Pod Insights Podcast Business News Network 14248 "WHATS LAW GOT TO DO WITH IT?" with Carol A. Sigmond Partner at Greenspoon Marder LLP and Steve Harper About this episode https://www.gmlaw.com/ Listen to us live on mytuner-radio, onlineradiobox, fmradiofree.com and streema.com (the simpleradio app)https://onlineradiobox.com/search?cs=us.pbnnetwork1&q=podcast%20business%20news%20network&c=ushttps://www.fmradiofree.com/search?q=podcast+business+news+networkhttps://mytuner-radio.com/search/?q=business+news+networkhttps://streema.com/radios/search/?q=podcast+business+news+network
Transcript 0:05 Speaker 00 Broadcasting from the business capital of the world. This is the Podcast Business News Network. Yeah, I love when we get together with her because you can Google things and watch news programs, feeds and things like that. But she breaks it down so that we can understand it and and figure out how this stuff that's going on globally is affecting us. That would be tariffs. That would be the housing situation, ever changing landscape there. What's law got to do with it? So great to have her back with us. She's an attorney located in New York City. Carol Sigmund is her professional of the year and and back with us. I don't
0:46 Speaker 00 think we've gone a week or past a podcast without talking about tariffs and we still need to because there's still a lot going on, right?
0:56 Speaker 01 Yes. Tariffs remain very interesting legally and economically.
1:03 Speaker 00 And I want to ask you before you even begin. Now, we started talking about this a year ago. Did you ever think that we'd still be at this juncture now in talking about it and the impact it has had? Or professionally, in your experience, did you think, yeah, this is going to be a blank show, if you will, we're still going to be dealing it is going to be a lot going on. But what were you feeling a year ago, if you think back in your mind?
1:33 Speaker 01 My feeling a year ago was that this was where we were going to be, that the Supreme Court was not going to sustain the I E P A tariffs, that President Trump was going to try another mechanism and that there would be additional litigation. And I think I even said to you around a year ago that I thought by June of 2026, the tariff situation might have returned to pre 2025.
2:02 Speaker 00 I honestly remember you saying that, Carol. I really do. Hmm. Okay.
2:07 Speaker 01 I think I'm going to prove to be wrong by a month or two. It may be July or August. Um, because I believe that this this new round of tariffs is going to be that the new round of tariffs that the president has put in
2:25 Speaker 01 have new legal bases. Okay, so one is the nineteen sixty-two Trade Act, which is basically a national security trade act. And I want to set that off to the side and address the broader set of new tariffs that he's imposed based on the nineteen seventy-four Trade Act, section one twenty-two of the nineteen seventy-four Trade Act.
2:51 Speaker 01 Now, the nineteen seventy-four Trade Act requires a little bit of context and history. In nineteen seventy-four, when Richard Nixon was president, he took us off the gold standard. It was at the time probably the right decision to make. However,
3:12 Speaker 01 in going off the gold standard, it did for a time destabilize the dollar.
3:18 Speaker 01 In response to that, there was a severe disruption in the balance of trade figures for the United States and the balance of payments figures, much more important, balance of payments being the magic words. President Nixon looked at it, felt that there was a national emergency and took emergency action to tariff certain items in order to control this balance of payments issue.
3:46 Speaker 01 The crisis ended, the courts questioned whether President Nixon had this authority, whatever, whatever. What ended up happening was Congress looked at the circumstances the president had faced, looked at the solution that he had come up with and looked at the relative success that President Nixon's interim solution had, and decided to equip the president in the future to deal with a very specific balance of payments issue. So if the US balance of payments somehow became heavily distorted against the United States, the president was given some emergency powers to restore that, including temporary tariffs.
4:30 Speaker 01 They can last, they're capped at fifteen percent, they can only last a certain amount of time. A hundred and fifty days, they require congressional authorization after a hundred and fifty days. That is the authority the president moved on. And he instituted these new one twenty-two tariffs immediately after the Supreme Court decision on February twenty-sixth of this year. The upshot is that he put back on tariffs, steel, aluminum, furniture, timber, copper, semiconductors, items like that.
