Tariffs on Trial: The Supreme Court Weighs Presidential Power

John Vecchione: Welcome to Unwritten Law. John Vecchione here with Mark Chenoweth and we are joined by Andy Morris, our colleague, to discuss, I think for all of us, an exciting case.

Andy Morris: Absolutely.

John Vecchione: And it’s now Learning Resources’ case because they filed first, so – there’s also V.O.S. Solutions and some states involved. But it’s the tariff case. And it’s whether or not the president, under statute we call IEEPA, has the ability to impose tariffs of – at any rate on any country for any – well, an emergency he declares – at emergency he declares. So, Andy, we filed an amicus brief on behalf of our clients. Many of our clients who we’ve filed and all their cases are stayed, waiting for the Supreme Court.

Andy Morris: Right.

John Vecchione: And on behalf of NCLA itself because this is an important issue of presidential powers and statutory interpretation. So, what are we doing in our brief here?

Andy Morris: Well, John, the gist of our brief is taking the position that the court should deal with this whole issue once and for all and not go halfway and say, well, these particular tariffs are too much and not say that even a little bit would be unacceptable.

Mark Chenoweth: This issue being whether or not the International Economic Emergency Powers Act – or excuse me, Economic Emergency – International Emergency Economic Powers Act – whether or not it allows tariffs or not.

Andy Morris: Right. And you’re illustrating why IEEPA became a popular way to refer to it.

Mark Chenoweth: Yes.

Andy Morris: That’s right. One of the courts that the case is teed up here, V.O.S. Selections, the Federal Circuit, didn't kind of grasp the nettle. They just said, well, we’re not gonna get into whether the president has any tariff authority at all. We’re gonna say he went too far in this case. Whereas the District of Columbia court issued kind of a flat – and we think correct – decision that said I don't care how great the tariffs are, president has no tariff authority under this statute. And so, the administration can't come back with some other kind of tariffs. And we like that outcome because we think it limits the president.

But we like it because it follows from the law. It follows from the text. And it follows from a history of drawing the frontiers between the presidency and Congress.

se [inaudible – crosstalk] [: 00:02:43

Andy Morris: Those are both right. I agree. But they’re completely different cases. Our grievance in this case, the beef isn’t that the president wants to impose tariffs, it’s that he’s using this emergency statute that we use for things like freezing Iranian assets or freezing Russian assets or blocking terrorist transactions – he’s using them to impose tariffs instead of – as you point out, there’s a whole big complicated section of the U.S. code that’s a long way from this section that has a lot of interrelated tariff statutes that Congress passed over the years. And the president is welcome to go through those hoops if he wants to. And he didn't want to, which is why he said, “Oh, there’s this emergency statute. I think I’ll just use that.”

John Vecchione: And as we say, that’s Title 19 of the federal code. And we talk about it, but – you know what it’s called? Customs and Duties. You can just go look.

Mark Chenoweth: That’s the name of the title.

John Vecchione: That’s the name of the title. So –

Mark Chenoweth: I bet there’s some tariff laws in there.

John Vecchione: There are, by gum. And I do think that –

Mark Chenoweth: But that’s not where IEEPA is.

John Vecchione: No. And so, it’s an emergency statute. And I’ll just say, just to differentiate a little of the Learning Resources and the V.O.S. Solutions. V.O.S. Solutions has said that they would like no tariffs to apply at all, that it doesn't allow tariffs, but it certainly doesn't allow these. And then I think we defer – the Learning Resources folks didn't hammer it, but they did a little more below that he can't just declare any emergencies. The courts can look at the emergencies, which would be a very dramatic change in the law were they to succeed there. So, I think they ratcheted that a little bit back from where they were.

But there is an even stronger position than ours on that issue because I think – mainly because I think the court isn’t gonna go there, ever, that the president doesn't declare emergencies. So, I do think though, that we learned a few things from past presidents. I certainly learned that – I didn't know that Polk tried to tariff Mexico. We were at war with Mexico. Can’t have a bigger emergency than that. And Congress said, you cannot tariff Mexico. You can just conquer them.

Andy Morris: And there are a lot of great historical dockets. I’ll give you one more, which is this statute we’re dealing with, IEEPA, is basically a descendant of a Trading with the Enemy Act, a wartime emergency statute, which depended on the existence of a state of declared war. And I learned in the course of this –

Mark Chenoweth: Which, of course, Congress has to declare.

