At oral argument in the tariff cases, a so-called “donut hole” argument was raised.  The argument maintains it would be highly unlikely for the statutory phrase “regulate … importation” to confer a host of unenumerated powers—including the power to impose licensing fees—but not confer the power to regulate importation by imposing duties (i.e., tariffs). 

The donut hole argument is sometimes lumped together with a related “greater-includes-the-lesser” argument, which maintains that because IEEPA^[1] grants greater powers (e.g., imposing embargos), IEEPA should be understood to also grant lesser powers (e.g., imposing duties).  But the donut hole argument is a distinct argument, since it does not depend on tariff powers being greater or lesser than other powers; the donut hole argument instead maintains that it would be linguistically unnatural for the term “regulate … importation” to include a host of unenumerated powers (e.g., the power to impose licensing fees), but not include the most traditional and well-known means of regulating importation (i.e., tariffs).

In defense of carving tariff power out of IEEPA, tariff-challengers maintain that, because duties raise revenue, duties are different in kind from the other unenumerated powers that fall within the statutory phrase “regulate … importation.”  As the Oregon Solicitor General saw it: carving tariffs out of IEEPA does not present “a donut hole” problem because tariffs raise revenue, and are thus “a different kind of pastry” altogether.^[2]  In a new blog post, Professors Vikram and Akhil Amar have offered a defense of that type of logic.  

In their post, the Amars concede that the Founding generation drew a distinction between taxation and commerce-regulating tariffs, but the Amars nonetheless insist that tariffs raising revenue were special.  Specifically, they contend that “American Patriots conceded that Parliament could regulate imperial trade for all sorts of purposes, but NOT for the purpose of raising revenue.” 

Respectfully, the Amars’ argument is both logically and historically flawed.  As a matter of logic: all duties (including regulatory duties imposed as an exercise of the Foreign Commerce Clause, rather than the Taxation Clause) may raise revenue. That is what duties do.  So-called revenue-raising duties are imposed primarily or solely to raise revenue, while regulatory duties can raise revenue as an incident to regulation.^[3]  Thus, to recognize that the power to regulate foreign commerce (e.g, importation) includes the power to impose duties is to recognize that the power to regulate foreign commerce includes the power to impose duties that raise revenue as an incident to regulating commerce.

As to history: the Founding generation recognized that regulatory duties may raise revenue as an incident to regulating commerce. The Founders thus did not treat regulatory duties that raise revenue as a meaningfully distinct class of duties.  That is because all regulatory duties could raise revenue as an incident to regulating commerce, and it was widely understood that the power to regulate foreign commerce included the power to impose duties that raised revenue as an incident to regulating commerce. 

Don’t take my word for it.  Consider Joseph Story’s Commentaries (1833), which explain that the power to regulate commerce included the power “not only to lay duties, but to lay duties for revenue,” since “revenue is an incident to such an exercise of the power” to regulate commerce.  Or consider John Dickinson’s Letters from a Farmer in Pennsylvania (1767–68), which the Amars cite for support of their position.  Although Dickinson did indeed protest against Parliamentary taxation, Dickinson was careful to define “Tax” to exclude commerce-regulating duties—as did other Revolutionaries.^[4]  Dickinson specifically quotes William Pitt, who famously defended the American objection to taxation and noted that “there is a plain distinction between taxes levied for the purposes of raising a revenue, and duties imposed for the regulation of trade … altho[ugh] … some revenue might incidentally arise from the latter.”^[5]  

In light of the logic and history concerning the ability of commerce-regulating duties to raise revenue, how much revenue can IEEPA tariffs permissibly raise? The IEEPA statute contains the relevant limit: The President can only incidentally raise revenue at levels corresponding to the levels of regulatory duties deployed to “deal with” (50 U.S.C. § 1701(b)) the declared emergencies.  That naturally leaves some discretion to set the appropriate tariff rates, as Justice Barrett seemed to acknowledge in a related context involving licensing fees.^[6]  And as I’ve argued elsewhere, the amount of revenue raised by regulatory tariffs “is not particularly meaningful as a legal matter” when considered in the abstract, since “[t]ariffs regulating a small amount of commerce can be expected to raise a small amount of revenue” and “tariffs regulating a large amount of commerce can be expected to raise a large amount of revenue.”  The IEEPA tariffs regulate a lot of commerce, and thus can be expected to raise a lot of revenue.