5:09 Speaker 01 And the tariffs range from, I think, ten to a higher percentage, but that higher percentage is coupled with the national security tariffs, which we're going to get to in a minute. As soon as the president put the tariffs, the one twenty-two tariffs on, twenty-four states, including, I think, all of the states that were involved in the IEP tariff case, plus a couple of others, then sued in the CIT, this Court of International Trade, saying that the economic circumstance, that is to say, this severe balance of payments issue
5:49 Speaker 01 doesn't exist, and therefore, there's no legal justification for the nineteen seventy, the tariffs based on Section one twenty-two of the nineteen seventy-four Trade Act. I'll give you my thoughts on that. I believe that I've read the complaint. I've read some of the literature associated with the complaint. And I noticed, once again, that the same coalition that came together against the IEP tariffs, which are the border states, Oregon, California, New York, the border
6:29 Speaker 01 states, many of them states with Democrats as Attorney General, including, you know, very liberal Attorney Generals, as well as somewhat more conservative Democratic Attorney Generals, are involved in this lawsuit. And who is supporting them? The Federalist Society. So it is an apolitical attack, once again, based on a lack of legal basis for the tariffs.
7:03 Speaker 01 My prediction, there will be briefing, there will be. First of all, the president will have to face the vote in 150 days, which will be in July. Whether he gets the vote or not is a question. There are arguments on both sides, let's leave that off to decide. Do they pass the House? Yes, I think he probably carries the House. Does he carry the Senate? Not so clear. But we'll leave that to decide. At the same time, this litigation is progressing. In all likelihood, the CIT will find that the requisite balance of payments disruption that is required to support tariffs under the 1974 Act
7:48 Speaker 01 is not present, and those tariffs will fail. That's a black set of tariffs, that's a whole series of tariffs, all under that statute, but they will fail.
7:56 Speaker 00 When you say they will fail, how do you, how do you define that?
7:59 Speaker 01 The courts will find them to be unconst- anti-statutory. Not subject, not authorized by the statute. The president has exceeded his, the mandate from Congress.
8:12 Speaker 00 Well, the White House
8:12 Speaker 01 Be surprised.
8:13 Speaker 00 The trade advisor for the White House is saying that we're going from 10 to 15%. And I'm paraphrasing words, but basically it's, it's happened. It hasn't happened, but it's happened, i.e. it's, it's, it's happening. So are you saying that that bump up to the 15% level isn't going to stick?
8:34 Speaker 01 None of the 1974 tariffs are going to stick. They, they lack. Whether you read the Federalist Society, you read the complaint from the, from the Democrat Attorney Generals, whether you look at literature in the field, the circumstances that President Nixon was facing in 1974, that Congress then legalized, if you will, with a statute to deal with that precise set of circumstances. Those circumstances are not present. We do not have a balance of payments problem. We simply don't have it. We don't have the economic crisis that President Nixon faced.
9:13 Speaker 01 And therefore, the courts are not going to sustain these because that is an essential precondition. So those tariffs, tariffs that are based on the 1974 Act, the ones Essentially coming out of the Trade Advisor and the Department of Commerce. Those will fail. They will not be sustained. And we will be back in the same situation that we're in now with the refund situation. Which is the refunds belong to the importers that actually paid them unless, unless customers get a little smarter this time and demand the rebate be passed on to them.
9:58 Speaker 01 So we have that issue out there. And I think that, you know, whether it's July or August or September, they're, they're gonna go. The 74 tariffs are gonna go. Leaving us only with one set of tariffs. The tariffs based on Section 232 of the 1962 Trade Act. Now, this is more complicated. While the states and the, and the various importers that have resisted the tariffs have been able to block resist the tariffs under the IEPA and the 1974 Trade Act, they can attack them all.
10:43 Speaker 01 The 1962 Trade Act will go product by product, item by item. And the reason is, these are not blanket tariffs. These are supposed to be tariffs targeted to very specific products for national security purposes. So if you are an importer of upholstered furniture or kitchen cabinets, your case is different from the case of someone who's got semiconductors. And, and those cases are different from steel importers. And then the, it gets more complicated because you've got different kinds of engines.
11:28 Speaker 01 So, and, and different kinds of vehicles. For example, there's, there is a 1962 tariff, fairly significant tariff, on vehicle imports. It applies to passenger cars, light trucks, and heavy trucks.
11:42 Speaker 01 Now, passenger cars and light trucks are not necessarily national security items. So that you won't even have a single battle over vehicles. You're going to have a different battle over different types of vehicles depending on whether or not they can be classified for national security purposes. And if you're curious about this issue and you want to try to understand how that might shake out, you can Google something at the State Department called the munitions list. Now, the munitions list basically contains a list of types of products and categories
12:25 Speaker 01 that are considered to be dual-use, that is to say, they have both military and civilian use. But I would posture that if the product is not on the munitions list, it's going to be difficult to find a national security implication. So I think people will be looking at the munitions list, looking at the various products that are being tariffed, look at the amount of tariffs, and then making assessments product by product. So there will be a great deal more litigation on the 1962, the tariffs arising under the Trade Act of 1962 because of how narrowly they have to be, the cases have to be tailored.
