Over the first 100 days and beyond, the Trump Administration has deployed national security authorities in novel ways. Perhaps most notably, President Trump has asserted authority under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§1701 et seq., to declare the trade deficit a national emergency and impose substantial tariffs on a wide array of US trading partners.1 Moreover, he has directed the Secretary of State to designate certain international drug cartels as Specially Designated Global Terrorists (SDGTs) under IEEPA and as Foreign Terrorist Organizations (FTOs) under the Immigration and Nationality Act.
The Administration has also reportedly considered relying on a combination of authorities, potentially to include IEEPA and other national security authorities, to target the domestic and overseas activities of US-based nonprofits. Doing so could stretch these authorities even further than the Trump Administration has done to date.
IEEPA authorities are broad but not limitless. While these designation regimes have been construed broadly to allow the Executive Branch significant flexibility in emergencies, the authorities carry important statutory and procedural constraints. As US companies make plans to mitigate risk and evaluate litigation options around the expanding reliance on these authorities, they should also take note of these limitations. Below, we discuss how courts have approached such limitations historically and what those constraints likely mean moving forward.
1.Requirements for National Emergencies Under IEEPA
Under IEEPA, presidents can declare national emergencies to address "unusual and extraordinary threat[s], which ha[ve their] source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States." 50 U.S.C. § 1701(a). While the text of the statute implies some limitation on that authority, in practice, neither Congress nor the courts have generally questioned presidential determinations of a national emergency under the law.
Historically, the authority has been used to declare national emergencies and impose sanctions with respect to challenges such as Iran's weapons of mass destruction program,2 malicious cyber activities and Russian aggression in Ukraine. And, early in his second term, President Trump designated certain international cartels as SDGTs, declaring a national emergency at the southern border and invoking IEEPA authority to combat "a campaign of violence and terror throughout the Western Hemisphere" that has "flooded the United States with deadly drugs, violent criminals, and vicious gangs."3
While IEEPA has empowered executive action in a range of contexts, Congress actually enacted IEEPA to rein in presidential power, which Congress believed had expanded under the Executive Branch's expansive reliance on the Trading with the Enemy Act of 1917. Congress's purposeful limitation of the President's powers to declare national emergencies only for "unusual and extraordinary threats" was originally thought to supply a meaningful constraint on presidential action. However, in the nearly half-century since IEEPA's enactment, Congress and the courts have broadly deferred to the Executive Branch to determine what constitutes a national emergency, and Congress in particular has rarely sought to intervene against perceived presidential overreach. Legislative measures are especially unlikely where the president's party holds majorities in both chambers—for example, a bipartisan measure to terminate the national emergency underlying certain recent tariffs deadlocked in the Senate in late April.
Courts also generally have deferred to the Executive Branch on what constitutes a national emergency under IEEPA. Multiple courts have found it to be non-justiciable under the political question doctrine. For example, in reviewing President Reagan's 1985 declaration of a national emergency against Nicaragua, a court determined that it lacked the resources and expertise to determine whether the country posed a sufficient threat to trigger IEEPA and that it could not "resolve such questions without making its own policy judgments about national security and foreign policy, judgments best left to the political branches of the federal government."4 Similarly, though at times relying more on their textual construction of IEEPA itself, rather than the question of justiciability, courts have declined invitations by plaintiffs to rule substantively on whether "an emergency declared by the President was not a 'real emergency'" on the grounds that "[courts] cannot second-guess the President's determination," since IEEPA "clearly grants the President discretion to make that determination."5
The Executive Branch itself, in practice, has used the statutory scheme in ways that strained Congress' original intent.6 For example, IEEPA emergencies generally have been neither "rare" nor "brief." The average IEEPA "emergency" lasts over nine years, and the longest—the national emergency related to Iran—has lasted over 40 years and continues to this day. More than half of the 69 emergencies citing IEEPA remain in effect.7
Although challenging the Executive Branch's declaration of a particular national emergency under IEEPA is likely to face hurdles, companies considering challenges to emergency declarations should take into account several considerations: whether a given executive order presents a bona fide emergency; if an emergency or designation is instead based on constitutionally protected activity; and whether that activity actually arises in whole or in substantial part outside the United States. To the extent novel facts are offered by the Executive Branch to justify declared national emergencies, successful court challenges might become easier to achieve.
2.Procedural Protections Against Arbitrary and Capricious Actions
Given the dynamics discussed above, many of the most practically significant limitations on IEEPA designations are procedural. Under the Administrative Procedure Act (APA), courts may strike down certain agency actions that are arbitrary and capricious—meaning "the agency has relied on factors that Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency experience."8 Such APA arbitrary-and-capricious review is available for particular designations made under IEEPA authority.