Andy Morris: Right, right, something they’re still supposed to do. And when President Franklin Roosevelt closed the banks, a very famous event, right after he was inaugurated – he was looking around for a statute. And they said let’s cite this Trading with the Enemy Act, even though there wasn't a declared war; it was an emergency statute. There was sort of the beginning of “the war on” this and “the war on” that. And they just cited it and went with it because it was an emergency statute. Congress later ratified it. But it’s an example of how tempting these emergency statutes are for a long line of presidents.

So, this is an opportunity to rein it in. Your comment is exactly right that the courts have been kind of reluctant to second guess the president about emergencies. But this case is the latest example of why it’s so important to take a hard look at these emergency statutes. And a good ruling in this case might be a step in the right direction to look a little more closely at these statutes, how judges review them, and how they could be used by the next president of the other party.

John Vecchione: I will say I was thinking, all right, it’s Herbert Croly, the moral equivalent of war. And Franklin Roosevelt really liked him, right?

Andy Morris: “Croly-er than thou” was his –

John Vecchione: Right, and so everything was a war. Everything was an emergency. But to their credit, Congress tried to take it back. So, the Trading with the Enemy Act after the Nixon period – and this is in all our briefs, right? Everyone’s mentioned this because it’s so vital. They said, no, here’s your war powers and here’s your emergency non-war powers.

Andy Morris: Exactly. And another piece of that, as you point out, Congress was dialing back this Trading with the Enemy power. This IEEPA statute was part of this post-Watergate era of a whole bundle of statutes – some constitutional, maybe some not. But this one’s constitutional – the purpose of which was to dial back to narrow the power of the presidency. That’s what all these statutes are doing. And this was in that family of statutes.

back to Madison’s letter of: 1828

And then Daniel Webster, who’s changing his tariff opinion because he used to represent the shipping industry that didn't like tariffs. And now he was representing the nascent manufacturers of Massachusetts. And he was like, “Oh, no, now that this has been passed, I understand why we have to do it.” And he’s quoting Madison’s letter again for protecting native industry. But all that goes into it because you look through it all and you say, but nobody says the president gets to do a tariff, right? There’s nothing in there about that.

Mark Chenoweth: It’s still Congress.

John Vecchione: Right. And so, what happens, Andy, if the Supreme Court goes with: yeah, “regulate importation” means tariffs?

because if you look – since: 1789

And in tariffs, in every instance that anybody’s come up with, Congress has used some variation of the word “duty” or “impost” in the tariff statute. This would be the first time that Congress has ever used “regulate” to authorize tariffs if the court rules for the president. It’s never happened.

Mark Chenoweth: Yeah, and my fear is that if they say that “regulate” means tax, it won't be the last time that a president issues a regulation.

Andy Morris: Then we’ll have a wave of – I’m gonna go back into private practice. We’ll have a wave of litigation about whether “regulate” empowers different agencies to impose fees, other kinds of fees and other costs.

Mark Chenoweth: Well, I’m concerned because this Supreme Court upheld the CFBP’s structure. It upheld the FCC’s funding structure. If it were to decide this, that “regulate” means tax, you’ve really taken away the power of the purse from Congress. And that is the primary power that the legislative branch has to hold the executive branch in check. So, I think that would be a tremendous mistake for the White House – or excuse me, for the Supreme Court.

John Vecchione: And another thing that we do in this brief, I think, is there is a canon that you don't wanna make a part of a statute superfluous. In this case, they’re making all Title 19 superfluous because I don’t know why – I guess he’s done a few 232 tariffs, but –

Mark Chenoweth: His first term, he did, yeah.

John Vecchione: You know now he’s done a few, yeah.

[Crosstalk]

John Vecchione: It’s because of furniture. Our furniture is a national security, so he used 232 for some reason for furniture. But I think that you’re making all of Title 19 superfluous. And that’s gotta be worse than making some paragraph of a statute superfluous by a wrongful interpretation. So, it’s worse. I don't even think there’s a canon for it because no one’s tried to do it before.

Andy Morris: Along those lines, it raises a lot of problems for just interpretation in future cases because to rule for the government, you’d be taking – rather than looking at these words and how they’ve been used –

Mark Chenoweth: IE, textualism.

