Unconstitutionality Of IEEPA Tariffs Upheld – Supreme Court To Review

BACKGROUND

The Court of Appeals for the Federal Circuit (CAFC) sitting en banc (11 active judges participating) affirmed, in a 7-4 majority decision filed on August 29, 2025, the decision of the U.S. Court of International Trade (CIT) that the President's use of emergency authorities to "regulate" imports does not authorize the tariffs imposed by several Executive Orders.

On May 28, 2025, a three-judge panel at the Court of International Trade (CIT) ruled in two cases (VOS Selections, Inc. v. Trump and the State of Oregon v. Trump) that the Presidential actions taken under the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. §§ 1701–1707) to impose tariffs on Canada, Mexico and China for illegal immigration and fentanyl smuggling are unconstitutional. The CIT said that the tariff actions did not directly address the declared emergency and were not delegated by Congress to the Executive Branch and therefore exceed the President's tariff setting authority under the Constitution.

The court also found that the ""Reciprocal" tariffs imposed under IEEPA are unconstitutional because those tariff actions exceeded the President's statutory authority without a specific grant of authority by Congress to impose such broad tariffs. After finding the IEEPA tariff actions to be illegal and unconstitutional, the CIT vacated the tariff orders and permanently enjoined their operation. Although the court's ruling implies that all tariffs paid under the IEEPA orders must be refunded, the judges did not address that issue.

CAFC Majority Reasoning

Analysis of Executive Orders: The judges carefully analyzed the CIT decision by looking first at the five Executive Orders that imposed tariffs on Canada, Mexico and China for immigration and fentanyl smuggling, as well and the so-called "Reciprocal Tariffs" imposed to rectify trade deficits and tariff disparities with virtually all countries trading with the United States. They also looked at the entire set of national emergencies and executive actions being used by the Trump Administration as well as the actions of the CIT leading to its decision.

Analysis of Statutes: The circuit judges then analyzed the statutes in which Congress has delegated its authority to levy and collect duties to the Executive. They started with the Constitutional power to levy duties and taxes. "The Constitution grants Congress the power to "lay and collect Taxes, Duties, Imposts and Excises" and to "regulate Commerce with foreign Nations." U.S. Const. art. I, § 8, cl. 1, 3. Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch;" (Maj. Op. at 12). They found that Congress has set limits on presidential authority to tax and levy tariffs and generally set specific legislative guardrails on the exercise of that power.

The circuit judges also found that the CIT had exclusive jurisdiction to hear the cases "because the Challenged Executive Orders purport to "effect changes to the [HTSUS]" to reflect the Trafficking and Reciprocal Tariff rates. The statute establishing the HTSUS specifies that "[t]he provisions of the [HTSUS] . . . enacted by" Congress, as well as "[e]ach modification or change made to the [HTSUS] by the President under authority of law," ... "shall be considered to be statutory provisions of law for all purposes." (Id. at 15). Because the Challenged Executive Orders modified the HTSUS, they are "purported laws of the United States, and a lawsuit challenging tariffs effectuated by such a modification "arises out of [a] law of the United States providing for . . . tariffs." (Id. at 24). Note that there is no claim that IEEPA itself conferred jurisdiction at the CIT because the words "regulate ... importation" were found by both the CIT and CAFC to NOT permit the imposition of tariffs.

IEEPA History: The majority reviewed the history and development of the IEEPA statute starting with its predecessor statute, the Trading with the Enemy Act (TWEA) (Pub. L. No. 65-91, §§ 1–19, 40 Stat. 411, 411–26 (1917) (codified as amended at 12 U.S.C. § 95a; 50 U.S.C. §§ 4305–41). They also analyzed the leading case setting the limits on the use of that statute involving tariffs, Yoshida Int'l v. United States, 378 F. Supp. 1155, 1175–76, (Cust. Ct. 1974) (Yoshida I), rev'd, 526 F.2d 560 (CCPA 1975) (Yoshida II). The circuit judges took pains to distinguish the finding in Yoshida II from the current situation. They stated, "the decision does not hold that TWEA created unlimited authority in the President to revise the tariff schedule, but only the limited temporary authority to impose tariffs that would not exceed the Congressionally-approved tariff rates." (Id. at 17-18) (emphasis added).

