national emergency, the threat has to be unusual and extraordinary. And there's not been as much clear cut precedent that unusual and extraordinary is a non-reviewable political question, non justiciable political question.

And I think you could see as these cases go forward, and you have seen some of the parties in different cases make the argument that at least with respect to the trade deficit—which the U.S. has run every year since 1976, notably the year before Congress passed IEEPA, every year since the year before Congress passed IEEPA the US has run a trade deficit—is not an unusual threat at the very at the very least in the sense of like unusual would suggest it's not, you know, as plain language would suggest it is not something that is usual and the trade deficit in the U.S. context appears to be usual. And then as you say, Scott, actually, the trade deficit peaked in 2005 and is actually today maybe just over half what it was again as a percent of GDP absolute dollars it's larger, but as a percent of GDP is is just over half what it was in 2005.

So I think we may see this argument go forward, but I think the courts didn't get into it, in part because they just found these other bases more compelling, you know, as they were thinking about how to rule on these cases.

That argument, also, I should also add, like that argument on unusual and extraordinary—I think if I were litigating these cases, I would only attempt to make that argument on the trade deficit. I think you would be very hard pressed on the trafficking executive orders to argue that the fentanyl crisis, opioid crisis, you know, is not an unusual and extraordinary threat in part because if you look at the something north now of 70 instances in which presidents have invoked IEEPA to impose sanctions, you know, many of them are on things like cyber hacking and drug trafficking generally, and you know, other kinds of transnational crime, corruption, you know, other threats. So it's hard to say, well, if the, you know, if these other threats meet the standard, it's hard to say that fentanyl trafficking doesn't also meet the standard.

Scott R. Anderson: Absolutely. Yeah. I mean, a lot of those emergencies have also been around for decades at a time making the unusual, extraordinary argument a little tricky. And worth noting for folks in case you're wanting the National Emergencies Act—no statutory definition of what an emergency is. That's part of the reason why it's such an open-ended question. Lots of procedural requirements, but doesn't really define it further, although IEEPA does require a nexus to you know, threat to the national security emergency of the United States.

So the, the, the other line of argument that we expected, and we did see in this Court of International Trade argument and was a big focus for at least some of the litigants, Ilya Somin—who helped run a legal organization and wrote about this case for us, for Lawfare as somebody representing VOS Selections, the, the name party, if I recall correctly, I believe who was he was representing—really hit this argument on Lawfare and in the briefing is this constitutional question. This idea that IEEPA, if you read it to extend so broadly as to some of these tariff actions, particularly the worldwide tariffs, it is raises big question under the nondelegation doctrine: this idea that the Constitution gives Congress only a limited authority to de delegate things that are squarely within its authority, like the regulation of foreign commerce, which this clearly is, and that while it can substantially delegate that authority to the president, it has to give some guidance on how that authority is to be used or becomes unconstitutional idea.

An idea, which is it's worth noting was pretty much dead for most of the 20th century—at least directly, kind of indirectly informed statutory interpretation, but wasn't directly invoked—but is now having a new moment in part because it's being revived through the major questions doctrine, at least through some readings of that doctrine. This idea that there, if the executive branch is using a statute to do something really extraordinary in a way that wasn't clearly anticipated by Congress, that is a reason to second guess that interpretation of the executive branch and subject it to scrutiny. That is popular with justices on the Roberts Court, most notably those appointed by President Trump on the court as well as Chief Justice Roberts.

So talk to us about this constitutional argument. It's interesting how this came out and worth noting the court didn't have to reach this, right. It could have disposed of this matter, and frankly, most of the time when you're dealing with federal judges, I would say lower, of lower courts, you expect them to avoid the constitutional issues if they can. That's kind of the norm assumption, this norm of constitutional avoidance, but the Court of International Trade didn't do it. It ran right into it. So talk to us about this constitutional holding and why they decided to go so far as to reach it.

Peter Harrell: I think this is gonna be, I think I, I think this, the, the constitutional questions are gonna be among the most important questions, particularly if, and I, I almost surely, when this lands in front of the Supreme Court probably sometime in the fall, because as, as you say, Scott, there, there has been a keen interest—both on the part of some conservative jurists and also on the part of a number of lawyers—in reviving this nondelegation doctrine, which is, which as you suggest, has been dead for many decades, but the, the core of which is that Congress, if it is going to delegate its powers to the president an intelligible principle and some sort of outer limits on what those powers are. And then I think there is, if you read some of conservative scholarship on this, even when you have an intelligible principle and some parameters are, actually probably still also substantive limits on how much power can be delegated from Congress to the executive branch.

