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CIT, DC Court Block IEEPA Tariffs… Until…

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The Court of International Trade (CIT) <a href="https://url.us.m.mimecastprotect.com/s/QYbuCmZ7pAIv3AWxuGf4fREvCv?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">ruled</a> yesterday on V.O.S. Selections, Inc. v. Trump and State of Oregon et al v. Trump that President Trump’s invocation of the International Emergency Economic Powers Act (IEEPA) to levy tariffs on goods from Canada, Mexico, and China because of issues with illegal immigration and illegal drugs crossing the border, along with all reciprocal tariffs on most countries, is beyond the authority of the executive. The CIT issued a permanent injunction against their use. In the <a href="https://url.us.m.mimecastprotect.com/s/A3ixCn5GqBcn2KmEUJhMfJh__U?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">judgment</a> following the decision, the court found that the tariffs, issued in response to immigration, fentanyl trafficking, and trade imbalances, were not sufficiently tied to the emergencies cited and that IEEPA’s language does not authorize broad tariff-setting powers. The unanimous ruling, issued by a three-judge panel, emphasized that the statute’s grant of power to “regulate importation” does not permit the imposition of limitless tariffs and rejected the administration’s argument that such duties could serve as diplomatic “pressure.”

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The CIT’s permanent injunction blocking the IEEPA-based tariffs for all importers (not just the plaintiffs in the case) provides the administration with 10 days to implement the order. The ruling also vacated tariffs already collected, but the timeline and process for U.S. Customs and Border Protection (CBP) to issue refunds for tariffs paid remains uncertain. However, later the same day, the U.S. Court of Appeals for the Federal Circuit granted an immediate administrative stay of the CIT’s order. This stay temporarily halts implementation of the injunction while the appellate court considers the government’s stay motion, with importer responses due by June 7 and the government’s reply due by June 9.

Additionally, in Learning Resources, Inc. et al v. Trump et al, the U.S. District Court for the District of Columbia issued an <a href="https://url.us.m.mimecastprotect.com/s/YzfaCo2ArDhkRBvnIVi9fpnbrl?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">opinion</a> and <a href="https://url.us.m.mimecastprotect.com/s/s4LcCpY9vEc5WvA2IGsGfGtXpA?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">accompanying orders</a> on May 29 requiring a preliminary injunction against the collection of the IEEPA tariffs only from the plaintiffs in the case, giving the government two weeks to appeal the decision. Judge Rudolph Contreras, an Obama appointee, rejected the government’s attempt to transfer the case to the CIT, arguing that IEEPA is not a tariff law and does not contain any language or provisions authorizing the imposition of duties. He emphasized that regulating imports is distinct from taxing them, and that Congress would need to explicitly grant such broad taxing authority to the president if intended.

In 1971, President Nixon <a href="https://url.us.m.mimecastprotect.com/s/EUNvCqxA0GT93zXQcNtVfEIvKg?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">imposed</a> a 10% tariff on imports under a statute known as the Trading with the Enemy Act (TWEA), which was the predecessor statute to the IEEPA. The tariff was terminated after five months, but in the meantime, Yoshida International challenged President Nixon’s legal authority. The company filed a lawsuit and won in the lower court, but in 1975, the decision was <a href="https://url.us.m.mimecastprotect.com/s/k7_aCrkgxJhxY12qhNunf4EG0L?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">overturned</a> in the Court of Customs and Patent appeals, with the conclusion that the tariff was legally justified under TWEA to address the trade imbalance during that period. Given the parallel language in the TWEA and the IEEPA, the Justice Department drew on the precedent from United States v. Yoshida International to strengthen its <a href="https://url.us.m.mimecastprotect.com/s/DfB4Cv2mBNhv52A9uyCrfQsKLM?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">argument</a>.

Shortly after the release of the decision, the Department of Justice announced it would file an <a href="https://url.us.m.mimecastprotect.com/s/5SNECwpnDOsomAyjuQF3fJTQfI?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">appeal</a> with the U.S. Court of Appeals for the Federal Circuit, with the potential for the case to be heard in front of the Supreme Court. The decisions over the past two days underscores judicial resistance to using IEEPA as a tool for unilateral tariff policy.

Kevin Hassett, head of Trump’s National Economic Council, <a href="https://url.us.m.mimecastprotect.com/s/HRKDCxkoEPhZV9xluAH1fyVCyb?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">spoke on the court ruling</a>, dismissing it as a temporary setback caused by “activist judges.” He predicted that within months, countries will lower trade barriers in response to Trump’s approach, warning that those who don’t comply should expect reciprocal tariffs.

What About Section 232 and Section 301 Tariffs?

The Section 232 tariffs, Section 301 tariffs, and other enacted tariffs remain unaffected by the court decisions, though the Department of Justice argued that a directive pausing the tariffs would make the President less able to agree to new trade deals.

The administration will likely look to other authorities – Section 122 of the Trade Act of 1974, Section 301 of the Trade Act of 1974, Section 338 of the Trade Act of 1930, or Section 232 of the Trade Expansion Act of 1962 – to potentially implement additional tariffs if the IEEPA tariffs are struck down. The CIT ruling itself specifically pointed to Section 122 as an alternative to IEEPA, particularly if the motivation of the tariffs is to address trade deficits (though any tariff implemented via Section 122 would have a limit of 15% and expire after 150 days).

Over the weekend, President Trump announced he is <a href="https://url.us.m.mimecastprotect.com/s/tZHQCyPpG0cYw0L1skIGfxlK-F?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">extending the deadline</a> for a trade deal with the European Union to July 9, 2025, <a href="https://url.us.m.mimecastprotect.com/s/nb_NCzpqJRsKZx41FJSZf94x4A?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">delaying the implementation of a 50% tariff</a> following a call with European Commission President Ursula von der Leyen. Both leaders expressed willingness to advance talks swiftly, though the EU emphasized the need for mutual respect in negotiations and reaffirmed its commitment to defend its interests. The focus for the EU will be on resolving the Section 232 sectoral tariffs, while the status of the reciprocal tariffs remains uncertain. White House Economic Advisor Kevin Hassett stated that the Administration does not expect recent court rulings to impact this or other ongoing trade negotiations. Despite this progress, tensions remain elevated, with the EU facing a significant tariff increase if no agreement is reached by the new deadline.

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Are you concerned about the impacts of the outlined trade issues? Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at <a href="mailto:sarah.helton@michaelbest.com" target="_blank" rel="noopener">sarah.helton@michaelbest.com</a> for assistance.

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Trump Trade 2.0: Courts Step in on Tariffs

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