While courts generally defer to the Executive Branch on issues of foreign policy and national security, judges will take a hard look at the administrative record and require that the government "articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made."9 Even in decisions ultimately rejecting arbitrary and capricious challenges to SDGT designations (which, as noted above, rest on IEEPA authority), courts emphasize the substantial evidence supporting the agency's determination. In Holy Land, for example, the court upheld the Office of Foreign Assets Control's (OFAC) Specially Designated Terrorist (SDT) and SDGT designations of a US-based humanitarian relief nonprofit organization, finding there were ample financial connections and coordination between the plaintiff and Hamas, and thus that the foundation met the criteria for designation set out in the executive order issued under IEEPA.10 Similarly, in Al Haramain Islamic Found., the court found substantial evidence that the also US-based plaintiff provided financial, material and technological support for Al Qaida and other designated persons while essentially operating as a "branch office" to a network of global organizations.11
Notwithstanding the traditional deference shown by courts to the Executive Branch on matters implicating national security, if the administrative record underpinning designations is insufficient to support agency decisions, companies or designated entities may have success in challenging designations as arbitrary and capricious. Similarly, courts may invalidate decisions where there is no rational link between the declared national emergency and the particular entity challenging its designation based on that declared emergency. That type of challenge may prove particularly viable when the declared emergency itself appears to lack the factual bases traditionally underpinning such designations under IEEPA.
Courts are also suspicious of inconsistent treatment, noting that "agency action is at its most arbitrary when it treats similarly situated people differently, meaning that agencies must provide an adequate explanation to justify treating similarly situated parties differently."12 Consequently, courts may be especially sympathetic to arguments that individuals or groups were targeted without any rational explanation, especially without a rational explanation grounded in national security risk, and were singled out compared with nonprofits and other organizations engaged in similar activities. And while political influence on agency decision making is allowed, courts may find that an agency decision that appears to rest on unstated reasons, together with a strong showing of bad faith or improper behavior, is arbitrary and capricious.13 In short, entities seeking to challenge SDGT designations may have powerful dual claims that there are no permissible grounds for the designations and that they are being targeted, unlike other similarly situated entities, for obvious but unstated reasons.
3.Constitutional Protections
Although, in keeping with the purpose and plain text of the statute, most targets of designations are foreign, IEEPA has also been used to target entities with a presence in the United States.14 The use of this designation authority is especially sensitive in the domestic context as it may implicate certain constitutional rights. In challenging such designations, litigants have typically relied on the Fourth and Fifth Amendments for their constitutional claims, with varying degrees of success depending on the particular facts and circumstances as well as the court.
With respect to Fifth Amendment claims, the question that typically arises is whether the designated entity has been provided by the government adequate procedural due process—typically in the form of proper notice and at least the unclassified basis for the government's decision to proceed with designation. Challenges to IEEPA by US individuals and entities under the Fifth Amendment have been met with mixed success. In Al Haramain Islamic Found., an Oregon-based nonprofit was targeted on the grounds it provided support to al Qaida and designated terrorists. The court found that OFAC violated the plaintiff's due process rights because (i) the blocking notice deprived the plaintiff of its ability to use any funds for any purpose, (ii) the risk of erroneous deprivation was high and (iii) OFAC did not demonstrate that its failure to provide the plaintiff with reasons for investigation promoted national security.15 However, the court ruled in favor of OFAC on the basis that the violation was a harmless error.16 In another example, the plaintiff in Islamic Am. Relief Agency v. Unidentified FBI Agents was a Missouri-based nonprofit that was designated as an SDGT based on the government's allegation that it aided terrorism. The court found that it could not be "reasonably argued that protecting the public from terrorist attacks is not an important governmental and public interest" and that "'prompt action by the Government was necessary to protect against the transfer of assets subject to the blocking order,'" leading to the dismissal of the plaintiff's due process challenge.17
With respect to Fourth Amendment claims, various courts have taken differing views as to whether an IEEPA asset freeze constitutes a Fourth Amendment seizure, with some holding that blocking assets under IEEPA "does not create a cognizable claim under the Fourth Amendment"18 and others taking the position that it does.19 In Al Haramain Islamic Found., for example, the Ninth Circuit treated the blocking of assets under IEEPA as a cognizable claim and concluded that the "special needs" exception to the Fourth Amendment was inapplicable on the basis that the "domestic entity's interest in being free from blocking orders is great" since "[a] blocking order effectively shuts down the private entity."20 Similarly, in KindHearts, where an Ohio-based nonprofit challenged OFAC's provisional SDGT determination based on the organization's alleged provision of material support to Hamas, the court granted summary judgment for the plaintiff, finding that OFAC's blocking of assets constituted a seizure because it created a meaningful interference with an American corporation's possessory interests.21 However, at least one court has held that no relief was needed because the Fourth Amendment seizure was a harmless error and the blocking was lawful under IEEPA.22 Thus, individuals and organizations subject to IEEPA designations may be able to assert challenges on the basis of constitutional protections, though the outcome will be highly dependent on the particular facts and circumstances as well as the specific court.