"In 1976, Congress pared back the scope of TWEA and enacted the National Emergencies Act (NEA). Pub. L. No. 94-412, 90 Stat. 1255 (1976) (codified as amended at 50 U.S.C. §§ 1601, 1621–22, 1631, 1641, 1651). The NEA limited presidential power and placed restrictions on the use of authorities granted by TWEA. As relevant to this appeal, the NEA ended within two years "[a]ll powers and authorities possessed by the President . . . as a result of the existence of any declaration of national emergency in effect on September 14, 1976," 50 U.S.C. § 1601(a), and placed new restrictions on the declaration and termination of future national emergencies. Id. §§ 1621–22." (Id. at 18).

IEEPA Analysis: The circuit judges undertook an extensive analysis of the powers conferred by IEEPA as described in their own words below:

"IEEPA provides that, after declaring a national emergency pursuant to the NEA, the President may "investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any . . . importation or exportation of . . . any property in which any foreign country or a national thereof has any interest." 50 U.S.C. § 1702(a)(1)(B). Notably, IEEPA does not use the words "tariffs" or "duties," nor any similar terms like "customs," "taxes," or "imposts." IEEPA also does not have a residual clause granting the President powers beyond those which are explicitly listed." (Id. at 19).

"The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax. The Government locates that authority within the term "regulate . . . importation," but it is far from plain that "regulate . . . importation," in this context, includes the power to impose the tariffs at issue in this case. Notably, when drafting IEEPA, Congress did not use the term "tariff" or any of its synonyms, like "duty" or "tax." (Id. at 26-27).

"in each statute delegating tariff power to the President, Congress has provided specific substantive limitations and procedural guidelines to be followed in imposing any such tariffs. It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs. The statute neither mentions tariffs (or any of its synonyms) nor has procedural safeguards that contain clear limits on the President's power to impose tariffs." (Id. at 30).

Major Questions Doctrine: One of the key arguments for finding the IEEPA tariffs to be an unconstitutional use of IEEPA was that the authority presumed by the Government entails vast economic and political significance. "The tariffs at issue in this case implicate the concerns animating the major questions doctrine as they are both "unheralded" and "transformative." ... "[J]ust as established practice may shed light on the extent of power conveyed by general statutory language, so the want of assertion of power by those who presumably would be alert to exercise it, is equally significant in determining whether such power was actually conferred." (Id. at 34).

The majority spent considerable energy to make the point that IEEPA has not previously been invoked by any President in almost fifty years to impose tariffs or even adjust tariff rates. However, in the cases before the en banc panel, the majority found that, "The Executive's use of tariffs qualifies as a decision of vast economic and political significance, so the Government must "point to clear congressional authorization" for its interpretation of IEEPA." (Id. at 37). The circuit judges then found that there was "no clear congressional authorization by IEEPA for tariffs of the magnitude of the Reciprocal Tariffs and Trafficking Tariffs." (Id. at 37).

"Given these considerations, we conclude Congress, in enacting IEEPA, did not give the President wide-ranging authority to impose tariffs of the nature of the Trafficking and Reciprocal Tariffs simply by the use of the term "regulate . . . importation." (Id. at 38).

Yoshida Analysis: As mentioned above, the circuit judges took pains to distinguish Yoshida II from the current situation. In that case, the predecessor Court of Customs and Patent Appeals (CCPA) found that President Nixon's imposition of a temporary surcharge on imports as a temporary measure to meet the specific economic emergency was permissible. The majority noted that because, "Yoshida II approved narrowly circumscribed tariffs that did not exceed Congressional caps, and the CCPA expressly declined to approve unbounded tariffs, today's case does not require us to decide whether to overrule Yoshida II." (Id. at fn19).

Vacating the CIT's Injunction: The circuit judges analyzed the permanent injunction to prevent the application of the Challenged Executive Orders and vacated the injunction, remanding that aspect of the decision to the CIT "to reevaluate the propriety of granting injunctive relief and the proper scope of such relief." (Id. at 45)

The circuit judges expressly adopted the four-factor test of eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) and found the CIT failed to apply that test in its decision. "The four factors a plaintiff must establish to secure a permanent injunction are: "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." ... "The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the [trial] court, reviewable on appeal for abuse of discretion." (Id. at 42).

