Case 1:20-cv-02658-CJN Document 60 Filed 12/07/20 Page 1 of 35
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`TIKTOK INC., et al.,
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`Plaintiffs,
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`v.
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`DONALD J. TRUMP, President of the United
`States, et. al.,
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`Defendants.
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` Civil Action No. 1:20-cv-02658 (CJN)
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`MEMORANDUM OPINION
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`On September 24, 2020, the Secretary of Commerce published a list of five types of
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`prohibited business transactions involving Plaintiffs. If implemented, those prohibitions would
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`effectively ban the operation of Plaintiff TikTok in the United States. On September 27, the Court
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`granted Plaintiffs’ motion for a preliminary injunction with respect to the prohibitions that would
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`have taken effect that day, but deferred judgment as to the others. See ECF Nos. 29–30. For the
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`reasons discussed below, the Court now grants Plaintiffs’ motion as to all the prohibitions.
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`I. BACKGROUND
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`A. International Emergency Economic Powers Act
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`The United States has long used economic sanctions to prohibit transactions that threaten
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`national security. In 1977, Congress enacted IEEPA, which grants the President peacetime
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`authority “to deal with any unusual and extraordinary” foreign “threat” to U.S. “national security”
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`so long as “the President declares a national emergency with respect to such threat.” 50 U.S.C.
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`§ 1701(a). Once the President has declared such an emergency, IEEPA empowers the President
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`to:
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`1
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`[R]egulate, direct and compel, nullify, void, prevent or prohibit, any . . . transfer
`. . . of, or dealing in, . . . or transactions involving, any property in which any
`foreign country or a national thereof has any interest . . . with respect to any
`property, subject to the jurisdiction of the United States[.]
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`Id. § 1702(a)(1)(B). The President may also “empower the head of any” executive agency to take
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`those actions on his behalf. 3 U.S.C. § § 301–02.
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`Although broad, the President’s IEEPA authority is subject to certain limitations. See 50
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`U.S.C. § 1702(b). As relevant here, the statute expressly provides that “[t]he authority granted to
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`the President . . . does not include the authority to regulate or prohibit, directly or indirectly”:
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`any . . . personal communication, which does not involve a transfer of anything of
`value;
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`[or]
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`the importation from any country, or the exportation to any country, whether
`commercial or otherwise, regardless of format or medium of transmission, of any
`information or informational materials, including but not limited to, publications,
`films, posters, . . . artworks, and news wire feeds.
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`Id. § 1702(b)(1), (3) (emphasis added).
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`Since its enactment, IEEPA has included a limitation relating to personal communications.
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`Pub. L. No. 95-223, § 203(b)(1), 91 Stat. 1627 (1977). In 1988, Congress added the limitation
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`relating to the importation and exportation of informational materials “as a reaction to several
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`seizures by the United States of shipments of magazines and books from embargoed countries and
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`to the Treasury Department’s restrictions on the permissible forms of payment for informational
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`materials purchased from Cuba.” Kalantari v. NITV, Inc., 352 F.3d 1202, 1205 (9th Cir. 2003).
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`In 1994, Congress expanded the “nonexclusive list of informational materials to include new
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`media, such as compact discs and CD ROMs” and added the phrase “regardless of format or
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`medium of transmission.” Id.
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`B. Executive Orders Regarding Foreign-Controlled Technology Companies and
`TikTok
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`On May 15, 2019, the President invoked his authority under IEEPA (among other powers)
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`and declared a national emergency regarding the “extraordinary threat” that foreign-controlled
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`technology companies pose to U.S. national security. Exec. Order No. 13873, Securing the
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`Information and Communications Technology and Services Supply Chain, 84 Fed. Reg. 22689
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`(May 15, 2019) (“ICTS Order”). The President therefore determined to prohibit certain
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`transactions with foreign countries or foreign nationals that pose national security risks to the
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`United States. Id. On May 13, 2020, the President renewed that declaration, stressing the unique
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`threat posed by China-based technology firms with close ties to the government of the People’s
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`Republic of China (“PRC”). Continuation of the National Emergency With Respect to Securing
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`the Information and Communications Technology and Services Supply Chain, 85 Fed. Reg. 29321
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`(May 13, 2020).
