Lawyer: Section 122 May Be a More Limited Fallback for Trump Should IEEPA Tariffs Fall
Section 122 of the Trade Act of 1974 may be a more limited "fall-back option" for the Trump administration should the Supreme Court strike down all the tariffs President Donald Trump has imposed under the International Emergency Economic Powers Act, Dr. Mona Paulsen, law professor at the London School of Economic Law School, wrote in a blog post.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Section 122 lets the president impose a tariff of up to 15% for 150 days in response to "fundamental international payment problems," including "large and serious balance-of-payments deficits" and unfair trade practices. In rejecting the reciprocal tariffs under the IEEPA, the Court of International Trade said Congress' passage of Section 122 stripped the president's ability to address balance-of-payments crises from the IEEPA (see 2505280068).
In the wake of the Supreme Court's oral argument in which some justices appeared skeptical of the administration's claims it can use the IEEPA to impose tariffs (see 2511050001), many attorneys have suggested Trump could turn to Section 122 as a stop-gap measure while he turns to other trade tools, such as Section 232 and Section 301, to replace the existing IEEPA tariffs.
In response, Paulsen questioned whether the "scope and meaning of Section 122 align with the Trump administration's intended objectives." Paulsen noted that the reciprocal tariffs "depend on selective discrimination," with each foreign nation receiving a new tariff rate. Thus, the first issue with using Section 122 is "whether a plausible interpretation of 'balance-of-payments' (BoP) deficits refers to 'trade deficits,'" she said.
Another issue is that Section 122 includes the "standard of non-discrimination," Paulsen wrote. Provision (d)(1) of Section 122 says that import restrictions imposed under this section "shall be applied consistently with the principle of non-discriminatory treatment." The provision also says any quota established under this section "shall be applied on a basis which aims at a distribution of trade with the United States approaching as closely as possible that which various foreign countries might have expected to obtain in the absence of such restrictions."
Paulsen said this provision "seems to defy the leverage sought by the Trump administration." Provision (d)(2) "confirms" that the president may only exempt all other countries from the trade restrictions should the president assert "one or more countries" are the focus of the action.
In addition, provision (e) of the statute says import restrictions "shall be of broad and uniform application with respect to product coverage except where the President determines, consistently with the purposes of this section, that certain articles should not be subject to import restricting actions because of the needs of the United States economy."
Paulsen asked if the term "uniform" will be interpreted as referring to universal or "stable" tariffs. That is, would Trump's constant changing of tariff rates violate this provision? Provision (e) also says import restrictions shall not apply to “articles already subject to import restrictions, goods in transit, or goods under binding contract," nor can there be an exception to the tariffs for “the purpose of protecting individual domestic industries from import competition.”
Paulsen noted that a "significant strategy of this administration has been to implement expansive tariffs and carve out from the sweeping scope afterwards."