Saturday, September 10, 2005

Skidding into Deference

Whenever an importer sues the government over duties, the system gives all the breaks to the government. The challenged decision is presumed to be correct. That means the importer has the burden of proving that Customs is wrong. That's not too terrible, as some one has to have the burden of proof and it does not make sense to force Customs to prove that it is right every single time they deny a protest. But, in most customs matters, the Court of International Trade is also required to reach the correct result on the record developed before it. That means the Court looks only to the papers or evidence submitted, not the agency's record. That is what we call de novo review just to make it sound sophisticated.

The apparent conflict between de novo review and the presumption that Customs is correct raised questions of how much independent thought the Court of International Trade is supposed to exercise when reviewing to Customs' decisions. Stay with me here, I have a point.

In most areas of federal administrative law, there is a pretty strict rule that the courts let the relevant agency decide what the laws mean and the courts go along with that interpretation as long as it is reasonable. So when the EPA, for example, says you measure smoke stack emissions at the top of each stack, that is going to be the rule even if the court thinks it would be better to measure emissions at ground level. The reason for this is that the agency is supposed to have technical expertise that a court is unlikely to have. The one important caveat is that if Congress has clearly said in the statute that the emissions are to be measured at ground level, that is the end of the matter. Both the court and the agency are bound by the law as written. All of this comes out of a famous 1984 Supreme Court cases called Chevron v. NRDC.

For lots of reasons unique to customs law, no one thought Chevron applied to most day-to-day customs decisions. There was some disagreement on this. The government, of course, always argued for Chevron deference of every decision. And, a lot of people were willing to concede that if Customs went to the trouble of issuing a regulation (including public notice and public comment), Chevron would probably apply. That last point was confirmed in 1999 a cased called United States v. Haggar Apparel.

This all came to a head in a case called United States v. Mead Corp. which involved the classification of day-planner style diaries. In this case, there was no regulation only a series of rulings; some of which were in conflict. Customs wanted Chevron-style deference. The importer wanted de novo review. This went up to the Supreme Court.

The Court (8 to 1) said that Customs rulings are not entitled to Chevron deference. Basically, there are too many, issued from too many offices, and they are not binding on third parties. So, they should not have the force and effect of law (so to speak). There was much rejoicing in the customs bar until we read the rest of the opinion.

The Court went on to hold that Customs rulings are entitled to deference under a 1944 case called Skidmore v. Swift & Co. Skidmore held that Courts should look at federal administrative decisions and decide what weight to give that decision based upon several factors including:

  • the thoroughness of the consideration
  • the validity of the reasoning
  • consistency with earlier and later decisions
  • and all other factors that give the decision the power to persuade

So, you may be wondering, what's my point? It is simple: Every decision Customs makes gets Skidmore deference. Under this rule, the vast majority will be ignored because they contain no evidence of consideration, no express reasoning, and nothing that gives them the power to persuade. The check box denying a protest has no power to persuade, so the decision will be ignored. But, it receives Skidmore deference at least to the extent that the Court needed to look at it.

Recently, some CIT opinions have appeared to flip this around. It looks like the Court is checking whether the decision has any power to persuade and then declaring that the decision gets or does not get Skidmore deference.

In my very first post, I said I would not take any pot shots at judges, and I am not going to do so here. I am doing this as an academic exercise. If I had more time on my hands, I'd do this in a law review article (giving due credit to the partner in my firm that originally pointed this out to me). But, it is likely more people will actually read this. So, here are a couple examples:

In Simon Marketing, Inc. v. United States, Slip Op. 05-118 (Sep. 1, 2005), the Court says: "As a preliminary matter, the Court finds that CustomsÂ’ decisions in NY D84205 and HQ 963793 are not entitled to Skidmore respect." Substantially the same language is in Cargill Citro-America, Inc. v. United States, Slip Op. 05-101. In The Pillsbury Co. v. United States, Slip Op. 05-51, the Court says outright, "Nor is Customs entitled to Skidmore deference."

I think these conclusions are, respectfully, all wrong. What they should say is that Customs rulings are entitled to Skidmore deference, which they receive in proportion to the individual ruling's power to persuade. In each of the cases cited above, that is none. But, they still get Skidmore deference.

So, you might well ask, what difference does this make? As a practical matter, maybe none. But, lawyers and judges must be precise in how we say things. It is very hard to tell what argument might be made 10 years from now over whether a court did or did not give Skidmore deference. We should avoid that problem by closely following the decision from the Supreme Court.

1 comment:

Anonymous said...

Great post. It is, of course, crucial to give proper credit to your partner whose pet peeve this is, but whose blog has unilaterally banned work posts.