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`On August 6, 2020, the President identified TikTok—a short-loop video sharing app
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`presently used by over 100 million Americans, Compl., ECF No. 1, ¶ 1—as a technology firm that
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`poses a risk to national security. See Exec. Order No. 13942, Addressing the Threat Posed by
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`TikTok, and Taking Additional Steps To Address the National Emergency With Respect to the
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`Information and Communications Technology and Services Supply Chain, 85 Fed. Reg. 48637
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`(Aug. 6, 2020) (“TikTok Order”). The President determined that TikTok “automatically captures
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`vast swaths of information from its users, including internet and other network activity information
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`such as location data and browsing and search histories.” Id. The President concluded that because
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`TikTok is owned by the China-based company ByteDance, the Chinese Communist Party (“CCP”)
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`might be able to “access . . . Americans’ personal and proprietary information—potentially
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`3
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`allowing China to track the locations of Federal employees and contractors, build dossiers of
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`personal information for blackmail, and conduct corporate espionage.” Id.
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`The President also found that TikTok could be used to transmit CCP-approved propaganda.
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`The CCP could, he determined, use TikTok to “censor[] content that the [CCP] deems politically
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`sensitive,” id., and share “disinformation campaigns that benefit the [CCP], such as when TikTok
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`videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.” Id.
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`The President took two actions to mitigate those risks. First, he directed the Secretary of
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`Commerce to identify a list of prohibited transactions with “ByteDance . . . or its subsidiaries,”
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`including TikTok. Id. at 48638. Second, he ordered ByteDance to divest itself of TikTok’s U.S.
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`operations, including any interest it might have in U.S. user data. See Regarding the Acquisition
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`of Musical.ly by ByteDance Ltd., 85 Fed. Reg. 51297 (Aug. 14, 2020) (“Divestment Order”). The
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`Divestment Order directed the interagency Committee on Foreign Investment in the United States
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`(“CFIUS”) to ensure the sale by ByteDance of “any tangible or intangible assets . . . used to enable
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`or support” its “operation of the TikTok application in the United States” by November 12, 2020,
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`unless CFIUS extended that deadline “for a period not to exceed 30 days.” Id.
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`C. The Secretary’s TikTok Prohibitions
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`Acting pursuant to the TikTok Order, on September 18, 2020, the Secretary of Commerce
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`published a list of five sets of prohibited transactions. After revising one implementation date, the
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`Secretary finalized the following set of unlawful transactions:
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`1. Any provision of services, occurring on or after 11:59 p.m. eastern standard time
`on September 27, 2020, to distribute or maintain the TikTok mobile application,
`constituent code, or application updates through an online mobile application
`store[;]
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`2. Any provision of internet hosting services, occurring on or after 11:59 p.m.
`eastern standard time on November 12, 2020, enabling the functioning or
`optimization of the TikTok mobile application[;]
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`3. Any provision of content delivery network services, occurring on or after 11:59
`p.m. eastern standard time on November 12, 2020, enabling the functioning or
`optimization of the TikTok mobile application[;]
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`4. Any provision of directly contracted or arranged internet transit or peering
`services, occurring on or after 11:59 p.m. eastern standard time on November 12,
`2020, enabling the functioning or optimization of the TikTok mobile application[;
`and]
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`5. Any utilization, occurring on or after 11:59 p.m. eastern standard time on
`November 12, 2020, of the TikTok mobile application’s constituent code,
`functions, or services in the functioning of software or services developed and/or
`accessible within the land and maritime borders of the United States and its
`territories[.]
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`U.S. Dep’t of Commerce, Identification of Prohibited Transactions to Implement Executive Order
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`13942 and Address the Threat Posed by TikTok and the National Emergency with Respect to the
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`Information and Communications Technology and Services Supply Chain, 85 Fed. Reg. 60061,
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`60062 (Sept. 24, 2020) (“Commerce Identification”).1
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`Before issuing those prohibited transactions, the Secretary reviewed and relied on an
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`internal Memorandum assessing the threats posed by ByteDance and TikTok. U.S. Dep’t of
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`Commerce, Mem. for the Sec’y, Proposed Prohibited Transactions Related to TikTok Pursuant to
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`Executive Order 13942 (Sept. 17, 2020), ECF No. 48-2, AR 27–50 (“Commerce Memorandum”);
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`see also Defs.’ Mem. Opp’n Pls.’ P.I. Mot., ECF No. 22, 2 (“Defs.’ Opp’n”). Like the President’s
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`TikTok Order, the Commerce Memorandum focuses on two threats: exporting data and importing
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`propaganda. See Commerce Memorandum, ECF No. 48-2, AR 30–35 (data), AR 35–38
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`(propaganda).
