Is the United States the world commerce police?

In a recent opinion, in which he dissented from the Supreme Court’s refusal to hear a case, Justice Clarence Thomas suggested that Congress’ power to regulate international commerce may be broad, but not as broad as some lawmakers and judges would have it.

In his dissenting opinion in Damion St. Patrick Baston v. United States, Thomas stated that he is interested in having the court address the limits of Congress’ power to regulate the world economy, and provided new language with which to scrutinize statutes that purport to do just that, such as the Lacey Act.

How Far Is Congress’ Reach?

This question emerged after the successful federal criminal prosecution of Damion St. Patrick Baston, a Jamaican citizen who ran an international prostitution ring for sex trafficking.

Following Baston’s conviction, the trial judge ordered him to pay one of his victims $78,000 in restitution, which is the amount she earned working for him as a prostitute while in the United States, and an additional $400,000 in restitution, which is the amount she earned working for him as a prostitute while in Australia.

The question presented was whether the second restitution order, which covered economic activity that occurred completely outside the United States, was constitutional.

“The facts are not sympathetic, but the principle involved is fundamental,” Thomas wrote, concluding that the court should have granted review in the case to “reaffirm that our federal government is one of limited and enumerated powers, not the world’s lawgiver.”

Ultimately, the other justices did not agree with Thomas, leaving unanswered the question of whether or not the Foreign Commerce Clause permits restitution to Baston’s victims based on extraterritorial conduct.

The Foreign Commerce Clause found in Article 1, Section 8 of the Constitution states, “Congress shall have power to … regulate commerce with foreign nations.” The drafters of the Constitution included this provision as a limitation on the states’ ability to raise tariffs on goods from other countries, among other economic concerns, including those reflected in Article 1, Section 9.

Under the Articles of Confederation, states set tariffs on goods from other states as well as foreign nations. The Constitution, instead, placed that responsibility with the federal government.

In Board of Trustees of University of Illinois v. United States (1933), the court explained, “In international relations and with respect to foreign intercourse and trade the people of the United States act through a single government with unified and adequate national power.”

The Foreign Commerce Clause, however, was not written as an invitation for the federal government to get involved in or import the laws of foreign nations.

Several courts of appeals, including the court of appeals in this case, have written far-reaching opinions that interpret Congress’ power to regulate international commerce quite broadly. The government argued that these cases hold that “Congress’ power under the Foreign Commerce Clause includes at least the power to regulate … activities that have a ‘substantial effect’ on commerce between the United States and other countries.”

Thomas writes:

Taken to the limits of its logic, the consequences of the Court of Appeals’ reasoning are startling. The Foreign Commerce Clause would permit Congress to regulate any economic activity anywhere in the world, so long as Congress had a rational basis to conclude that the activity has a substantial effect on commerce between this nation and any other …

That power might sound fair when used to increase the amount of money damages to the victim in Baston v. United States, but in other contexts, it seems less so.

“Congress would be able not only to criminalize prostitution in Australia,” Thomas continues, “but also to regulate working conditions in factories in China, pollution from power plants in India, or agricultural methods on farms in France.”

The Founders, Thomas argues, did not intend for Congress’ power to extend so far. Instead, “whatever the correct interpretation of the foreign commerce power may be,” he writes, “it does not confer upon Congress a virtually plenary power over global economic activity.”

Although Thomas presents a hypothetical, the scenario is a real one. In fact, it may be worse than Thomas lets on.

The Lacey Act

Under the Lacey Act (1900), which regulates commercial trade in plants and animals, commerce abroad is not only regulated by U.S. and foreign law. It can also be a crime in this country for Americans to violate the laws of foreign countries, or even to contract with other parties who violate foreign law.

For example, the U.S. Department of Justice sent Lumber Liquidators, an American flooring retailer, a $13 million tab in criminal fines and penalties because, unbeknownst to them, a Russian timber company harvested more wood in remote regions of Russia than Russian law allowed.

The Russians sold that wood to a Chinese flooring manufacturer, who sold it to Lumber Liquidators, who imported it into the United States.

The Justice Department argued that Lumber Liquidators should have exercised greater “due care” to uncover the illegal harvesting in “the Russian Far East,” which the Sierra Club names as “the last refuge of the Siberian tiger.”

A Lumber Liquidators showroom store in New York City. (Photo: Richard B. Levine/Newscom)

An international organization known as the Environmental Investigation Agency helped “to bring Lumber Liquidators’ deception to light,” according to the Sierra Club. And Assistant Attorney General John C. Cruden, at the Department of Justice’s Environment and Natural Resources Division, said, “Now they will pay a price for this callous and careless pursuit of profit … [a] trail of corrupt transactions and habitat destruction.”

That scenario may be worse than the one that Thomas describes, as criminal sanctions are far more severe than civil fines or administrative penalties for regulatory violations.

As our colleague John Malcolm explains, criminal laws and penalties are “meant to enforce a commonly accepted moral code that is set forth in language the average person can readily understand and that clearly identifies the prohibited conduct.”

Holding a company criminally liable for the acts of a third-party supplier operating under foreign law at the beginning of a multi-national supply chain oversteps those bounds.

Instead, regulatory schemes, Malcolm writes, should “establish rules of the road (with penalties attached for violations of those rules) to curb excesses and address consequences in a complex, rapidly evolving, highly industrialized society.”

Clearly, Russian logging limits and foreign Siberian tiger populations belong in the latter category—if at all—in U.S. law.

Moreover, in United States v. Molt, the 3rd U.S. Circuit Court of Appeals wrote that the Lacey Act “simply limits the exclusion from the stream of foreign commerce to wildlife unlawfully taken abroad,” but the word “unlawfully” there means that a violation of foreign law is an element of a crime under the Lacey Act.

Thomas’ dissent could provide the impetus for the court to examine the scope of Congress’ power to regulate international commerce in a future case. None of the Supreme Court’s opinions, Thomas notes, “involve[d] legislation of extraterritorial operation which purports to regulate conduct inside foreign nations.”

It is unclear whether Thomas would find it permissible for Congress to take the additional step of reaching “conduct inside foreign nations” through the laws of foreign nations.

Pushing Back on Regulatory Overreach

Thomas’ dissenting opinion provides at least two insights into federal law on foreign commerce.

First, he is interested in scrutinizing Congress’ power to regulate activity under the Foreign Commerce Clause if and when an appropriate case arises.

Building on the Supreme Court’s past opinions on the scope of the Interstate Commerce Clause, lower federal courts have charted an expansive vision of Congress’ power to regulate foreign conduct—perhaps, according to Thomas, straying a bit too far from the Founders’ understanding of the reach of that clause.

Second, Thomas’ dissenting opinion provides new perspective into constitutional questions surrounding statutes that regulate conduct abroad.

One of those statutes is the Lacey Act, which our colleague Paul Larkin has argued is unconstitutional insofar as it makes otherwise law-abiding businessmen—from lumber merchants to lobstermen to guitar manufacturers—liable for violating the criminal laws of foreign nations without knowledge of their wrongdoing.

Americans who run afoul of the Lacey Act and other U.S. laws that regulate foreign commerce may find a useful guidepost in Thomas’ dissenting opinion in Baston.