Andy Morris: – as a starting point. Yes, and – which we’re all textualists now – starting with the purpose of the statute. And that’s how the government argues it and says, well, the point of this – and the purpose, of course, is a very vague, at best, standard. And it’s even more dangerous in this area.

Mark Chenoweth: I believe John said wiffly-waffly.

Andy Morris: Oh, that’s very good. And you have this vague standard. And here not only do you have this vague standard, the government also argues that there’s limited, if any, judicial review. So, it’s not even like handing a vague standard to the courts. It’s creating a vague standard that the president can invoke with virtually no judicial review. So, it’s really – I’d put it – it’s indeterminacy run riot.

Mark Chenoweth: And John, you were at the oral argument at the Federal Circuit where they were pressing – they were begging the government’s advocate to essentially put some limits on it.

John Vecchione: I was thinking that Shumate was saying that “Oh, there’s these limits Congress has put in.” And when he stated the limits, they didn't sound like limits because they weren't judicial reviewable. So, they did – all of them, every single one of the judges asked the question: “But is that a limit? That’s not a limit.” Well, the limiting principle is that president has declared an emergency. So, I do think that’s gonna be something to see on November 5th whether John Saur is given a little running room on that because I think he’s just gonna be pounded from all sides on that particular question.

Mark Chenoweth: Is there more or less running room when the president is in the room, watching you argue?

John Vecchione: Oh, that’s the other thing. He says he’s gonna be there. But if there’s a government shutdown, we can't be there. They won't let the lawyers in. So, I’m like – I think I might have to write Chuck Schumer a letter. But –

Mark Chenoweth: Gotta reopen it, Chuck. John wants to be there.

John Vecchione: Yeah, I wanna be there. But I do think that that “regulate” issue is so – it’s such a Pandora’s box, right? The last thing at the bottom of the box was supposed to be hope. This would eliminate hope, if “regulate” can mean taxes by the executive. So, I have to think that there’s not gonna for that.

Andy Morris: Agreed. And I think that goes back to why our approach to this in this amicus brief and elsewhere, which I don’t think is rocket science – I don’t think it – unfortunately it doesn't require advanced lawyering. It’s straightforward application of statutes and contracts the way lawyers do. And that avoids a lot of these other problems as well. The court just does its job of interpreting: when Congress listed authority for the president, it listed powers, was tariffs on that list? It doesn't involve foreign affairs, national security. It’s just a straightforward statutory case.

John Vecchione: Can I ask a question about that? So, I think some of the questions that – some of the problems it avoids is they don't have to reach the major questions doctrine. They don't have to reach the non-delegation doctrine. So, they don't even have to add to the Supreme Court reporters a lot of verbiage on that. But some of our listeners may think, well, aren't tariffs foreign affairs and national security? Why isn’t that a good argument?

Mark Chenoweth: Well, and to just put a finer point on that, I believe that there was an opinion this summer where one of the justices said, well, of course, deference in the foreign policy area –

John Vecchione: It was Kavanaugh. You know who it was, Mark. I thought you were being kind, for once.

Mark Chenoweth: Yeah, well…so, might they try to go the government’s way on some sort of foreign policy deference theory?

Andy Morris: Before I answer your question, it would be interesting at the argument to see – if the conversation is about that topic and not about what “regulate” means, that’ll raise some concerns. And it’ll be interesting to see just what the subject matter of the discussion is. But it doesn't implicate – this is a power under the – it’s a first power granted Congress to order tariffs – to impose control of tariffs and imposts.

Mark Chenoweth: Yeah, Article 1, Section 8, first line.

Andy Morris: It has nothing to do with Article 2. And deciding whether when it listed here’s seven or nine things the president can do, whether Congress included tariffs on that list, that has nothing to do with the president exercising the kind of judgment presidents are permitted to exercise when kind of assessing events in foreign countries and assessing risks and so forth that come into the case law. This is: what did Congress mean? It’s just the toolbox of lawyers. So, those concepts just don't come into play. That’s why I think we found a clean ground that has the virtue of being correct, I think, to decide the case on.