What is more, it is not surprising that politically accountable officials would publicly highlight politically popular incidents (e.g., revenue) of their regulatory policies.  To use a simple analogy: If an elected official planted trees to protect against climate change, one could imagine that official highlighting that the trees have created additional shade as an incident to protecting against climate change.  And with more trees comes more shade (and more press statements highlighting that new shade). 

What matters is not the amount of revenue raised in the abstract, but whether the revenue is actually an incident to regulation, and whether the amount of incidental revenue is consistent with IEEPA’s “deal with” language—which imposes a statutory constraint on revenue raising that courts can enforce on the margins.  For example, a court might determine that duties set on countries for which the United States has a trade surplus do not “deal with” a declared emergency concerning trade deficits—at least not without additional evidence.  Parsing that type of evidence for each set of duties could require fact-intensive analyses typically reserved for lower courts of first view.  But the mere fact that regulatory duties raise revenue is not itself legally dispositive.

The Amars seem to propose a use of the Major Questions Doctrine, which would require the President to identify “clear congressional authorization” to impose duties that raise revenue—or at least duties “intended” to raise “gigantic” amounts of revenue.  The problem with their argument is that—as a historical matter—Congress has implicitly (i.e., without express authorization) empowered the President to impose taxes and fees on importation.  To wit, Professor Aditya Bamzai flags history indicating that a general declaration of war (which did not include special language empowering the President to subject importation to taxes or fees) was understood to confer on the President the power to subject importation to taxes and fees.  Law-of-wars examples include President Polk during the Mexican-American War, and President Lincoln during the Civil War.

Professor Bamzai’s history also details how Congress codified that law-of-wars practice in the TWEA,^[7] which the parties agree is the statutory precursor to IEEPA.  Specifically, in 1917, Congress codified the law-of-wars practice concerning taxes and fees by statutorily empowering the President to subject “import[s]” to “regulations” during war.  And in 1941, Congress streamlined TWEA by empowering Congress to “regulate … importation” during peacetime emergencies.  In 1977, Congress then took TWEA’s “regulate … importation” language and placed it into IEEPA.  Professor Bamzai explains that “[t]he link between the TWEA and the preexisting law-of-wars regime” was “direct and unmistakable.”  And he concludes that, because the term “regulate … importation” was carried over from TWEA to IEEPA, the “the use of … a ‘tax’ or ‘fee’ remains an appropriate method by which the executive branch may ‘regulate . . . importation’ under the IEEPA today.”

President Nixon’s administration explicitly relied on the President’s TWEA authority in order to impose worldwide tariffs.^[8]  And in 1975, an appeals court ruled in U.S. v. Yoshida that the phrase “regulate … importation” indeed empowered the President to impose those worldwide tariffs.  At oral argument last week, Justice Barrett seemed to discount the Yoshida ruling as coming from an “intermediate appellate court.”^[9]  But Yoshida’s analysis is not important because it is binding on the Supreme Court; it is important because it is evidence of what “regulate … importation” originally meant to a congressional outsider (i.e., the Yoshida court) when those words were enacted in the 1970s.  The tariff-challengers’ efforts to dismiss Yoshida in their briefing and at oral argument is therefore misplaced.  Dismissing the Yoshida ruling does not dismiss the congressional practice (nor does it dismiss the Nixon Administration’s reliance on that congressional practice) that led to the Yoshida ruling.  Indeed, Justice Kavanaugh corrected tariff-challengers’ counsel (Neal Katyal) for conflating (i) the Nixon Administration’s reliance on TWEA, with (ii) the Yoshida court’s determination that the Nixon Administration’s reliance on TWEA was legally correct.^[10]  

The history of TWEA and IEEPA is problematic for the tariff-challengers’ position.  So in response, they have sought to shift the interpretive focus by looking outside the specific history that led to IEEPA, and they argue instead that when Congress confers non-emergency tariff power in other contexts, Congress does so using special words—like “tax,” “tariff,” or “duties.”  And it is correct that, in other contexts, Congress has used those words to confer tariff power.  

