Issue 303, June 1, 2001
The U.S. Supreme Court is expected to rule this summer on whether courts must give deference to tariff classification rulings issued by the U.S. Customs Service. Under general principles of administrative law, where a statute is silent or unclear on a given subject, courts will customarily defer to an administrative agency's reasonable interpretation of that statute. This principle is referred to as "Chevron deference," named for the court case in which it was first described. The courts have already established that Customs' regulations (as opposed to rulings) are entitled to Chevron deference, based in part on the fact that regulations are made through formal procedures involving advance public notice and comment. In the pending case of United States v. Mead, the Supreme Court is considering whether tariff classification rulings are entitled to the same level of deference, or whether courts may give them less weight in deciding whether the agency acted properly in a given case.

The Supreme Court's ruling - either way - will have the most impact on the U.S. Court of International Trade (CIT), where importers must go to challenge an adverse Customs ruling. The CIT, however, is not waiting for the Mead ruling before addressing the deference issue. In one recent case, for example, the CIT ruled that a long-standing Treasury Decision issued by Customs was not entitled to Chevron deference: "As there is no evidence that TD 83-173 was issued with the benefit of notice and comment procedures, it is appropriate for the Court to afford it respect, but not deference." (BOUSA, Inc. v. United States, Slip Op. 01-53, Ct. Int'l Trade, April 26, 2001, at 5.) In that case, the CIT found that the Treasury Decision could not control the tariff classification of a petroleum product, because it conflicted with the legal notes to the tariff schedule.

This is good news for importers. The less deference a court gives to Customs' decisions, the easier it should be for importers to challenge those decisions in the courts. Conversely, a court's application of Chevron deference makes it very difficult to challenge an agency action. Much will depend on the Supreme Court's upcoming ruling in Mead, but in the meantime the BOUSA case indicates the CIT's inclination to give less deference rather than more.

Our contributing writers, Richard H. Abbey and Sarah M. Nappi, are attorneys at Ablondi, Foster, Sobin & Davidow p.c. and can be reached at via email at: rabbey@ablondifoster.com and snappi@ablondifoster.com respectively.

Please note that due to the complex nature of the subject matter, Danzas AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with Danzas AEI.