John Vecchione: And I will say this. What I tell everyone is we put in all our complaints the invoices that have been paid by our clients for tariffs, right? It’s not a foreign policy to have a simplified – and Emily Ley Paper or Firedisc or any of our clients pay this tax and they’re not – it’s not Xi paying it or any foreign leader or any foreign person. It’s a domestic person paying a tax that you pay in this country. So, I think that really takes away from that whole foreign policy thing. And then to the extent that they wanna argue that it has foreign policy repercussions, well, that’s fine. But Congress has foreign policy competency as well.

That’s why they have committee in the House and committee on the Senate. And they have lots of things that they have to fund like the State Department and who we sell weapons to, all kinds of things they make. So, if it’s a joint power, it still means you don't get to tax without their help. And they didn't give you help.

Mark Chenoweth: Right, not unilaterally. Yeah. So, what language does Congress use when it wants to tariffs things, Andy, because we said they don't use the word “regulate”?

Andy Morris: It uses – and we’re not trade lawyers, although we’ve now a lot of time on this. And trade lawyers have weighed in on this. And it appears in every statute in some way there’s reference to duties. And the operative language in almost every statute is “impose duties,” “authority to impose duties,” and other similar language. And that’s not magic words, as Professor Squitieri and some others have suggested. That is the way we understand how Congress has used its language. That’s the way you interpret text.

When Congress does the following: tariffs, what language has it used for the last 230 years? And that’s what it has used in every instance. And nobody’s come up with an instance where it’s used other language, including “regulate.”

John Vecchione: There is one: “adjust imports.”

Andy Morris: Well, that statute has duties in it. That actually talks about –

John Vecchione: Yes, it does.

Andy Morris: So, “adjust imports” follows reference to duties as in the context of talking about duties. So, even that statute has it.

John Vecchione: And that that was the argument they made. Well, “adjust imports,” it’s just like “regulate imports.”

Andy Morris: And it’s not “regulate” because they contend “regulate” has a special meaning. And there are a cluster of reasons that – we could go through – that the different ways you interpret statutes that the regulate interpretation offends them: the words it’s with, the fact that it negates the tariff laws, the fact that it also would affect exportation.

John Vecchione: Well, explain that. That’s our best – I think that’s such a slam dunk argument why this can't possibly mean this. Tell our –

Mark Chenoweth: It’s a strong constitutional argument.

John Vecchione: Tell our listeners about – which I had forgotten before I got into this that the – what does the Constitution prohibit that it doesn't prohibit with imports?

Andy Morris: I don’t know that I knew that. But the Constitution prohibits tariffs or taxes on exports, for historical reasons I’ve since learned about.

Mark Chenoweth: From any state?

Andy Morris: You just can't do it. Congress cannot impose tariffs on exports. And the way “regulate” is used in this statute, in IEEPA, it says “regulate” and later on, “importation” or “exportation.” So, to the extent it means tariffs, it would authorize tariffs on exports just as much as on imports. And that seems devastating for their argument. Now they argue that – I’ll get into counterarguments. But that’s a devastating for them that “regulate” can't mean tariffs because it would authorize unconstitutional action by authorizing tariffs on exports as well as on imports.

John Vecchione: You know, we had Professor Josh Blackman on here on a previous episode, probably the last one. And he was saying, “Well, there’s parts of the constitution which no one cares about any more like the import – the tariff power.” I was like, “What?” because I’ve looked at this so much now. But one of the things we have in our brief that I enjoyed is there was a case from the 19th century called The Conqueror because that’s the name of the ship because they named ships great things back then.

Andy Morris: Oh, Vanderbilt’s ship, I think.

John Vecchione: Exactly, it was Vanderbilt’s yacht. And he was trying to get it in without any – paying any tariffs. And they were looking at whether or not it allows tariffs. And they pointed out that the first thing Congress did after swearing everybody in – everyone got swore in and then they passed two tariff statutes: one on tonnage of ships – if you bring in a ship this big, you gotta pay this much – and then one on goods.

Andy Morris: And that was because they needed money. The first thing you do. Okay, now we have a club; we need a budget. That was their first act.

John Vecchione: Yeah. And so, they’ve been doing it since the very first day they came in there. And they’ve never used “regulation.”

Andy Morris: Yeah.