And as I actually, we start, before I talk about what the CIT did is, as you'll recall, when we, we go to the, the predecessor of the Yoshida Court, Yoshida upholding Nixon's tariffs in 1975—that Court addressed it in what, you know, maybe you could say is dicta in the sense of it said, you know, nondelegation doctrine could apply to some kinds of tariffs, it just doesn't apply to these kinds of, of tariffs here, which again, back then had been 10% and lasted for, for four months.

I think part of the reason the CIT was getting into the constitutional question is because the CIT, unlike the district court, I think clearly felt itself bound by Yoshida. And in fact, at oral arguments in one of the cases, I think it was Judge Restani, one of the three judges on the panel, sort of got into a back and forth with government’s, the government's lawyer, which Judge Restani was basically arguing well, Yoshida has this language about non delegation in it for sort of unlimited tariffs, and if we at the CIT are bound by Yoshida that IEEPA should allow tariffs in at least some circumstances, shouldn't we also be bound by this idea in Yoshida that it wouldn't allow unlimited tariffs because that would violate potentially the nondelegation doctrine. And which the government's response was that's really just dicta, you don't need to pay attention to that part of Yoshida.

And I think what you see, the CIT doing here—all three of them, not just Restani joined by Katzmann, Reif, and Restani—I think what you see is all three of them sort of saying, well, look, Congress could not have delegated all of its tariff authority to the president to basically do any tariffs, at any rate, on any product in any country for any duration, which is essentially what the government is arguing. IEEPA lets it do, because that would violate the nondelegation doctrine 'cause there's no like intelligible limiting principle for the deployment of these tariffs

So, so that's kind of the, the legal argument. They're looking at what happened in Yoshida. They're looking at some of the old, old cases as well as you say, the kind of recent resurrection of the major questions doctrine and finding IEEPA, if it were going to allow tariffs, sort of any rate for any time against any country, any product would violate nondelegation doctrine.

And I think this will be a major issue as I say, as it goes to appeals for jurists and lawyers who would like to revive the nondelegation doctrine, and if you're a Supreme Court justice, who wants to give an opinion, a substantive opinion on the non delegation doctrine, and what can Congress delegate and what can it not delegate, this would be an appealing case to do it.

Scott R. Anderson: Yeah, absolutely. So, and that really gets us to where we go next. So we know where these two courts have ruled on this. We already know this dispute is gonna go up two lines of appeal, one to the D.C. Circuit, which we're waiting to hear whether they're gonna issue an administrative stay or other stay—and there I should note this is gonna go because they filed for the end of the month to the current May motions panel, which I believe is Judges Henderson, Judge Walker, and Judge Childs, a 2:1 Republican appointee for the third, third month in a row, in which is otherwise a court where it's kind of, the ratio goes the other way 2:1 Democratic to Republican appointees.

Maybe the next panel I, I don't know which way that cuts. A lot of the assumption is that that cuts in favor of the administration; I'm not sure that's true on this particular issue set, but we'll have to wait and see. But regardless, that is one panel that's gonna be waiting on the Contreras opinion and weighing in on that, potentially staying it. Right now, that's the thing, stopping the application of the tariffs.

Then we have the, the CIT opinion, gonna go to the Federal Circuit, very interesting federal court where notably, which I did not realize till I looked into it, actually doesn't have a single Trump appointee on it. Several Republican appointees from prior administrations, but no Trump appointee from the first term or the second term now, so really, really interesting there. Although it's worth noting the Trump administration strategy in all these cases has been to try and channel cases into the Court of International Trade, which goes to the Federal Circuit, I'm guessing, because they at least had that Yoshida opinion they could hang their hat on, but obviously didn't work, at least at the CIT level.

Where do you think this is gonna go? And it's worth noting by the way, we have the Northern District of California, might yet get the Ninth Circuit involved on another level of appeals. Is this something that inherently actually has to go to the Supreme Court, particularly 'cause of this jurisdictional divide where the two opinions are mutually exclusive of each other, at least if you read them in a particular way or read, I should say the underlying jurisdictional statute in a particular way? Does the Court at least have that issue or is this something particularly where both circuit courts come out contrary to the administration, even maybe on separate, slightly different grounds, they're not gonna feel obligated to take it up or to resolve those sorts of internal tensions between the two opinions?