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`1 The Commerce Identification states that the prohibitions “only apply to the parties to business-
`to-business transactions.” Commerce Identification, 85 Fed. Reg. at 60062.. It also notes that the
`prohibitions “do not apply to . . . [t]he exchange . . . of personal or business information” shared
`among TikTok users on the app, id., and that none of the prohibitions bars transactions related to
`restructuring TikTok in accordance with the President’s Divestment Order. Id.
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`U.S. User Data. The Commerce Memorandum found that the PRC is “building massive
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`databases of Americans’ personal information” to help the “Chinese government to further its
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`intelligence-gathering and to understand more about who to target for espionage, whether
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`electronically or via human recruitment.” Id. at AR 31. It also concluded that the CCP will exploit
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`“close ties” with ByteDance to further its foreign policy agenda. See id. at AR 32–34. ByteDance
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`is headquartered in Beijing and remains subject to the PRC’s National Intelligence Law, which
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`“permits Chinese intelligence institutions” to “take control of” any China-based firm’s “facilities”
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`and “communications equipment.” See id. at AR 35. ByteDance has already signed a cooperation
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`agreement with a PRC security agency, closed one of its media platforms in response to CCP
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`demands, and (as of August 2020) placed over 130 CCP committee members in management
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`positions throughout the company. Id. at AR 32, 45; see also Defs.’ Opp’n, ECF No. 22, 7–8.
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`And because “ByteDance is subject to PRC jurisdiction, [and] PRC laws can compel cooperation
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`from ByteDance, regardless of whether ByteDance’s subsidiaries are located outside the territory
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`of the PRC,” the data held by ByteDance’s subsidiary companies may also be extracted by the
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`PRC. Commerce Memorandum, ECF No. 48-2, AR 44–45.
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`The Commerce Memorandum determined that, because ByteDance owns TikTok,
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`TikTok’s Terms of Service and Privacy Policy for new users allow TikTok to collect and share a
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`user’s information with both ByteDance and the PRC to respond to “government inquiries.” Id.
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`at AR 38–40; see also Ex. 8, ECF No. 22-8, 6. The information that TikTok gathers is substantial,
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`including:
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`1) registration information, such as age, username and password, language, and
`email or phone number; 2) profile information, such as name, social media account
`information, and profile image; 3) user-generated content, including comments,
`photographs, videos, and virtual item videos that you choose to upload or broadcast
`on the platform; 4) payment information, such as PayPal or other third-party
`payment information (where required for the purpose of payment); 5) phone and
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`social network contacts (names and profiles); 6) opt-in choices and communication
`preferences; 7) information in correspondence users send to TikTok; and 8)
`information sent by users through surveys or participation in challenges,
`sweepstakes, or contests such as gender, age, likeness, and preferences.
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`Commerce Memorandum, ECF No. 48-2, AR, 38. Indeed, TikTok’s core value to users lies in its
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`ability to transmit data like “text, images, video, and audio,” all of which constitute “[b]ulk data”
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`that the Secretary’s Memorandum determined might be used by China “to train algorithms for
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`facial and voice recognition.” Id. at AR 31.
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`The Commerce Memorandum also determined that the TikTok data of U.S. users are
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`especially vulnerable because TikTok keeps a backup of all its U.S. data in Singapore with a China-
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`based company called Alibaba. Id. at AR 40. “Alibaba is a Chinese company . . . beholden to
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`PRC laws that require assistance in surveillance and intelligence operations.” Id.
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`Propaganda. Like the President’s TikTok Order, the Commerce Memorandum highlights
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`the risk that the CCP will leverage TikTok to spread propaganda and censor disfavored content in
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`the United States. Id. at AR 35–38; see also TikTok Order, 85 Fed. Reg. at 48637 (describing pro-
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`CCP “disinformation campaigns . . . , such as when TikTok videos spread debunked conspiracy
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`theories about the origins of the 2019 Novel Coronavirus”).
