Last Friday, the Federal Circuit issued its opinion in V.O.S. Selections v. Trump, which concerns whether the International Emergency Economic Powers Act (“IEEPA”) empowers the President to impose emergency tariffs.  In a 7-4 opinion, the Federal Circuit ruled that IEEPA did not authorize the challenged tariffs.  Given how oral argument had gone, that ruling was not a surprise—although I agree that the vote breakdown is surprisingly good news for the government.  Similarly, the blistering four-judge dissent—which was written by Judge Taranto, who was appointed by President Obama—is also surprisingly good news for the government.

The Federal Circuit majority opinion has serious flaws.  For example, I agree with Beau Baumann that the majority’s analysis of the Major Questions Doctrine (“MQD”) was lacking.  The majority’s analysis, which extends the MQD to the national security and foreign policy contexts, does not even seek to rebut Justice Kavanaugh’s recent opinion explaining why such an unprecedented extension is inconsistent with the MQD’s internal logic.  The Federal Circuit’s heavy reliance on legislative history—which seeks to limit the President’s emergency power in ways that the ratified statutory text does not—was also problematic.  Similarly misguided was the Federal Circuit’s suggestion that, because non-emergency tariff statutes with more cumbersome procedural requirements exist, the President must use those cumbersome non-emergency statutes to impose tariffs during an emergency.

I will not dwell on the above-mentioned flaws here.  Instead, this post will focus on a more central flaw: the majority’s insistence that tariffs must be an exercise of taxation power, rather than commerce-regulation power.  The majority’s position stands in tension with the overwhelming originalist evidence that I have presented elsewhere (JLPP, JREG, WSJ).  And the majority’s clear error is central to determining whether IEEPA’s reference to “regulate . . . importation” includes the power to impose tariffs.  The majority says IEEPA doesn’t delegate sufficient tariff authority because tariffs are taxes, and IEEPA’s reference to “regulate” doesn’t include taxation power.  The majority is wrong—and it would be difficult to think of a judicial rationale less deserving of support from the originalists at the Supreme Court.

I trust the upshot of flagging the Federal Circuit’s conflation of taxes and tariffs is clear.  But to spell it out: Because tariffs are a traditional and familiar means of regulating commerce for the benefit of domestic industry, IEEPA does not need to delegate taxation power in order to delegate tariff power.  Instead, by empowering the President to “regulate . . . importation,” IEEPA is best read as empowering the President to “regulate . . . importation” through a traditional and familiar means of regulating commerce: tariffs. 

Tariffs as a Means of Regulating Commerce

In a prior post, I outlined originalist evidence making clear that tariffs have long been understood to be a means of both taxation and regulation.  Readers looking for more detail should refer to that prior post (as well as my lengthier academic work).  It will suffice for the moment to note that the view is supported by the writings of James Madison, John Marshall, Joseph Story, and the Tariff Act of 1789—signed into law by President George Washington on the Fourth of July. 

Ordinary Americans at the Founding, whose views are particularly helpful for triangulating the Constitution’s original public meaning, also recognized that tariffs can be a means of commerce-regulation.  Chief Justice Marshall noted in Gibbons v. Ogden that “[t]he right to regulate commerce . . . by the imposition of duties . . . was not controverted” by the “illustrious statesmen and patriots” of the founding era.  And Professor Robert G. Natelson has demonstrated that although American “pamphleteers staunchly contested efforts by Parliament to ‘tax’ them” in the lead-up to the Revolution, the pamphleteers “conceded the authority of the British government to regulate commerce . . . by . . . imposing prohibitory tariffs to restrict trade.”

The Supreme Court has also recognized that tariffs need not be an exercise of taxation power, but can instead be a means of commerce-regulation.  In addition to the above-quoted line from Gibbons, the Court in Bd. of Trs. of Univ. of Illinois v. United States “recognized that even though ‘the taxing power is a distinct power and embraces the power to lay duties, it does not follow that duties may not be imposed in the exercise of the power to regulate commerce.’” Instead,  the Court recognized that “[t]he laying of duties is ‘a common means of executing the power’” of regulating commerce.  And in McGoldrick v. Gulf Oil Corp., “the Court wrote that, although ‘[t]he laying of a duty on imports’ can be ‘an exercise of the taxing power,’ it ‘is also an exercise of the power to regulate foreign commerce.’” 

The Federal Circuit Majority

The Federal Circuit majority seems to be entirely unaware of the voluminous historical record indicating that tariffs are a traditional and familiar means of regulating commerce.  Instead, the majority’s statutory analysis flows from the mistaken premise that tariffs must be a means of taxation.  And for that reason alone, the majority’s statutory analysis should be rejected by the Supreme Court’s originalists.

The majority opens the portion of its opinion dedicated to “discuss[ing] the history and legal authority concerning the imposition of tariffs as relevant to this appeal” by stating the following:

The Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations.”  Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch[.] 

Maj. at 12 (emphases added and citation omitted).  The Federal Circuit majority thus operates—from the start—under the mistaken assumption that tariffs must be defended as a means of taxation, rather than commerce-regulation.  Serious and dispositive errors flow from that mistaken starting point.^[1]

Consider the majority’s observation that “IEEPA does not use the words ‘tariffs’ or ‘duties,’ nor any similar terms like ‘customs,’ ‘taxes,’ or ‘imposts.’”  Maj. at 19.  From the majority’s internal perspective, a search for such terms might seem logical.  If one assumes that tariffs must be a tax, then one might search the statute for an explicit reference to the power to tax.  But as explained above, tariffs need not be a tax.  Tariffs can instead be an exercise of the commerce-regulation power.  Given as much, it is nonsensical to require Congress to use the word “taxes” in order to delegate a tariff power that flows not from Congress’s taxation power, but instead from Congress’s power to regulate commerce.

