The US Customs Service has the
authority to set import duties and tariffs based on regulations set by the
Secretary of the Treasury.
The Secretary issued a regulation that said that any port-of-entry Customs'
office can issue a "ruling letter" to set the tariff for a
particular category of imports.
Mead was a company that made
calendars and day-planners. These were initially considered to be
duty-free items until Customs Headquarters issued a "ruling
letter" that reclassified them as diaries, which made them subject to
a 4% tariff. Mead sued in the Court of International Trade.
Mead argued that Customs
should not be allowed to change their tariff classifications without
public notice and input, like they would have to for changing a regulation.
are very informal. There was no notice and comment period. This was a
decision that Customs made directly to Mead. Other companies might get
their day-planners categorized differently. It depended on the whim of
the specific customs' examiner that day.
There was no due process,
and no explanation or reasoning given in the ruling letter.
The Court of International
Trade found for Customs in summary judgment. Mead appealed.
The Court found that based
on Chevron U.S.A. Inc. v. Natural Resources Defense Council (467 U.S. 837 (1984)), they were to give
deference to Agency actions, as long as the actions were reasonable. In
this case, Custom's decision was reasonable, so the Court had no
authority to overturn it, even if they disagreed with it.
The Appellate Court reversed.
The Appellate Court found
that "ruling letters" should not be treated like regulations because they are not preceded by notice and
comment as under the Administrative Procedure Act, do not
carry the force of law, and are not intended to clarify importers' rights
and obligations beyond the specific case. Therefore, the Court is not
required to give them Chevron deference, like they are required to give
The US Supreme Court affirmed.
The US Supreme Court found
that the courts do not have to give judicial deference to Customs tariff
The Court looked to Chevron, and found that the courts are to give
deference to Administrative Agencies, "when it appears that Congress
delegated authority to the agency generally to make rules carrying the
force of law, and that the agency interpretation claiming deference was
promulgated in the exercise of that authority."
"Chevron should apply
only where Congress would want Chevron to apply."
The Agency wasn't doing
anything that would appear to be a rulemaking, therefore they aren't entitled to the
deference that a normal rulemaking decision would have.
The Court found that in this
case there was no indication that Congress intended Custom's tariff
classification decision to carry the rule of law, therefore deference is
However, the Court noted
that based on Skidmore v. Swift
(323 U.S. 134 (1944)), "the ruling is eligible to claim respect
according to its persuasiveness."
Basically, the courts
should consider the Agency's position as the advice of an expert. Not
controlling, but helpful.
In a dissent, it was argued
that the regulation game from the
head of the US Customs Service when he issues the regulation saying that
individual Customs Offices could issue "ruling letters." The
majority would have the Agencies issued official rulemakings for
everything, and that's a waste of time and paper. It would be impossible
for an Agency to have defined everything in a formal rulemaking process.
In addition, the dissent
suggested that Chevron deference should be a simple yes-no question. The
majority blurs the line into a 'totality of the circumstances' approach
which makes it a much more complicated legal question.
Basically, this case said that
only things that go through the rulemaking process or are signed by the head of the Agency are
entitled to full (Chevron) deference, while lower decisions are only
entitled to partial (Skidmore) deference.
But, it doesn't matter if it
is a legislative rule or just an interpretive
rule. The important thing is whether
the ruling was meant to have 'the force of law'.