But the above history demonstrates that, in the more specific context of war and peacetime-emergencies, Congress has conferred the power to subject imports to taxes and fees by using language just like the language used in IEEPA—and even, during war, by using no special language at all.  When Justice Alito gave Neal Katyal an opportunity at oral argument to flag any other relevant statutes that conferred tariff power during an emergency, Katyal came up empty-handed.^[11]  That is telling.  And it suggests that the most pertinent universe of congressional practice indicates both that Congress need not use special language to confer tariff power, and that the phrase “regulate … importation” is best read to include the traditional and well-known power to regulate importation via regulatory duties. 

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

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^[1] International Emergencies Economic Powers Act.

^[2] Tr. 166:8–9.

^[3] At oral argument, the Solicitor General described the IEEPA tariffs as regulatory duties, distinguishing them from revenue-raising duties. Tr. 10:6–8.  In doing so he maintained that regulatory duties can raise revenue as an incident to regulating commerce.  Tr. 10:8–9.

^[4] See Dickinson Letter IV (“To the word ‘Tax,’ I annex that meaning which the constitution and history of England require to be annexed to it; that it is, an imposition on the subject for the sole purpose of levying money.”).  As Professor Robert Natelson describes, “[i]n publications arguing the American cause, pamphleteers such as Richard Bland, John Adams, James Wilson, and, most notably, John Dickinson, conceded the authority of the British government to regulate commerce though financial exactions by, for example, charging fees to fund inspections and imposing prohibitory tariffs to restrict trade. . . . However, the pamphleteers staunchly contested efforts by Parliament to ‘tax’ them. They defined ‘tax’ so as to exclude trade regulations: a financial imposition for the sole purpose of raising revenue.  As Dickinson insisted, ‘every ‘tax’ being an imposition, though every imposition is not a ‘tax.’’” Robert G. Natelson, What the Constitution Means by “Duties, Imposts, and Excises”—and “Taxes” (Direct or Otherwise), 66 Case W. Rsrv. L. Rev. 297, 306–07 (2015) (emphasis added) (citations omitted); see also id. at 307 (“By the time of the constitutional debates of 1787-90, the distinction between impositions for regulation and impositions for revenue had eroded somewhat. . . . [D]uring the constitutional debates Americans considered exactions adopted primarily for regulatory purposes to be fundamentally different from taxes, which were enacted primarily for revenue.”)

^[5] Dickinson Letter IV (quoting William Pitt’s Stamp Act Speech).

^[6] Tr. 164:2–9 (“JUSTICE BARRETT: Well, what makes something revenue-raising? I mean, fees raise money . . . and unless they’re going to be kind of one-to-one this is exactly what it costs, I mean, it — it might raise some surplus. It might raise some extra.”).

^[7] Trading With the Enemies Act.

^[8] At oral argument, Neal Katyal oddly suggested that, in a private conversation, President Nixon indicated that he did not personally agree with his own administration’s reliance on TWEA.  Tr. 107:12–19.  But even if that unsworn hearsay offered on the fly at oral argument was accepted as accurate, President Nixon’s private statements are immaterial.  When the Nixon administration had the chance to formally defend President Nixon’s worldwide tariffs in court, the Nixon Administration expressly invoked the President’s TWEA authority. See, e.g., Yoshida Int’l, Inc. v. United States, 378 F. Supp. 1155, 1157 (Cust. Ct. 1974) (The United States “contend[s] that Presidential Proclamation 4074 was lawfully authorized by . . . the authority vested in the President by section 5(b) of the Trading with the Enemy Act.”).

^[9] Tr. 25:24.

^[10] Tr. 107:8–11 (“JUSTICE KAVANAUGH: It’s — it’s not so — my question — I never mentioned Yoshida. It’s the use by the president of that power under ‘regulate import’– ‘importation.’”).

^[11] Tr. 113:13–115:1.