What Does It Mean To “Regulate Importation”?

An interesting exchange occurred during last Wednesday’s oral argument in the tariff cases [transcript available here] that caused me to scratch my head a little.

Background: As I’m sure most of you know, the relevant statute, the International Emergency Economic Powers Act (“IEEPA”), provides that if the President “declares a national emergency with respect to … any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States,” the President may “regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, . . . or transactions involving, any property in which any foreign country or a national thereof has any interest.”

The bold-faced language is where all the action is – at least, that’s pretty much all the Court wanted to talk about during oral argument:  Is the imposition of a tariff included within the power to “regulate importation”?[1] The Administration says it has long been so understood; indeed, at one point the Solicitor General said that “the power to impose tariffs is a core application of the power to regulate foreign commerce, which is what the phrase ‘regulate importation’ in IEEPA naturally evokes.”  The challengers, on the other hand, pointed out that Congress has never – not once – used the phrase “regulate” to “impose taxes or for revenue-raising.”

At one point, Justice Alito posed the following question to Neal Katyal, one of the lawyers for the challengers:

JUSTICE ALITO: [L]et’s just start with the bare statutory language: regulate importation. If we disregard all of the rest, would you dispute that that would include the imposition of a fee?

KATYAL: So if it’s revenue, yeah, we do dispute that. Absolutely.

JUSTICE ALITO: [S]uppose that there’s a particular national park that’s very crowded, and Congress passes a statute that says the National Park Service may regulate admission to the park. Would you say, well, that does not allow them to impose a fee?

KATYAL: So, you know, Your Honor, sometimes we think of fees as not revenue-raising but rather capturing the cost of government services in your example, the going to the park. That may — you know, those kinds of cases, which I think some people struggle with —

JUSTICE ALITO: Suppose it goes beyond the cost of running the park. Congress just wants to control admission to the park, regulate admission. Wouldn’t that include the imposition of a fee?

KATYAL: So if — if it doesn’t raise revenue, then — and it’s not about that, then I think that’s fine. If it does —

JUSTICE ALITO: It raises revenue. That’s the hypothetical. That wouldn’t apply?

KATYAL: So I think — I think in that circumstance that it wouldn’t be a regulation in context. It wouldn’t be permitted.

Katyal – who did, I thought, an admirable job overall responding to the Court’s questions yesterday – seemed thrown off-guard by this question, and it’s not difficult to see why.

On the one hand, it seems clear to me that a statute that says ‘The National Park Service may regulate admission to Yellowstone National Park’ does authorize NPS to impose entrance fees. In ordinary usage, the imposition of entrance fees is one of the more obvious ways – along with shutting down the Park at certain hours, or on certain days, or closing down certain Park entrances – to “regulate admission” to a park.

I can certainly understand why Katyal was reluctant to come out and say that.  Had he done so, presumably Justice Alito would have pounced:  If you concede that charging fees for admission is one way to “regulate” admission, doesn’t it follow that charging fees for imports (i.e., imposing a tariff) is one way to “regulate” importation?

It struck me, at the time, as it appears to have struck Katyal[2]: as a tough question. Doesn’t it follow?

The answer is: No, it doesn’t follow.  Context matters – indeed, it is dispositive. To regulate “Commerce with foreign Nations” – a power that Article I of the Constitution gives to Congress – clearly means something different, and encompasses different actions and activities, than the power to regulate “the Value [of] Money” (also given to Congress in Art. I), or to regulate “admission to the National Parks,” or, for that matter, to regulate the “temperature in the Senate chamber” or the “bloodflow through the aorta.”  Different contexts, very different meanings.

And importantly: The question in this case isn’t “what meaning might conceivably be given to the phrase ‘regulate importation’?”  The question is: What meaning did Congress give it in IEEPA? When Congress used the phrase “regulate importation,” what actions and activities did it envision being encompassed within that capacious phrase?

