California Says IEEPA Tariff Suit 'Arises Out of' IEEPA, Not Trump's EOs

Last month, the federal district court dismissed California's case on the grounds that CIT has exclusive jurisdiction to hear the matter under Section 1581(i), which says only the trade court will hear cases that arise out of U.S. laws providing for tariffs (see 2506030020). Judge Jacqueline Scott Corley said the lawsuits arise out of Trump's executive orders, since they modify the Harmonized Tariff Schedule, and a federal statute says modifications to the HTS made by the president are laws of the U.S.

On appeal, California said its claims arise out of IEEPA, not the executive orders, since IEEPA is the "substantive law giving rise to the claims." To support this point, the state cited a string of decisions holding that for jurisdictional purposes, the phrase "arises out of" refers to the substantive law underlying the arguments.

For instance, in International Labor Rights Fund v. Bush, various advocacy groups brought a claim under the Administrative Procedure Act to allege that the U.S. failed to open an investigation that was required by Section 307, which bars imports made with forced labor. The U.S. District Court for the District of Columbia said the suit belongs at CIT, since the case arises out of Section 3017, which is a law "providing for ... embargoes," and not the APA.

The 9th Circuit, in Earth Island Institute v. Brown, resolved a similar issue regarding a lawsuit alleging the U.S. failed to implement tuna importation bans required under the Marine Mammal Protection Act. The appellate court said the suit arose out of the MMPA, "as that was the substantive law the plaintiffs argued required the government to act" and was thus "the substantive law giving rise to the plaintiffs’ claims."

Here, IEEPA is the substantive law giving rise to the claims, since it's the "substantive law under which the President acted" and is thus the "basis for California’s claims that the President’s actions were in excess of statutory authority and therefore in violation of the separation of powers," California said.

Corley's finding to the contrary "confuses" the executive order with the substantive law giving rise to the claims. The origin of the claims is IEEPA, since that statute "is the law the President claimed as his source of authority to issue the challenged orders, and which California alleges does not confer such authority," the brief said. Under Corley's rationale, any challenge to an executive order providing for tariffs would satisfy Section 1581(i) "regardless of the nature of the challenge," even though Congress didn't commit to CIT "every suit against the Government challenging customs-related laws and regulations."

Even if Corley is right that this case arises out of the executive order implementing the tariffs, the orders aren't "laws of the United States" as required by Section 1581(i), California argued. The district court's analysis of the HTS statute and the fact that the orders modify the HTS misses the requirement that presidential acts modifying the HTS are only laws of the U.S. when made "under authority of law." Thus, executive orders "issued without statutory authority providing for presidential implementation are generally held not to be ‘laws’ of the United States," the brief said. Corley failed to do any analysis of whether IEEPA provides for tariffs, the state said, making her jurisdiction finding, at best, incomplete.

California then laid out all of its substantive claims against the use of IEEPA to impose tariffs, arguing that the law's plain text, statutory context, legislative history and constitutional issues clearly show that the statute doesn't provide for tariffs.

Among those claims, the state argued that IEEPA doesn't have any of the "procedural, substantive, and temporal limits" found in statutes where Congress expressly delegated to the president the authority to impose tariffs. California specifically invoked Section 338, which a Trump-aligned legal group recently claimed can be used to uphold the current IEEPA tariffs (see 2506240060). The state emphasized the differences between IEEPA and Section 338, noting that Section 338 lets the president "declare new or additional duties" on imports from countries that have discriminated against the U.S. in trade, "but only up to 50 percent and only after a 30-day waiting period."

California also said considerations of "uniformity and expertise" don't support the notion of giving CIT exclusive jurisdiction in the case. Even if there's a conflict in the courts over the trade court's jurisdiction here, "such conflict is unremarkable," California said, since the Supreme Court in K Mart Corp. v. U.S. "has previously resolved a circuit split over the meaning and application of a different provision of Section 1581(i)."

As for the notion that CIT has special expertise, it doesn't have any special expertise to adjudicate IEEPA issues, California said. District courts, not CIT, have been handling IEEPA issues for the last 50 years, and the trade court has "never once cited IEEPA's provisions, nor has the federal government ever moved to transfer an IEEPA case from district court to the Court of International Trade," the brief said. If anything, sending the case to CIT would "hinder the utilization of judicial expertise by suddenly shunting cases" to CIT "that until now have been heard by district courts," the brief said.