In addition, the circuit judges pointed to a recent Supreme Court decision in Trump v. CASA, Inc., 145 S. Ct. 2540 (2025) on the use of universal injunctions. "In CASA, the Supreme Court considered the Government's challenge to three universal injunctions issued by different district courts prohibiting enforcement of the President's policy with respect to birthright citizenship. While the Court held that the universal injunctions at issue "likely exceed the equitable authority Congress has granted to federal courts, it "decline[d] to take up . . . in the first instance" arguments as to the permissible scope of injunctive relief," (Id. at 43) ... "Instead, it instructed "[t]he lower courts [to] move expeditiously to ensure that, with respect to each plaintiff, the injunctions comport with this rule and otherwise comply with principles of equity" as outlined in the opinion." (Id. at 44).

Additional Views

The additional views of Circuit Judges Cunningham, Lourie, Reyna and Stark fully support the majority opinion. They go further to respond to many of the points raised in the dissent as well. The following quote summarizes the bulk of the views:

"We join the majority opinion in full. While we agree with the majority that the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1701 et seq., does not grant the President authority to impose the type of tariffs imposed by the Executive Orders, ... we write separately to state our view that IEEPA does not authorize the President to impose any tariffs. In particular, we conclude that (1) the Government's expansive interpretation of "regulate" is not supported by the plain text of IEEPA; (2) the Government's reliance on the ratification of our predecessor court's opinion in United States v. Yoshida Int'l, Inc., 526 F.2d 560 (CCPA 1975) ("Yoshida II") does not overcome this plain meaning; and (3) the Government's understanding of the scope of authority granted by IEEPA would render it an unconstitutional delegation." (Additional Views at 2-3).

Supreme Court Review Expedited

On September 9 the Supreme Court agreed to hear the two cases involved in the CIT and CAFC decisions. The hearing will take place in early November with a decision possible as early as December2025. The dissent offers some possible avenues for the Supreme Court to overturn the CAFC and CIT decisions.

Key Points from Dissent

Circuit Judge Taranto authored the dissent, joined by Chief Judge Moore, and circuit judges Prost and Chen. They agreed with the majority on the issues of jurisdiction, standing and on the need for reconsideration of the remedy if the tariffs are unlawful. But they spent considerable energy addressing the majority's findings that the IEEPA tariffs were not used legally. They disagreed on the summary judgment and the majority's findings as to the use of the statute and the constitutionality of its use for imposing tariffs.

Statutory Authority: The dissenters describe the majority finding as saying, "the particular tariffs at issue are not among the tools IEEPA makes available through the authorization to "regulate . . . importation" of goods even when all the required preconditions are met (citations omitted. (Dissent. at 3–4). The dissent found instead that "IEEPA's language does not contain the additional limits on which the majority opinion today relies as the sole basis for its illegality holding," (Dissent at 3-4).

IEEPA Analysis: The dissent took a broader view of the scope of IEEPA's grant of authority for Executive action in foreign affairs emergencies. They disagreed with the CIT's IEEPA analysis, stating that, " contrary to the CIT's reason for invalidating the reciprocal tariffs, such emergency authority is not displaced by another statute (section 122 of the Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 1978, 1987–88, (1974) (codified at 19 U.S.C. § 2132)); nor does IEEPA contain the exclusion of using IEEPA authorities as leverage that the CIT articulated as the sole basis for holding the trafficking tariffs unlawful." (Dissent at 4).

Additionally, the dissenters disagreed with the majority's analysis under the major questions doctrine. They would have found IEEPA and its use legally supported and constitutional. They would have remanded to the CIT for further analysis of its findings in light of their analysis. The dissent offers the Supreme Court a path to overturn the CAFC and CIT decisions. The dissent's legal analysis is critical of the findings of unconstitutionality by the majority and offers an alternative route based on the foreign affairs nature of the emergency declaration in the first instance.

What About Refunds?

The decisions in the two cases, if upheld, are likely to result in refunds of duties to the plaintiffs. The CIT is reconsidering its blanket injunction on the imposition of tariffs as required by the remand from the CAFC. No process for U.S. Customs and Border Protection (CBP) is currently operating to specifically deal with refunds of IEEPA tariffs, although there are processes available to request refunds in specific situations. No finding has been made as to whether only the named plaintiffs would obtain refunds, or whether all importers who paid IEEPA duties will be eligible for refunds. No refunds will be possible unless the Supreme Court decision supports the finding that the IEEPA tariffs were imposed in some manner that violates the law or the Constitution. So, until we know what the Supreme Court orders, it is premature to speculate very much on the possibility of obtaining refunds of IEEPA tariffs already paid by importers.

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