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`In particular, the CCP has a track record of using the media platforms owned by ByteDance
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`as a “mouthpiece for the Party and State.” Commerce Memorandum, ECF No. 48-2, AR 35.
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`“Through Douyin,” for example, “ByteDance has actively assisted and complied with CCP
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`domestic directives in surveillance, censorship, and propaganda efforts.” Id. at AR 36. As a 2018
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`media report (relied on by the Commerce Memorandum) put it: “Chinese government agencies
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`are turning to the country’s viral video app Douyin, known as TikTok outside China, to create
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`entertaining short-form music videos.” Meng Jing, Government Agencies Jump on Short-video
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`Bandwagon to Ensure Chinese Youth Still Hears “Official Voice,” South China Morning Post
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`(June 15, 2018, 8:01 AM), https://www.scmp.com/tech/china-tech/article/2150837/government-
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`agencies-jump-short-video-bandwagon-ensure-chinese-youth
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`(“Official
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`Voice”);
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`see
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`also Commerce Memorandum, ECF No. 48-2, AR 36 n.95 (citing Official Voice).
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`The Commerce Memorandum also observes that “more than 500 government agencies,
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`Communist Party organizations, and official media” outlets had “Douyin accounts.” Id. at AR 36.
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`Those accounts were used to create and spread “government videos” that “had been seen over 1.6
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`billion times as of June 2018.” Id. And in 2019, “ByteDance signed a strategic cooperation
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`agreement with the Ministry of Public Security’s Press and Publicity Bureau in Beijing aiming to
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`give full play to the . . . platform advantages of . . . TikTok in big data analysis” and advance
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`“public security propaganda, guidance, influence, and credibility.” Id. (internal quotation marks
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`omitted). The Commerce Memorandum cited numerous media reports showing that “ByteDance
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`has [already] censored or restricted TikTok content globally that is critical of or relevant to issues
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`the CCP deems controversial” as well. Id. at AR 37–38.
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`The Memorandum recognized that ByteDance is negotiating “a potential divestiture of
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`TikTok” with CFIUS and that “the President has established a deadline of November 12, 2020, for
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`any deal or agreement to be reached,” but concluded that “[b]arring a complete divestiture of
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`ByteDance from the TikTok application, TikTok presents an immitigable risk to the national
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`security . . . of the United States.” Commerce Memorandum, ECF No. 48-2, AR 47.
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`The Secretary scheduled the prohibitions in paragraph one (which in part ban TikTok from
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`U.S. app stores) to go into effect by “11:59 p.m. eastern standard time on September 27, 2020.”
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`Commerce Identification, 85 Fed. Reg. at 60061. But he delayed the prohibitions listed in
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`paragraphs two through five until 11:59 p.m. on November 12, 2020. Id. He adopted that “phased”
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`approach to “mitigate some national security risk immediately while allowing the [government]
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`the latitude to further evaluate the viability of national security mitigations in the context of CFIUS
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`negotiations.” Commerce Memorandum, ECF No. 48-2, AR 47. He also suggested that “[t]o the
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`extent the dates for the CFIUS process are extended, the dates for the secondary phase [of the
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`TikTok prohibitions] may also be extended.” Id.
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`D. Procedural History
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`On September 18, 2020, Plaintiffs TikTok and ByteDance filed this lawsuit alleging that
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`the government’s actions violate the Administrative Procedure Act (Count One), the First
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`Amendment (Count Two), and the Due Process Clause of the Fifth Amendment (Count Three);
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`exceed the President and Secretary’s authority under IEEPA (Counts Four through Six); and
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`violate the Takings Clause of the Fifth Amendment (Count Seven). Compl., ECF No. 1, ¶ ¶ 80–
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`141. On September 23, Plaintiffs moved for preliminary injunctive relief, arguing that they have
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`a likelihood of success on some of these claims and that, absent an injunction, they would suffer
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`irreparable harm. Pls.’ P.I. Mot., ECF No. 15-1, 15–36. Following expedited briefing on the
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`Motion, ECF Nos. 15, 21–22, 26, the Court heard oral argument on September 27, 2020.
