SUPREME COURT DECIDES MEAD
6/01


The trade community has been surprised at the number of import-export cases the U.S. Supreme Court decided to hear in the last year, a larger number of cases than it heard in the previous ten years. The latest case involves Mead Corp. and the classification of its day planners and was decided on June 18, 2001.

For many years, Customs classified these day planners so they were free of duty.  In 1993, Customs issued a ruling in which it changed its position and found them to fall under a different tariff provision so they became dutiable. Mead filed the appropriate protests which were denied and the case made its way to court.  The Court of International Trade found Customs' classification decision to be correct. The Court of Appeals for the Federal Circuit found in favor of Mead and so Customs appealed to the U.S. Supreme Court.  The basis for Customs' appeal was that its interpretation of the relevant tariff provision should have been binding on the court because it explained the agency's position in interpreting that tariff provision, sometimes referred to as Chevron deference. Not surprisingly, the importer vigorously disagreed. The question was framed for the Supreme Court as - to what degree of deference, if any, are Customs rulings entitled? Put another way, can the court hearing a classification dispute simply start from scratch in deciding a case or must it follow Customs' interpretation of a given tariff provision? In the end, the Court said - maybe!

The Supreme Court held that Customs rulings are not entitled to Chevron deference but may nonetheless be eligible for Skidmore deference.  In Haggar (decided while Mead was before the appellate court), the Supreme Court found that Chevron deference was due to actions by Customs where Congressional delegation allowed it to interpret statutory provisions, in that case HTS 9802.  The Court found that Chevron deference was also proper when Congress delegates authority to the agency to make rules carrying the force of law. Such deference is generally given when an agency promulgates regulations through notice to the public and an opportunity to comment, or adjudicates matters.

Clearly rulings do not go through a notice and comment process.  They also do not generally bind all importers. In fact, rulings can and often are reconsidered or later overturned. Through various means, Customs has warned importers not to rely on rulings unless they are the recipient.  As a result, the Supreme Court held that rulings are similar to "policy statements, agency manuals and enforcement guidelines." They are entitled to some weight but the amount of weight is to be decided by reference to the criteria enunciated in Skidmore.  Factors such as the specialized experience and broader investigation and information available to an agency must be considered, along with the writer's thoroughness, logic and expertness, the decision's fit with prior interpretations and any other sources of weight.  In the end, the Supreme Court left the importing community and the courts to decide how much "power to persuade" is contained in a given ruling by ordering the case back to the lower court for further hearings on the Skidmore deference question. In the broader scope of rulings generally, obviously New York (and most Port) rulings will not be entitled to any amount of deference as they generally contain only the final decision and little explanation. Rulings issued by Headquarters generally contain an explanation of the facts relied on, the law considered and sometimes even a clear explanation of why the decision was reached. However, just because the ruling is well thought out does not automatically mean an importer cannot challenge it. For example, if the ruling is based on material misstatements of fact or relies on the wrong law for its result, it may still be challenged. In the end, the U.S. Supreme Court left the playing field between Customs and the importing community relatively level when it comes to rulings, a good result for the trade given the enormously high cost of litigation.