Peter Harrell: So, a number of thoughts on that.

You know, so first Scott, I think that you know, your point on the government wanting, consolidate things in front of the Court of International Trade, I think if you're the government, you almost have to, right, because you are arguing that IEEPA authorizes tariffs, and the CIT has exclusive jurisdiction over over statutes that authorizes tariffs, —let's put aside the sanctions, the whole what are they going to do with sanctions cases going forward—but at least, you know, for the purposes of tariffs, you have to consolidate them in front of the, the, the CIT. So I, I, I didn't really read anything into that other than their, their argumentation meant they had to push to consolidate them into the CIT.

It's interesting you think about the partisan breakdown of the judges. I don't think that this particular issue has a clear overlay with kind of Democratic vs. Republican appointed judges. I think this is an issue where you can see, you know, potentially, more Democratic judges wanting to constrain this administration, but also where conservative jurors have a long history of thinking that there should be constraints on the exercise of executive power here.

And I'd also note that the CIT panel was a George W. Bush appointee, an Obama appointee, and a Trump appointee. And so you had a bipartisan panel including a Trump appointee on it. And I thought it was interesting on that last night, the president had a very lengthy social media post complaining about the CIT opinion, but much of his complaint was how he'd been led astray on his appointments by Leonard Leo in the Federalist Society and how it was terrible, that, you know, the Federalist Society and, you know, been advising him on on judges. It was kind of–

Scott R. Anderson: It was a heck of a truth. I'll say. I did not see that one coming. This was not on my bingo card for this year.

Peter Harrell: No it was really quite something. He had some interesting theories on the separation of powers where he, you know, said that if this opinion is left to stand, it would gut presidential power, and I think all of us have historically thought that Article I, Section 8, which provides Congress the power to impose tariffs, a congressional power that you know, has to be delegated and we're just arguing over did Congress in fact delegate it and could they delegate it. Trump seems to think that the tariff power is a presidential power, but Trump has plenty of his own idiosyncratic views about, about the law.

But, but, but, but be that, as that may I, I think it is virtually impossible to see a scenario in which this does not land before the Supreme Court. I mean, I suppose conceptually, you know, you could see it not landing before the Supreme Court either, because multiple appellate courts come out against administration, and even if they are on slightly different grounds, because the end result is the same, the Court could decline to take it up.

I, I could also see a scenario where if the appellate courts end up all favoring the government, maybe the Supreme Court decides, you know, not—I mean, if we get, you know, reversal of the CIT at the appellate level, we get reversal of the D.C. District Court in the D.C. Circuit, like maybe the Supreme Court, but that doesn't seem very likely to me.

And I think even if you did have unanimous appellate, unanimous circuits, and, and even if the reasoning was largely aligned, as this kind of goes through at the circuit level, the reasoning aligns, I think this is one the Supreme Court's gonna wanna take up, right. Because it is such a, an important question for the country, I think they're gonna wanna to take it up. So I think this will land in front of it.

In terms of what sort of the posture that gets us there right now—the CIT, you know, the case has been appealed to the Federal Circuit; as you noted. There's an administrative stay. The parties have arguments on the administrative stay due on the fifth for the plaintiffs and on the ninth for the government. And I, I think we, I think we will see the Federal Circuit deal with this quite quickly. We saw the CIT deal with it quite quickly. All the judges understand the importance of this case, and, and so I think they have an incentive to move it.

There's also no factual dispute really on any of this, right. I mean, it's a, a purely a matter of statutory interpretation. You know, you could have some arguments around preliminary injunction—you know, had the CIT granted preliminary injunctions rather than summary judgment, maybe you'd have some disagreement over whether the preliminary injunction standards, but this is a summary judgment, a decision, it's not a preliminary judgment, there's really no factual disagreement for the purposes of summary judgment. So it can all be briefed quite—you don't need fact finding—it can be briefed quite quickly.

So I, I suspect, I mean, I, you know, I've not talked to any of the litigators yet on this, in the cases in the Federal Circuit. But I, I suspect we'd have a decision in the Federal Circuit, you know, certainly by mid, late summer, and then, you know, it would go up from, from there.

