Today, the U.S. Court of Appeals for the Federal Circuit in Washington D.C. held a highly anticipated en banc oral argument in the case of V.O.S. Selections, Inc. v. Trump, a pivotal case challenging the legality of President Trump’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The case involves tariffs imposed by President Trump on various goods, including those related to Canada, Mexico, and China, as well as “Liberation Day” tariffs. The tariffs were challenged in the Court of International Trade, which found them to be unlawful and issued an injunction against them. That injunction was stayed by the Federal Circuit Court of Appeals pending its review.
Today’s arguments were presented before a full panel of the appellate court, which delved deep into constitutional separation of powers, statutory interpretation, and the limits of presidential authority in trade matters. This case is of paramount interest to the Ecommerce Innovation Alliance and its members, given its potential to redefine the landscape of U.S. trade policy and impact global supply chains.
The en banc panel hearing this crucial argument included Chief Circuit Judge Kimberly A. Moore, and Circuit Judges Alan D. Lourie, Timothy B. Dyk, Sharon Prost, Jimmie V. Reyna, Richard G. Taranto, Raymond T. Chen, Todd M. Hughes, Kara F. Stoll, Tiffany P. Cunningham, and Leonard P. Stark. Notably, none of these judges were appointed by President Trump. Judge Moore was appointed by President George W. Bush, Judge Lourie by President George H. W. Bush, Judge Dyk by President William J. Clinton, Judge Prost by President George W. Bush, Judges Reyna, Taranto, Chen, Hughes, and Stoll by President Barack Obama, and Judges Cunningham and Stark by President Joseph R. Biden.
The Government’s Stance: Broad Emergency Powers Under IEEPA
Brett Shumate, representing the Justice Department on behalf of President Trump and the U.S. Government, opened by asserting that the IEEPA’s “text and history, as well as governing precedent,” clearly authorize the President to impose tariffs to address declared emergencies. The government’s core argument rests on the IEEPA’s provision allowing the President to “regulate… importation” in response to an “unusual and extraordinary threat” to national security, foreign policy, or the economy.
Shumate emphasized that while IEEPA has not been used for tariffs before, the statute incorporates “the exact same language” from the Trading with the Enemy Act (TWEA) that President Nixon used in 1971 to impose tariffs. He cited Yoshida, a 1975 decision by the Federal Circuit’s predecessor, which upheld Nixon’s use of that language for tariffs, arguing that Congress was aware of Yoshida when enacting IEEPA in 1977 and thus intended to authorize similar presidential actions. Shumate contended that “regulate importation” should be read broadly, similar to how “adjust imports” has been interpreted to authorize license fees, likening a tariff to a “condition on import”.
He further argued that IEEPA is a “broad emergency statute” designed to provide the President with “extraordinary power” to protect national security and foreign policy, particularly in situations where there’s no time for the “highly technical” procedures of other trade relief statutes. Shumate asserted that the President’s declaration of an emergency, specifically relating to trade deficits and their consequences on military readiness and domestic manufacturing, falls within IEEPA’s scope, and such declarations are generally not subject to judicial review. He also pushed back on concerns about the “unbounded” nature of the power, stating that IEEPA itself contains limits, such as the requirement for a national emergency emanating from outside the United States and dealing with the emergency.
V.O.S. Selections’ Rebuttal: An Unprecedented and Unlawful Power Grab
Neal Katyal, representing V.O.S. Selections, Inc., swiftly countered, labeling the government’s assertion of power as “breathtaking” and “unprecedented” for two centuries. He argued that allowing the President to impose tariffs unilaterally under IEEPA would constitute a “major question” doctrine violation, demanding “clear express authorization” from Congress, which he contended is absent.
Katyal directly challenged the government’s interpretation of “regulate importation,” asserting that it does not include the power to impose tariffs. He pointed out that whenever Congress intends to delegate tariff authority, it does so “expressly” using terms like “duties” or “tariffs”. He suggested that “regulate importation” more appropriately refers to actions like setting import quotas or requiring licenses for certain goods, not taxation. Katyal emphasized that the power to tax is fundamentally distinct from the power to regulate commerce and is explicitly reserved for Congress by the Constitution.
Regarding the Yoshida precedent, Katyal argued that the government selectively cited it. He contended that Yoshida included “very strong limits” on presidential power, such as the requirement for tariffs to be temporary, bounded by existing statutory rates (like Column 2 rates), and not an attempt to “tear down or supplant the entire tariff scheme of Congress”. He asserted that the current tariffs, which amount to a “wholesale rewriting of the tariff schedules,” far exceed these Yoshida limitations. Katyal also argued that Congress’s ratification of Yoshida (if it occurred at all) would have incorporated all of its limitations, and that the “statutory landscape” has changed significantly since 1977 with the enactment of specific trade statutes like Section 122.
The States’ Intervention: Specific Statutes Should Govern
Benjamin Gutman, the Solicitor General for Oregon, representing several states, reinforced the plaintiffs’ arguments, focusing on the principle that “the specific governs the general”. He argued that Section 122 of the Trade Act of 1974 specifically addresses “large and serious balance of payments deficits” and includes built-in limits on the President’s authority to impose tariffs. Therefore, IEEPA’s general “regulate importation” authority should not allow the President to bypass the specific and limited framework established by Section 122.
Gutman echoed the sentiment that “persistent” trade deficits, even if large, are not “unusual and extraordinary threats” as defined by IEEPA. He emphasized that the President’s executive order primarily invoked “persistent trade deficits” as the emergency, rather than other mentioned consequences like manufacturing deficiencies, suggesting that the justification itself was flawed. He clarified that while IEEPA might authorize actions like inspections or quarantines for health threats, it does not grant the power to impose revenue-raising tariffs. Like Katyal, Gutman concluded that the tariffs’ “rates and the duration and the scope” were not “modest modifications” akin to Yoshida and thus exceeded any permissible “adjustment” under the statute.
What’s Next?
The stakes in V.O.S. Selections Inc v. Trump are exceptionally high for the ecommerce industry. The court’s decision, which could be appealed to the United States Supreme Court, could determine whether future presidents can unilaterally impose sweeping tariffs during declared emergencies, potentially leading to significant and unpredictable changes in import costs, supply chain stability, and international trade relations. Should the court uphold the broad interpretation of IEEPA, businesses could face an environment of heightened regulatory uncertainty, where tariff rates could shift dramatically based on executive declarations. Conversely, a ruling that limits presidential tariff authority would reinforce the role of Congress in trade policy, potentially leading to more predictable trade frameworks but also requiring legislative action for significant trade adjustments.
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