We'll come back to that.
Whenever I talk to students (either as an adjunct professor or in so-called "informational interviews"), I talk up the value of a class in administrative law. Customs and trade law is administrative law. Despite the name and the often undue emphasis on WTO disputes, this practice is generally about the federal government regulation of business. That makes it administrative law. It is only tangentially international law.
The only way to be fully able to advise clients on what Customs and Border Protection can and cannot due is to understand the more general limitations imposed upon the agency by administrative law. Agencies are bound by law. Agencies must follow their own regulations. Courts should defer to the agency only when the law is unclear. Stuff like that. As I tell students, the most important trade law case is Chevron and that case involves environmental regulations.
So, what are we to do with this decision of the Third Circuit? The case involves the review of the FCC's fine for the 9/16 of a second broadcast of Janet Jackson's breast during the Superbowl halftime show. The applicable standard of review is "arbitrary and capricious" under the Administrative Procedure Act (5 USC 706(2)(A)). Arbitrary and capricious is the standard applied to reviews of negative preliminary injury determinations in trade cases and by the Court of International Trade in cases brought under 28 USC 1581(i). Clearly, this case is relevant to us.
Here is a nice articulation of the standard of review based on SEC v. Chenery:
We generally find agency action arbitrary and capricious where:
the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency’s action that the agency itself has not given.
Here is another useful quote for the proposition that agencies can change their policies provided they do it in a reasoned way:
The question is whether the FCC’s departure from its prior policy is valid and enforceable as applied to CBS. As noted, agencies are free to change their rules and policies without judicial second-guessing. See, e.g., Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 863 (1984). But an agency cannot ignore a substantial diversion from its prior policies. See Ramaprakash v. FAA, 346 F.3d 1121, 1124 (D.C. Cir. 2003) (agency must “provide a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored”). As the Supreme Court explained in State Farm, an agency must be afforded great latitude to change its policies, but it must justify its actions by articulating a reasoned analysis behind the change . . . .
Does first sale valuation come to mind?
I am now speaking directly to the judges (and their clerks) at the CIT: Please inject some appropriately judicial spice into your opinions. Find in-context ways in which to mention Janet Jackson's breast in your decisions. It can only improve the traffic to the CIT's web site.
For those who care, the FCC fine was, in fact, deemed arbitrary and capricious but since it is a 102 page opinion and I have work to do, that's all you will get from me.