The majority’s search of IEEPA for words like “duties” or “tariffs” is a bit less absurd.  That’s because, at the Founding, “not all duties were taxes,” and “[s]ome [duties] were imposed not for revenue but merely . . . to regulate (or effectively prohibit) trade in particular articles.”^[2]  Thus, a statute that used the term “duties” or “tariffs” could be a statute that delegates either regulatory or taxation power—depending on the rest of the statutory context.  Nonetheless, a judicial search for specific words like “duties” and “tariffs” is best understood as an inappropriate imposition of a magic word test.

Consider a hypothetical.  If Congress enacted a statute empowering the President to “regulate the importation of food into professional sports stadiums,” and the President invoked that authority to regulate the importation of food into professional baseball stadiums, it would be ridiculous for a court to conclude that the President could not do so because the statute “does not use the words ‘baseball,’ nor similar terms like ‘America’s Pastime.’”  The phrase “professional sports” would more than suffice to give the President baseball-related authority.  And that is in part because baseball is a traditional and familiar “professional sport.”  Similarly, tariffs are a traditional and familiar means of “regulat[ing] . . . importation.”  And it is inappropriate for a court to interject itself into the messy (and dangerous) world of emergency international powers by imposing a magic word test, and thus reading a traditional and familiar means of regulating importation out of IEEPA.^[3]

To be sure, the Federal Circuit majority does signal some semblance of an understanding that the authority to regulate commerce is relevant to determining whether IEEPA delegates tariff authority.  The majority writes: “While Congress may use its taxing power in a manner that has a regulatory effect,  . . . the power to tax is not always incident to the power to regulate.”  Maj. at 31.  But even here the majority misunderstands the nature of the relevant inquiry.  The inquiry is not whether IEEPA delegates a “power to tax” for “regulatory effect.”  The inquiry is instead whether IEEPA delegates the power to regulate commerce for regulatory effect. 

Yes, sometimes Congress can impose a tax for regulatory reasons.  But Congress can, of course, also regulate commerce for regulatory reasons too.  The relevant question in the IEEPA tariff litigation is whether Congress has delegated its authority to do the latter (i.e., delegated power to regulate for regulatory reasons) rather than delegated its authority to do the former (i.e., delegated power to tax for regulatory reasons). 

The majority tries to find refuge in a parade of horribles.  Specifically, the majority references the SEC’s statutory power “to regulate the trading of [tradeable assets],” as well as the FCC’s statutory power to “[r]egulate . . . [radio] apparatus,” and then contends that interpreting IEEPA’s reference to “regulate” as delegating the power to tariff “would mean . . . that Congress delegated to the SEC power to tax substantial swaths of the American economy by granting the SEC the authority to regulate various activities.”   Maj. at 31-32.  The majority suggests that its SEC and FCC analogies support its conclusion that IEEPA’s “mere authorization to ‘regulate’ does not in and of itself imply the authority to impose tariffs.”  Maj. at 31.

That line of argument is so unserious that it hardly merits a response.  Nonetheless, and to state the obvious: IEEPA does not empower the President to “regulate” in the abstract.  It instead empowers the President to “regulate . . . importation.”  The SEC and FCC, by comparison, are not empowered to “regulate . . . importation.” Nor are those commissions empowered to “regulate” in the abstract.  They are instead empowered to “regulate the trading of [tradeable assets]” and to “[r]egulate . . . [radio] apparatus.”  Tariffs are a traditional and familiar means of regulating importation; tariffs are not a traditional and familiar means of regulating tradeable assets and radio apparatus in the domestic sphere.  The statutory words that come after the term “regulate” are quite important.  And a court can rest easy knowing that, if it interprets the phrase “regulate . . . importation” as including the traditional and familiar means of regulating importation, that would not require ruling that unrelated administrative agencies—empowered to regulate unrelated things—can also regulate imports via tariffs.

* * *

There are many other errors in the majority’s analysis.  Several of those errors were flagged by Judge Taranto’s scholarly dissent.  And other errors will no doubt be highlighted in briefing at the Supreme Court.  But the Federal Circuit’s conflation of tariffs and taxes is so crucial—and so in tension with the historical record—that it is difficult to imagine offering a rationale in the tariff litigation that is less deserving of support from the originalists on the Supreme Court.

Chad Squitieri is an Assistant Professor of Law at the Catholic University of America, where he serves as the Director of the Separation of Power Institute and as a Managing Director of the Center for the Constitution and the Catholic Intellectual Tradition.

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[1] Even more fundamental errors flow from the concurrence, which mistakenly asserts—despite the overwhelming originalist evidence to the contrary—that “[a]t the founding, the power to tariff and the power to tax were synonymous.”  Concurrence at 7 n.3; but see infra (outlining the writings of James Madison, John Marshall, Joseph Story, the revolutionary pamphleteers, etc.).  For its part, the dissent correctly notes that tariffs have long been recognized as a tool for both regulatory and taxation purposes.  Dissent at 29-31.  But even the dissent mistakenly conflates topics when it states that courts have long “recogni[zed] that taxes are often a species of regulation—specifically aimed at altering conduct.”  Id. at 29.  It would bring more clarity to the relevant inquiry to recognize that tariffs (not taxes) are often a species of regulation specifically aimed at altering conduct.

[2] Similarly so for words like “customs” and “imposts,” which at the Founding referred to types of duties. 

[3] As the dissent correctly notes: “An exclusion of tariffs, a common tool of import regulation, would be an ‘artificial’ prohibition not grounded in the natural scope of the language of IEEPA[.]” Dissent at 35.