And on this one, the challengers have the better of the argument – by far.  Congress has used the verb “regulate” hundreds – perhaps thousands – of times in its statutes, but never once to mean “impose taxes/tariffs.”  Not to mention that if the power to “regulate” foreign commerce includes the power to impose tariffs, why did the Constitution have to specify that Congress has both the power to “regulate” foreign commerce and the power to “lay and collect Taxes, Duties, Imposts and Excises” in Article 1?

[1] One important threshold question that was barely touched upon during the 2.5 hours of argument: do we face an “unusual and extraordinary threat” in connection with either our trade deficits or the Fentanyl crisis, warranting the designation of a “national emergency” sufficient to justify the President’s invocation of the powers granted to him in IEEPA?  And relatedly: is the President’s decision to declare an IEEPA “emergency” subject to any judicial review at all, or is that an unreviewable decision committed to his sole discretion?

The absence of any serious examination of these questions during oral argument makes me think that the Court is going to ignore these questions – i.e., assume them away – when it issues its final judgment, and focus exclusively on the question: Assuming arguendo that the IEEPA was properly invoked here, does that statute give the President the power to impose tariffs?

Notice, incidentally, that the Court can ignore the question of whether the “emergency” powers were properly invoked only if the President loses.  That is, for the President to prevail in the suit, he has to prevail on two issues: the Court has to find both that (a) IEEPA was properly invoked, and (b) it gives him the tariff-determining powers he has been exercising.  The challengers, of course, need only prevail on either of the two, viz., “Assuming arguendo that the statute was properly invoked, it doesn’t grant the power to impose tariffs” or “Assuming arguendo that the statute grants the power to impose tariffs, it wasn’t properly invoked here.”

And this leads to the possibility that this case could produce a “voting paradox” (a subject I’ve been interested in for a long time – see here, here, here and elsewhere).  Suppose the individual Justices (labelled “A” through “I” just to avoid any implication that I’m actually predicting any actual Justice’s vote here – just speaking hypothetically!) view the matter as follows:

Was IEEPA properly invoked here?      Does IEEPA grant tariff-setting power?

Justice A                   Yes                                     Yes

Justice B                   Yes                                     Yes

Justice C                  Yes                                      Yes

Justice D                  Yes                                      Yes

Justice E                  Yes                                     No

Justice F                   No                                      No

Justice G                  No                                       No

Justice H                  No                                       No

Justice I                   No                                      Yes

Notice:  In this hypothetical lineup, the Court (5-4) is of the view that IEEPA was properly invoked, and also of the view (5-4) that IEEPA does encompass the tariff-setting power.  So the President should win.  But 5 Justices (E,F,G,H,I) cast their vote for the challengers – Justice E because while the statute was properly invoked, it does not include the tariff-setting power, and Justice I because he/she believes that the statute was not properly invoked here (although if it were properly invoked, it does include the tariff-setting power.

So the challengers win, 5-4.

Again, I’m not saying this is going to happen! But it’s a definite possibility, and it would leave the law in a very messy state, for reasons I’ve discussed elsewhere.

[2] Katyal went off on something of a tangent regard “revenue-raising” tariffs versus “regulatory” tariffs.  Not a good idea, in my opinion. The Administration, and Solicitor General Sauer in his responses to the Justices; questions, tried to make much of the distinction between “regulatory tariffs” (which, in their view, are encompassed with the IEEPA) and “revenue-raising tariffs,” which they concede are not.  It’s an unreasonable and totally unworkable distinction.  All tariffs raise money, and all tariffs affect behavior.  Trying to figure out whether a tariff is “revenue-raising” or “regulatory” is the very definition of a fool’s errand.  They are, always, both. I think it was a mistake for Katyal to try to steer the discussion in this direction in response to Justice Alito’s questions.

Note that my suggestion that Katyal had a much better retort to Justice Alito’s question is not intended as criticism; I have had several days to ponder the Justice’s question, while Katyal had about 3.5 seconds.