13:09 Speaker 01 I'm personally expecting the timber products, upholstered furniture, kitchen cabinets, that sort of thing to be first. I'm thinking that dual-use military items would be the last items challenged under that act.
13:25 Speaker 00 This gets really mucky and detailed. I brought up that list. Part 121.
13:33 Speaker 00 You could scroll, you could scroll for 10 years. It's so detailed and it's, I mean, my gosh. And there's the obvious stuff there. If it's a, you know, a muffler for a, or a silencer for a gun, that type of thing. Okay, we put that over to the side, but you know, you get down, I just randomly scrolled down here. Radio controlled devices, different subchapters. You know, what about if somebody imports, exports components, but they're not connected to warfare, but they are connected to radio control, whatever it may be. This is, it's very great territory, it seems like.
14:17 Speaker 01 This is going to be very, very complicated. So I thought that it would be a good idea for the, for our friends in podcast world to at least understand that there was a list out there that might give them some guidance.
14:30 Speaker 00 I appreciate that. It's, I, I find it challenging, detailed, but fascinating all in the same time.
14:38 Speaker 01 So I, I will relate one sort of anecdote about this. Many, many, many years ago,
14:47 Speaker 01 there was a time when you could not export a Singer sewing machine to mainland China. And why? Because at the time Singer was using, I don't know, a 4004 or 8008 chip. And that was something the Chinese didn't have yet. So you couldn't get, you couldn't export the sewing machine. Now that was for national security reasons on the export side, not the import side. But, and, and the munitions list is an export list, not limitations on exports, not imports. But it gives you an idea of the, of the way that the government looks at national security and the kinds of factors that the courts would be weighing.
15:26 Speaker 00 A hundred percent. Here's one here. Ensembles, garments, suits, jackets, pants, boots, or socks for individual protection and liners for collective protection that allow no more than 1% breakthrough of GD and no more than 2% blah, blah, blah, blah, blah. What about if these are garments for somebody? Doing chemical work in a building. Like that potentially could come under the category, potentially, of something connected to warfare. Very.
15:54 Speaker 01 It's on the dual use list. It's therefore potentially national security and but this is a source of information for for people to look at to to think about what could be considered national security.
16:07 Speaker 00 Yeah.
16:09 Speaker 00 Wow. And this, can I just ask before we move on from this point? This list, was this an ongoing list or was this developed, you know, way back in the day?
16:20 Speaker 01 Oh, this, the the dual use list has existed for many, many years. And just to set it in context, because the context is important. It is the list that we use to control what kinds of products we allow to be exported. For example, if you look at the the list, there are very few countries that can legally receive exports of anything nuclear related.
16:48 Speaker 01 If memory serves me correctly, it's it's probably Great Britain, maybe Canada, Australia and and France. Very limited. Because the the the list is has to be read in on the export side in conjunction with who the who the receiving country is. And the world is divided into roughly speaking, five categories. You have our closest allies, mostly our NATO allies, who can who are entitled to receive many things. You have the you have other countries that are considered allies, but not either was
17:31 Speaker 01 close or maybe don't have governmental controls to protect this kind of technology. And so they are in a different class. And you have countries that are essentially ranked as more sympathetic, say, to Russia or China. They're classified differently.
17:49 Speaker 01 Russia and China and their allies are classified yet differently. And then you have what I have oftentimes kind of joked about it, the three outliers, although it's really more like two outliers. It used to be three, Turkey, Taiwan, and Israel, that were in very odd classes for dual use. Turkey has moved closer to sort of the NATO's, they're part of NATO, so they've moved more into the NATO world, but Taiwan and Israel remain sort of, they can get a lot of things that you'd be surprised that they can buy, that a lot of other people can't buy.
18:26 Speaker 00 Well, what's troubling here is if this list hasn't been updated, technology has.
18:31 Speaker 01 No, that list is continually updated.
18:34 Speaker 00 Okay, that was my question. Okay, gotcha.
18:36 Speaker 01 No, no, that is continually updated. And it's updated in two regards, the product list and how products are considered. It's also updated in terms of where countries stand. So, you know, where, where, say, Poland stood when it was part of the Soviet Bloc is one place where it stands now, where it's, it's, it's more of a, of a US ally and, and has joined NATO, it's, it's in a different place. So, this is constantly updated. It's a very important part of our national security and our national defense.