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`After oral argument, the Court granted the Plaintiffs partial relief by preliminarily enjoining
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`the prohibitions in paragraph 1, which threatened to irreparably harm Plaintiffs by banning TikTok
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`from all U.S. app stores by 11:59 p.m. that night. See Mem. Op., ECF No. 30, 17–18. The Court
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`then approved expedited briefing to consider Plaintiffs’ Renewed Motion for a Preliminary
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`Injunction as to the prohibitions listed in paragraphs 2–5. See ECF Nos. 43–44, 47–48. The Court
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`heard oral argument on Plaintiffs’ Renewed Motion on November 4, 2020.
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`On October 30, 2020, another federal court in a suit brought by TikTok users preliminary
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`enjoined all the prohibitions listed in the Commerce Identification. See Marland v. Trump, 2020
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`WL 6381397, at *14–15 (E.D. Pa. Oct. 30, 2020). Although it declined to reach most of the
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`TikTok users’ claims, the Court held that those plaintiffs had established that the Secretary’s
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`prohibitions likely violated IEEPA by indirectly regulating informational materials and that,
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`without an injunction, plaintiffs would suffer irreparable harm. See id. at *6, *8–12.
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`The Court’s reasoning focused on the “effect” of the Secretary’s prohibitions. See id. at
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`*9–10. It held that Congress “insert[ed] the word ‘indirectly’ into IEEPA” to show that even
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`regulations which “do not on their face regulate the exchange of informational materials” may
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`“nevertheless” do so when they “have such an effect.” Id. at *9. The Court concluded that because
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`the Secretary’s prohibitions “will have the effect of stopping over 100 million existing U.S. users
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`from continuing to” share informational materials “posted on the app with each other and with
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`over 600 million international TikTok users,” the prohibitions indirectly regulate informational
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`materials. Id. at *10. The Court acknowledged that not every regulation that tangentially burdens
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`informational materials also indirectly regulates those materials. Id. at *9. But the Court
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`determined that there was no “line-drawing problem” because “[t]he effect the Commerce
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`Identification will have on the exchange of informational materials is in no way tangential.” Id. at
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`*10.
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`On November 12, 2020, the government appealed that injunction to the Third Circuit.
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`Notice of Appeal, ECF No. 55 (Nov. 12, 2020); Marland v. Trump, No. 20-3322, ECF No. 1 (3d
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`Cir. Nov. 12, 2020). Five days later, the Secretary of Commerce published a notice in the Federal
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`Register acknowledging that all the prohibitions listed in the Commerce Identification had “been
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`enjoined” and Commerce “is complying” with that injunction, so the TikTok prohibitions “will
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`not go into effect, pending further legal developments.” 85 Fed. Reg. 73191 (Nov. 17, 2020).
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`CFIUS also extended the deadline for the President’s Divestment Order from November
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`12, 2020, to November 27, 2020, and that deadline was extended again to December 4, 2020 (the
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`Parties have not provided the Court with any further update on the CFIUS process). See Pls.’
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`Notice of CFIUS Extension, ECF No. 56 (Nov. 12, 2020); Pls.’ Second Notice of CFIUS
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`Extension, ECF No. 58 (Nov. 25, 2020).
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`II. LEGAL STANDARD
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`“A preliminary injunction is an extraordinary remedy that should be granted only when the
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`party seeking the relief, by a clear showing, carries the burden of persuasion.” Cobell v. Norton,
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`391 F.3d 251, 258 (D.C. Cir. 2004) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)). A
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`plaintiff seeking such relief must demonstrate that (1) it has a likelihood of succeeding on the
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`merits, (2) it faces irreparable harm if an injunction does not issue, (3) the balance of equities
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`favors relief, and (4) an injunction is in the public interest. Winter v. Nat’l Res. Def. Council, Inc.,
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`555 U.S. 7, 20 (2008). When “the Government is the opposing party,” the assessment of “harm to
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`the opposing party” and “the public interest” merge. Nken v. Holder, 556 U.S. 418, 435 (2009).
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`Plaintiffs must make “a clear showing” that they are “entitled to such relief.” Winter, 555
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`U.S. at 22. And while the D.C. Circuit has not yet directly held that a plaintiff must make a clear
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`showing on each of the four Winter factors, considered dicta in this jurisdiction favors that
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`approach. See In re Navy Chaplaincy, 738 F.3d 425, 428 (D.C. Cir. 2013) (demanding proof on
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`all four prongs); Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1296 (Kavanaugh, J.,
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`concurring) (observing that, after Winter, “the old sliding-scale approach to preliminary
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`injunctions—under which a very strong likelihood of success could make up for a failure to show
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`a likelihood of irreparable harm, . . . is no longer . . . viable” (internal quotation and citation
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`omitted)).