Scott R. Anderson: Absolutely and, and worth noting when it comes to granting cert ,where the executive branch asks for things that in case they have a national security balance, which just certainly does, even though we think of it as a tariffs trade case, a hundred percent record of the Court actually granting cert. So if the Trump administration wants them to take up this, they lose at the Federal Circuit, which seems certainly plausible then the odds would increase significantly of them taking it up.

Peter Harrell: To your point on, does it seem plausible to lose the Federal Circuit, I, you know, who knows, right? I mean, it, I, I, if I were a bet, if I were gonna bet on this case, I would bet that the CIT’s ultimate outcome is upheld. Like I, it'll be interesting to see if the Federal Circuit comes out a little bit different on the reasoning, even if it reaches the same, the same ultimate outcome. That'll be an interesting thing to, to, to watch, but it does seem to me more likely than not that the Federal Circuit will, will uphold the CIT’s, you know, ultimate order as this goes forward.

And, you know, I got a couple of questions yesterday—obviously saw on the news there is this administrative stay. I got a couple of questions like, well, does that mean the Federal Circuit might be, you know, skeptical of this? I don't read it that at all. I read that as simply, you know, they understand this is an important and weighty case; they want to have a chance to hear the arguments on it before the CIT's judgment comes into force on a nationwide basis. I don't read anything into it.

The analogy I kind of see is actually when this, when the, the, the case was first filed when the first, the VOS case was filed in front of the CIT, the CIT denied a request for a temporary restraining order basically just on the grounds that, well these guys, these particular plaintiffs couldn't show they were gonna suffer irreparable harm, you know, in a couple of weeks that it was gonna take to hear this case. And at that time I got some questions about, well, does the denial of the TRO mean anything? It clearly did not. I similarly expect the administrative stay—I don't read anything substantive into the administrative stay.

Scott R. Anderson: I think, I think that, I think that's right. That makes a lot of sense and was actually a notable distinction between the plaintiffs in Learning Resources where the court did find irreparable harm. They specifically argued, we're gonna have to shut down, like, we may not exist as an entity if we have to live through these tariffs much longer, and that definitely entered in, I think, to Judge Contreras’s reasoning, certainly for the PI.

So before we part, I wanna dip back into your experience as a sanctions practitioner and a broader IEEPA practitioner, somebody who's looked at how IEEPA is used in a lot of other contexts. Because we have been looking at this as one particular lens of tariffs, but of course holdings regarding IEEPA are gonna have broader ramifications.

I'm curious whether A) any of what either quarter has done, gives you some heartburn as somebody who's represented the executive branch, thought about policy from the executive branch’s perspective, often otherwise sympathetic often do the executive branches need to be able to use authorities in ways to advance policy interests, even if there might be some limits on that—do parts of this give you heartache? And are parts of it something that on more scrutiny by the appellate courts, by additional briefing, by amicus and other people who—although there are plenty amicus already—but other people getting involved in this case, if they pull in more of the sanctions context, may undermine some of these arguments?

One point of tension that jumped out to me, which I'll, I'll just put before you, is this argument about the, the Trade Act of 74 impacting the interpretation of IEEPA and basically an assumption against redundancy. That's not something we've seen actually applied in the IEEPA context. In other contexts, you think about the terrorism sanctions context—obviously Congress enacted the foreign terrorist organization regime, which allows for the designation and position of sanctions on terrorist groups in 1996 as part of the Anti-Terrorism Effect Death Penalty Act, but that did not stop subsequent presidents from enacting, not one, but actually two separate terrorism related sanctions regimes that actually are applied totally coincident with the FTO regime alongside of it in current practice. I don't think that was always the case, but it is now for organizations that qualify as FTOs.

A, a Trade act of 74 type argument actually would be a, could be a problem in the, in the terrorism context. I don't know if any plaintiffs made that argument when they were challenging that regime, particularly, you know, after 9/11 when we had that whole wave of cases, and I'd have to go back and look—it very well might have 'cause a lot of those were very buckshot challenges raising all sorts of issues.

But I'm just curious—that jumped out at me because the argument makes sense in this context, but it's harder to reconcile with our practice with IEEPA in other contexts. Do other points like that jump out? Is there a way to reconcile them that's easier in your mind? I'm just kind of curious what this means for sanctions practice, broader IEEPA practice, and, and how that broader practice may yet bear into this case in ways we haven't seen yet.