19:16 Speaker 00 Gotcha.
19:17 Speaker 01 But I, but I, by introduce it into the discussion so that everyone can understand how complicated classification of products for national security can be.
19:27 Speaker 00 It was complicated before we even got there. And then now, even more deeper so. With the time we have left, housing, big on our minds, mortgage rates jumping out because of the war in Iran.
19:48 Speaker 00 How are the tariffs affecting housing, potentially mortgage rates? You know, obviously steel and things like that, building products. But, you know, broadly here, fresh information. What are you feeling right now?
20:02 Speaker 01 The pressures in the housing area are the same pressures that we've been talking about for the last year. The average cost of a of a single family home throughout the country is probably seventeen thousand five hundred dollars more there about plus or minus because of the tariffs.
20:25 Speaker 01 The fluctuating petroleum prices are going to have a very negative effect in terms of housing pricing because petroleum is so commonly used in so many things that are used in building houses.
20:41 Speaker 01 There's some literature I've seen that there could be up to four hundred and fifty thousand fewer homes built over the next, over the last, this tariff period as a result of the tariffs alone. That's without even thinking about the the cuts to, or the attempted cuts and the lack of stability in the HUD budget and the sort of ongoing state shortfalls in terms of money for for this kind of housing, affordable housing and new affordable housing. So we've got, we've got the aging affordable, existing affordable housing stock.
21:23 Speaker 01 We've got, you know, attempts to cut the maintenance budget at the federal level. We have constraints on state and local governments trying to maintain housing. And so you have, you have the potential of losing housing units as a result, not gaining them. And, you know, you continue to have housing shortages in places like New York City.
21:49 Speaker 01 Um, a lot of the big cities still have housing shortages. The South, things have improved a little bit, possibly because of the um
22:01 Speaker 01 uh slowdown in immigration. That may have reduced some pressure and locally along the border. Not a hundred percent clear, but that may be part of it. So, but you have the millennials forming families and trying to uh form new households. And so you have a lot of pressures in mostly running toward a housing shortage. You have efforts by uh state governments, California and New York in particular, but they're far from the only ones to uh change zoning laws, to change regulatory requirements, to try to make it easier to build housing.
22:46 Speaker 01 Uh Governor Hochul is looking at uh modifying the 2019 New York State Climate Act to make it easier to build housing. You have her looking at possibly uh taking some housing projects out of, out of uh the state's environmental quality regulations. Because there's another whole layer of regulations on stormwater uh pollu- uh stormwater pollution runoff plans. And uh other kinds of uh clean water controls that are almost duplicative of these, of these, and so she's trying to, to slim it down and, and you know streamline it a bit so that there's only sort of like one path rather than two that have to be followed.
23:30 Speaker 01 So there are a number of legislative and um uh
23:37 Speaker 01 regulatory efforts being made to make it easier to build housing, but it's the cost of materials, the cost of money are being pressed upward and the current uh circumstances with fuel uh not making things any better.
23:55 Speaker 00 Hmm, yeah. It's like getting attacked from all sides when it comes to housing. My gosh.
24:03 Speaker 01 Well, it's, what, what remains troubling is that we are not, we are not allowing the, the millennials to, you know.
24:15 Speaker 01 Get into the, to home purchasing, which has been a traditional means of, you know, stabilizing membership in the middle class.
24:24 Speaker 00 Sure.
24:25 Speaker 01 And so, you know, that's tough. And, you know, we're going to have to find some ways to, I still think we have to find a way to really reinvest in housing in a way that's meaningful for the millennials.
24:39 Speaker 00 Completely. Because you have boomers not moving, millennials can't move. The American dream, where did it ever go? Carol, thank you so much for the updates on everything here. Amazing what's going on, but I truly appreciate your insight and, and your superpower to break this down in a way that we can all, whether you're plugged into it or not, politics or not, we don't go there, but you make it understandable and I truly appreciate that.
25:11 Speaker 01 Well, it's been fun, Steve. Have a good week.
25:14 Speaker 00 I wonder what we're talking about next time we get together. Hmm. Have an idea. By the way, any feedback you want to reach out, [email protected] . Need expert legal support? Carol A. Sigmund at Greenspoon Marder specializes in business litigation, transactional law, and real estate banking and finance. With years of experience, Carol provides tailored solutions to protect your business. Call 212-524-5074 or visit gmlaw.com for trusted counsel.
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