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`A. Likelihood of Success of the Merits
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`III. ANALYSIS
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`The Court begins with the “most important factor”—Plaintiffs’ likelihood of success on
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`the merits. Aamer v. Obama, 742 F.3d 1023, 1038 (D.C. Cir. 2014). For the reasons discussed
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`below, Plaintiffs have demonstrated that they are likely to succeed on their IEEPA and APA
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`claims.
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`1. Plaintiffs’ IEEPA Claim
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`This Court must “set aside” an “agency action” that exceeds its statutory “authority” or
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`“limitations.” 5 U.S.C. § 706(2)(C). Here, the Secretary exercised the President’s delegated
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`authority to prohibit transactions under IEEPA. See Commerce Memorandum, ECF No. 48-2, AR
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`27 (citing the President’s TikTok Order). But IEEPA contains several express limitations, two of
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`which are relevant here: the “authority granted to the President . . . does not include the authority
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`to regulate or prohibit, directly or indirectly” either “personal communication[s], which do[] not
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`involve a transfer of anything of value,” or the import or export of “information or informational
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`materials.” 50 U.S.C. § 1702(b)(1), (3).
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`Plaintiffs contend that the Secretary’s prohibitions overstep both limitations by, at a
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`minimum, indirectly regulating personal communications and the flow of informational materials.
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`Renewed P.I. Mem., ECF No. 43-1, 13–21. The government, by contrast, frames the Secretary’s
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`prohibitions as a scheme to directly regulate commercial transactions, and nothing more. Renewed
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`Opp’n Mem., ECF No. 44, 10–24. The Parties’ dispute turns on the meaning of three phrases in
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`§ 1702(b): (i) “to regulate or prohibit, directly or indirectly,” (ii) “personal communication,” and
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`(iii) “information or informational materials.” As the Court examines each phrase, it will “begin
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`with the text, turning as need be to the structure, purpose, and context of the statute.” S.C. Pub.
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`Serv. Auth. v. Fed. Energy Regul. Comm’n., 762 F.3d 41, 55 (D.C. Cir. 2014) (per curium).
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`i. Indirect regulation
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`Section 1702(b) expressly provides that the power granted to the President “does not
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`include the authority to regulate or prohibit, directly or indirectly,” several activities, including
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`personal communications and the import or export of informational materials. 50 U.S.C.
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`§ 1702(b). Regulate means “[t]o control (an activity or process) esp[ecially] through the
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`implementation of rules.” Regulate, Black’s Law Dictionary (11th ed. 2019). And prohibit means
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`“[t]o forbid by law” or “[t]o prevent, preclude, or severely hinder.” Prohibit, Black’s Law
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`Dictionary (11th ed. 2019). Both verbs are transitive and require an object—like an activity,
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`process, or action—to express a complete thought. The Chicago Manual of Style ¶ 5.98 (17th ed.
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`2017) (noting that verbs describe the “action the subject exerts on the object”).
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`“Regulate” or “prohibit” are also both modified by the adverbs “directly or indirectly,”
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`which describe the relationship between a prohibition or regulation and its object. Directly means
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`“[i]n a straightforward manner” or “[i]n a straight line or course.” Directly, Black’s Law
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`Dictionary (11th ed. 2019). Indirectly means “[n]ot in a straight line or with a straight course;
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`circuitously” or “through some intervening . . . thing; mediately.” Indirectly, Oxford English
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`Dictionary (3d ed. 2009). Both adverbs tell readers something about the path a regulator takes to
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`reach an intended destination (i.e., a straightforward or circuitous path). And the inclusion of both
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`adverbs demonstrates that, at least as used in IEEPA, prohibitions and regulations must have some
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`object or goal. Otherwise, it would be impossible to discern whether a regulator’s path toward that
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`object or goal is straightforward, circuitous, or mediate. Miller v. Clinton, 687 F.3d 1332, 1347
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`(D.C. Cir. 2012) (we construe statutes “so that no provision is rendered inoperative”).