Peter Harrell: Yeah. Well, so maybe I'll start with the Contreras opinion. In D.C. you know that IEEPA as a sort of textual matter doesn't authorize tariffs. If that is the way in which the, this case ultimately lands, you know, if circuit courts and the Supreme Court ultimately resolved this case on that grounds, I see almost no impact on sanctions cases, right? We haven't used tariffs under a, since 1977 until earlier this year, and reading tariffs out has really almost no impact on sanctions.

I do see, if the CIT's reasoning is ultimately upheld—like if we, if we see grounds on, if that reasoning ends up being the grounds on which the ultimate opinions are, are, are formed—I do see at least two areas in which sanctions practitioners could be impacted. One is the one, you know, right, and I think that would, that would probably be limited in the terrorism case, although could also be limited in some of the drug cases, right? Congress passed Kingpin Act. I mean, you know, you could, you could, you know, this sort of IEEPA cannot be used for, to impose sanctions or to impose measures where Congress has adopted a separate authority arguably could be read across a couple of different programs.

I think probably practically speaking you wouldn’t have as much of that risk on like where Congress has adopted country programs, you know, whether it's Iran or you know, some of these other ones, because where Congress did that, they so often incorporated past exec, you know, IEEPA executive orders and built on them and referenced IEEPA. I think that probably wouldn't be an issue, but I, you know, conceptually you could start seeing some arguments where Congress has enacted separate programs, to challenge, you know, to to to target, you know, non-state actors. That'd be interesting to see where that plays out.  I agree with you—I don't remember, when I read, when I've read the cases challenging the 9/11 designations, and I haven't read those in the last couple of months, but when I have read those, I don't remember these arguments being raised, but certainly could see it going forward.

The other one I’ve been thinking about quite a bit reading, the CIT opinion is the CIT's view that these tariffs targeting, you know, most imports from Canada, Mexico, and China aren't dealing with the declared, unusual and extraordinary threat of drug trafficking. You know, and, and, and this comes against a backdrop where the government had argued, well, what the dealing with requires is, you know, or, or, or one way to address the dealing with requirement is as long as the measure is getting leveraged to solve the problem, that is dealing with it, and what Trump is doing is getting leveraged to get the Canadians to do something.

And that, of course, is something that we have done in sanctions quite often. You know, we will sanction some part of the Russian economy that is only very tangentially related to Russia's war machine on the grounds that we're trying to get some leverage over the Russians to put pressure on them to to, to do something. And if you, you know, saw courts start taking this, dealing with argument that we see in or holding that we see in, in VOS Selections serious and applying it to other circumstances, you could begin to see some constraints on how the government thinks about sanctions as a leverage generation tool beyond just kind of we're gonna sanction the particular, you know, bad actors that are directly involved in the threat we're trying to to deal with.

Now, I, I think as a, you know, somebody who's drafted IEEPA executive orders and that kind of thing, you can think of, of kind of creative drafting solutions, how you could define the threat in a way that let you use sanctions as as leverage, and so maybe there'd be kind of ways that you could draft around or partially draft around judicial requirements in this in this era, but I think we'd have to, we'd have to think about it.

I guess final sort of historical point for your listeners, you know, it’s interesting, for those of you who work on sanctions and listen to this podcast—over the last 15 years, there has been an increasing reliance by the government on what we call status based sanctions, where the, the legal basis for sanctioning somebody is that they are a, you know, a Russian government official, or an Iranian company that operates in the Iranian energy sector, rather than trying to some linkage between, as a legal matter, between the the person you're sanctioning and some bad act.

And that shift to status based designations was really driven by European litigation in the 2000s, late 2000s, late 2010s where European courts were saying, no, no, you have to, for European sanctions, you have to show a kind of direct nexus between, you know, the individual doing some bad act, and the, the solution is, well, we'll just stop draft, we'll stop sanction them for doing bad acts, we'll start sanctioning them for, you know, characteristics about them. And then, you know, and now Americans have adopted that too.

Scott R. Anderson: Well, we will see how that fares under whatever standard we may see come out of this process. Needless to say, there are a lot of open questions still. This is not the last word in this dispute. We're going to see at least another round, probably another two, maybe even three rounds of litigation on this matter or more, and so we'll have opportunities to come back. But until then, we are out of time today. Peter Harrell, thank you for joining us here today on the Lawfare Podcast.

Peter Harrell: No, thank you, Scott, it's been a pleasure.

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