Mark Chenoweth: So, before we go, we should talk about the jurisdiction issue under this case because there were competing theories of jurisdiction as to why this case needed to proceed in the Court of International Trade or in federal district court. And we tried in federal district court. One of these cases did as well; Learning Resources succeeded in the D.C. district court. But the other one was brought where our case was transferred, which is to the Court of International Trade. So, maybe John, you can go first and explain why you think it should be in the district court. And maybe Andy, you can explain why some folks think it needs to be in the Court of International Trade or what the implications are for one or the other.

John Vecchione: We’ve got a very easy – if IEEPA is not a tariff statute – because the CIT only has tariff authority as far as jurisdiction goes. The general jurisdictional statute of all federal questions can go to the district courts. So, we think – and IEEPA’s not – we think the court can decide immediately is IEEPA tariff statute or not and then decide the jurisdictional statute. They don't have to take any other steps. So, that’s why we filed where we did in both Firedisc in Texas and Emily Ley Simplified in northern Florida. But we got moved. We got stayed in Texas. But I do – here’s their argument. And I’ll toss it to Andy.

Their argument was that IEEPA was a tariff statute when they were fighting us on our motion to transfer. They didn't have any other theory that I know – and Andy can correct me – but what’s happened?

Andy Morris: No, that’s right. They didn't. And since then, they’ve come up with kind of a backup theory.

John Vecchione: The government.

Andy Morris: And part of this you have to know the cases. But the gist of the jurisdiction is does the case arise out of – is the language – a tariff statute? And as John said, we said no because it’s not a tariff statute. And the government said, well, it is. So, we get to the Court of International Trade. Later they developed two arguments. One is, well, you shouldn’t look at IEEPA at the jurisdictional stage because that’s also the same as the merits issue, whether it’s a tariff statute. And that argument, just to put it politely, just does not have a basis in case law. There’s just no good case law for that.

And then they have a second argument where they say this case really arises out of these kind of technical statutes that are – or technical/legal items that are steps in implementing the tariffs: changing the tariff schedules for example or the executive orders themselves when you strip out the IEEPA reference, which doesn't leave much. And again, the case on that is just poor. It doesn't comply with the case law, which says what’s the gist of your case? What does the court have to decide? And what the court has to decide is whether IEEPA’s a tariff statute. And in fact, you can go through 127 pages – whatever it is – of the Federal Circuit’s opinion.

And you can go through hundreds of pages of briefs. And all the fights are about what IEEPA means. There are no fights about how to interpret the tariff schedules. So, that’s why we think we’re right about jurisdiction. But the federal government wanted to be in the Court of International Trade because they thought they would get better outcome there. And in fact, there are some remarkable deference cases there…Maple Leaf Fish.

John Vecchione: Yeah, we found a new deference. You even didn't know Maple –

Mark Chenoweth: I didn't know about the Maple Leaf Fish deference. I did not.

John Vecchione: Yeah, I know. So, we even found –

Mark Chenoweth: I just know that Maple Leaf Fish deference rots from the head down. That’s what I know.

John Vecchione: Yeah, so they do – and we make a very strong point in our amicus brief, which I don't think anyone else has made and we haven't read – everything hasn’t been filed. But we say if you allow everything to go to the CIT when the president illegally alters the tariff schedule, you are just stripping the district courts of jurisdiction Congress gave them for unlawful actions by the president, right?

Andy Morris: Right.

Mark Chenoweth: And you’re forcing every American citizen to go to a court in New York City rather than the court that’s right around the corner from them. And that’s a problem as well.

Andy Morris: Yeah, I think it creates significant problems. But the CIT is happy to have jurisdiction. And in fact, in this case so far, if the Supreme Court were to affirm the Federal Circuit, which is the CIT decision, it would be a much more limited decision than if the court were to affirm the outcome in the District of Columbia court. So, the government still would get a little bit of a better outcome that way.

John Vecchione: Well, and I don't think the CIT should be worried because I do think you probably have to go there to get your tariff money back. So, there’ll be plenty active.

Andy Morris: Yeah, that’ll be for another podcast. Stay tuned on that one. That’d be an interesting process.

John Vecchione: Well, thank you, Andy, for being here.

Andy Morris: Thanks for having me.

John Vecchione: You’ve been listening to Unwritten Law.

[End of Audio]

Duration: 26 minutes