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`In short, by modifying the verbs “regulate or prohibit” with the adverbs “directly or
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`indirectly,” Congress withdrew the President’s authority to control or forbid certain ends (objects),
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`regardless of whether the means (prohibitions or regulations) aim to achieve those ends in a
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`straightforward way (directly) or circuitously (indirectly). Ass’n of Colleges v. Duncan, 681 F.3d
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`427, 444 (D.C. Cir. 2012) (phrase “directly or indirectly” is “extremely broad language”). Three
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`of the Parties’ arguments can therefore be easily resolved.
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`First, Plaintiffs contend that § 1702(b) contains no “purpose” requirement, while
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`Defendants argue that transitive verbs like regulate and prohibit lack discernable meaning without
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`an intended object. Reply, ECF No. 47, 8; Renewed Opp’n Mem., ECF No. 44, 11. Congress’s
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`decision to include the word “indirectly” shows that Defendants have the better argument. A
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`regulator cannot be said to indirectly (or mediately) control a primary object by regulating a
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`secondary object, unless the regulator has some primary object in view. In other words, a regulator
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`must have a goal or object before the means selected to achieve that goal can be called indirect or
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`circuitous. By including the adverb indirectly, Congress precluded regulations that directly target
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`permissible objects (like business-to-business transactions) but have the goal of indirectly
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`controlling impermissible objects (like “personal communications” or “informational materials”).
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`See 50 U.S.C. § 1702(b)(1), (3).
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`Second, Plaintiffs are right to object to the government’s reliance in this litigation (but not
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`in the Commerce Memorandum) on a Treasury regulation about the scope of the informational-
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`materials limitation. Compare Reply, ECF No. 47, 7, with Renewed Opp’n Mem., ECF No. 44,
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`18 (discussing 31 C.F.R. § 560.210(c)). The Treasury regulation states that the President may
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`always regulate (among other things) “transactions related to . . . informational materials not fully
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`created and in existence at the date of the transactions, . . . [or the] provision of services to market,
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`produce or co-produce, create, or assist in the creation of information or informational materials.”
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`31 C.F.R. § 560.210(c)(2). The regulation parrots rather than interprets § 1702(b). See id.
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`§ 560.210(c)(1); Gonzales v. Oregon, 546 U.S. 243, 257 (2006) (noting that the “existence of a
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`parroting regulation does not change . . . the meaning of the statute”). Plus, the regulation
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`unreasonably overlooks the possibility that some rules that directly target a permissible object—
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`like the provision of marketing services—might also aim to mediately (or indirectly) control an
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`impermissible one. To be sure, many marketing regulations are likely permissible, but Treasury’s
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`interpretation oversteps the plain meaning of § 1702(b) by suggesting that all such regulations,
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`regardless of their intended objects, are permissible under IEEPA.
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`Third, the Parties accuse one another of misunderstanding the words “indirect” and
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`“incidental.” Reply, ECF No. 47, 9; Renewed Opp’n Mem., ECF No. 44, 14–15. The Court does
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`not doubt that the terms cover different ground, as only one of the four objects that Congress
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`shields from indirect regulation in § 1702(b) explicitly references “transactions ordinarily incident
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`to travel.” 50 U.S.C. § 1702(b)(4); see also Russello v. United States, 464 U.S. 16, 23 (1983)
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`(noting that when Congress includes a term “in one section of a statute but omits it in another”
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`courts generally presume that Congress “act[ed] intentionally and purposely”). But the Parties
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`disagree about how to decide when a regulation indirectly regulates an activity, as opposed to
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`burdening an activity incidentally. Reply, ECF No. 47, 9; Renewed Opp’n Mem., ECF No. 44,
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`14–15. The text, however, offers a simple distinction: regulations (whether direct or indirect)
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`target objects, whereas incidental burdens are effects regulations impose on something other than
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`intended objects. See 50 U.S.C. § 1702(b); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
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`50 (1987) (“A common-sense view of the word ‘regulates’ would lead to the conclusion that in
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`order to regulation insurance, a law must not just have an impact on the insurance industry, but
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`must be specifically directed toward that industry.”).
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`While those arguments are easily resolved, a central issue remains: the phrase “regulate or
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`prohibit, directly or indirectly” does not provide a method for identifying the objects of a
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`regulation. The phrase assumes that an action that directly regulates one object may circuitously
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`or mediately (indirectly) regulate another object. But it offers no clear method for sorting direct
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`from indirect objects or for deciding whe