Conclusion
As entities take measures to assess their exposure to potential national security measures, they should prepare for potential investigations and litigation by understanding the limitations of IEEPA. Designations must, by the terms of the statute itself, address bona fide national emergencies, though any congressional and judicial scrutiny of the Executive Branch's determination that such emergencies exist is likely to be circumscribed and deferential. And procedural safeguards under the APA require that designations be rational and supported by substantial evidence, as courts may scrutinize more carefully whether actions are arbitrary or capricious as well as alleged violations of Fourth and Fifth Amendment rights.
Footnotes
1 As of May 13, 2025, courts are currently reviewing as many as 7 challenges to these tariffs as not legally authorized under IEEPA. WilmerHale will continue to monitor these developments.
2 Notice—Continuation of the National Emergency With Respect to Iran, 90 FR 11887 (March 7, 2025).
3 Executive Order 14157 (Jan. 20, 2025).
4 Beacon Prods. Corp. v. Reagan, 633 F. Supp. 1191, 1195 (D. Mass. 1986), aff'd, 814 F.2d 1 (1st Cir. 1987) (emphasis added).
5 United States v. Smit, 899 F.2d 1226 (9th Cir. 1990) (emphasis added).
6 H.R. Rep. No. 95-459, at 10.
7 Cong. Rsch. Serv., R45618, The International Emergency Economic Powers Act: Origins, Evolution, and Use (updated Jan. 30, 2024).
8 5 U.S.C. § 706(2)(A).
9 Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983).
10 Notably, OFAC was allowed to consider the totality of the plaintiff's history with Hamas even though there were no recent links between the groups. Holy Land Found. for Relief & Dev. v. Ashcroft, 219 F. Supp. 2d 57, 74 (D.D.C. 2002).
11 Al Haramain Islamic Found., Inc. v. U.S. Dep't of the Treasury, 686 F.3d 965, 975 (9th Cir. 2012).
12 Nasdaq Stock Mkt. LLC v. Sec. & Exch. Comm'n, 38 F.4th 1126, 1141 (D.C. Cir. 2022) (internal citations omitted).
13 See Dep't of Commerce v. New York, 588 U.S. 752 (2019).
14 For example, President Bush used IEEPA to sanction a number of US individuals as well as primarily Muslim charities allegedly supporting terrorism under Executive Order 13224, "Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism."
15 See Al Haramain Islamic Found., Inc., 686 F.3d at 985–86.
16 Id. at 1001.
17 Islamic Am. Relief Agency, 394 F. Supp. 2d at 50, quoting Holy Land Found. for Relief and Dev. v. Ashcroft, 219 F. Supp. 2d 57, 77 (D.D.C. 2002).
18 Islamic Am. Relief Agency v. Unidentified FBI Agents, 394 F. Supp. 2d 34, 48 (D.D.C. 2005), aff'd in part and remanded sub nom. Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728 (D.C. Cir. 2007). See also Holy Land Found. for Relief and Dev. v. Ashcroft, 219 F. Supp. 2d 57, 78–79 (D.D.C. 2002) (citing Tran Qui Than v. Regan, 658 F.2d 1296, 1301 (9th Cir. 1981) ("The Government plainly had the authority to issue the blocking order pursuant to the IEEPA and the Executive Orders and the Court has determined that its actions were not arbitrary and capricious. Further, the case law is clear that a blocking of this nature does not constitute a seizure.")
19 Al Haramain Islamic Found., Inc. v. U.S. Dep't of the Treasury, 686 F.3d 965, 992 (9th Cir. 2012).
20 Id.
21 KindHearts for Charitable Humanitarian Dev., Inc. v. Geithner, 647 F. Supp. 2d 857, 874 (N.D. Ohio 2009).
22 KindHearts for Charitable Humanitarian Dev., Inc. v. Geithner, 647 F. Supp. 2d 857, 884 (N.D. Ohio 2009)("The government has not shown that the need to act without a warrant was so compelling that it could do so lawfully under the exigent circumstances exception to the warrant requirement.")
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