/>iOur colleagues’ prior alert “Nine Questions, Nine Answers: The Supreme Court Decision Overruling ‘Chevron Deference,’” provides the details of the Loper Bright decision. The central holding is that when faced with an ambiguous law or a gap in the statute, judges rather than federal agencies will decide what the law means.
Much has been written about the Loper Bright decision as it marks a power shift from the agencies to the judiciary and is bound to reshape US law based on activities of federal agencies. The Chevron case had laid out a framework that federal judges have followed for almost 40 years in deciding challenges to agency action. Post-Chevron, it is up to the judges to fill the gaps in administering the statutes.
How Was Chevron Applied in Trade Cases?
Chevron has played an important role in judicial review of antidumping and countervailing duty (AD/CVD) determinations by the US Department of Commerce (Commerce), the US International Trade Commission (ITC), and in litigation over determinations by US Customs and Border Protection (CBP).
Prior to Loper Bright, if a company challenged one of the international trade agency’s decisions because the decision was based on an incorrect review of the statute, the Court of International Trade (CIT) and/or the Court of Appeals for the Federal Circuit (Federal Circuit) would conduct a two-step analysis under Chevron. First, the courts considered whether the statute was clear or whether it was silent or ambiguous. Second, if the statute was ambiguous, the courts would consider whether the trade agencies reasonably interpreted the statute based on their expertise and defer to that interpretation.
In one of the few cases involving trade remedies that was decided by the Supreme Court, United States v. Eurodif S.A., 555 US 305 (2009), Chevron deference played a key role. The issue in Eurodif was whether certain contracts, whereby a domestic buyer provided Eurodif with cash and unenriched uranium in exchange for receiving a specified quantity of low enriched uranium, are sales of goods subject to the antidumping laws or, alternatively, sales of services that are exempt from the antidumping laws. In a unanimous opinion by Justice David Souter, the Supreme Court relied on Chevron to answer this question. The Court explained that “[t]he statute gives this determination to the Department of Commerce in the first instance … and when the Department exercises this authority in the course of adjudication, its interpretation governs in the absence of unambiguous statutory language to the contrary or unreasonable resolution of language that is ambiguous.” Because, in the Court’s view, Commerce had reasonably determined that the contracts were sales of goods, it reversed the Federal Circuit’s decision to the contrary. The last paragraphs of the Eurodif decision imply that a ruling in Eurodif’s favor might have had significant effects on Commerce’s ability to enforce antidumping laws.
Post-Chevron, in a case like Eurodif, Commerce no longer gets to resolve the substantive issue, i.e., whether there was a sale of goods or services, but courts must come to their own independent conclusions about how to interpret the statute. This would require a court to delve deeper into the technical issues to interpret the trade laws.
What Does the Future Look Like? Some Things Change…
Under the Chevron framework, Commerce, the ITC, and CBP enjoyed a certain leeway with their decisions. The agencies did not need to present the best interpretation of the law but a reasonable interpretation of the law. Now, where the Supreme Court has explained that courts are the arbiters of the law — not agencies — Commerce, the ITC, and CBP may be required to be more persuasive and offer more rigorous analyses in their explanations. We expect that the agencies must put forth an analysis and interpretation which the courts agree is the correct or only interpretation. Thus, the Loper Bright decision will likely result in more litigation in the already heavily litigated world of international trade.
There may be new legal actions focused on what questions are permitted for the agencies to handle and which are for the courts to resolve. For example, where Commerce or CBP’s decisions rely largely on the facts, these decisions may still be accorded the same level of deference they traditionally enjoyed. The Supreme Court in Loper Bright stated that “when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation while ensuring that the agency acts within it.” However, Loper Bright provides little guidance on how to separate policy decision-making questions that the agency can decide from legal questions that the courts must decide.
Recently, Commerce issued new regulations relating to its analysis and authority to examine allegations in AD/CVD cases, which we described here. While we expected legal challenges to Commerce’s implementation of these regulations before the Loper Bright decision, it is possible that the core of Commerce’s new regulations will also be reviewed. However, as described below, Commerce will still receive deference in interpreting its own regulations.
While Others May Not…
In appeals of trade remedy determinations made by Commerce and the ITC, the standard of review is provided in Section 516A(b)(1)(B) of the Tariff Act of 1930 (19 U.S.C. § 1516a(b)(1)(B)). According to that section, the relevant agencies must prepare and issue decisions which are based on substantial evidence and in accordance with law. A decision is “based on substantial evidence” if it is reasonably supported by the administrative record compiled during the proceeding. A decision is “in accordance with law” if it is consistent with the text or reasonable interpretation of the text of the governing statute.
Post Chevron, this standard of review remains unchanged. Therefore, in the international trade context, a court’s analysis may not be radically different because the statute already provides a certain level of deference to the relevant trade agencies. What will be different, is that agencies may be more limited in their ability to fill the gaps in administering the statute.
Similarly, the Loper Bright decision may have little impact on judicial review of actions challenging the imposition of tariffs by the Office of the US Trade Representative/president. This is because the courts have reviewed presidential action in international trade matters under a different, more deferential standard of review. This is logical as the president’s decisions on trade matters may have foreign policy or national security implications.
Deference Survives in Other Forms
Although the Loper Bright decision seems like a seismic shift in how federal agencies and the courts will approach issues in administrative law cases, including international trade cases, the Supreme Court included a few exceptions in its decision:
- Loper Bright cites Kisor favorably, which holds that agency interpretations of their own regulations are entitled to deference when those interpretations are made in a formal context, consistent with the agency’s precedent, based on actual expertise, and issued with fair notice. When CBP, Commerce, and the ITC rely on their own regulations — which is often — these decisions will receive the same amount of deference they traditionally enjoyed.
- Deference to agency interpretations of its rules, based on specialized experience, under the Supreme Court’s opinion in Skidmore still exists.
- Loper Bright announced that all cases already decided based on Chevron deference are still good law.
Does Loper Bright Bar Courts From Considering an Agency’s Expert Input?
As previously discussed in our firm’s blog, the answer is no. Perhaps the Federal Circuit’s recent opinion in Asociación de Exportadores e Industriales de Aceitunas de Mesa v. United States, 102 F.4th 1252 (Fed. Cir. 2023), issued a few weeks before the Loper Bright decision, already demonstrates one of the possible frameworks that courts may use in deciding trade cases. In Asociación de Exportadores, the court addressed the meaning of the words “substantially dependent” in Section 1677-2 of the Tariff Act, 19 U.S.C. § 1677-2, a countervailing duty law setting forth the conditions under which Commerce may treat a subsidy on a raw agricultural product as a subsidy on the finished good for countervailing duty purposes. The government in this case argued that the court should apply Chevron and defer to Commerce’s interpretation of Section 1677-2.
The Federal Circuit decided the issue without relying on Chevron. The court reasoned that Congress delegated the task of making that determination to Commerce:
Because we regard the term ‘substantially dependent’ as general but not ambiguous, we believe this case is more properly viewed as one involving implied delegation of adjudicative authority to the agency rather than deference to the agency’s interpretation of an ambiguous statute (102 F.4th 1252, 1260).
The Federal Circuit explained that the statutory term “substantially dependent” is general in nature, indicating that Congress intended to delegate the question of whether particular facts satisfy the statute’s requirements to Commerce. “Congress … may confer substantial discretion on executive agencies to implement and enforce the laws.” Gundy v. United States, 588 US 128, (2019). By using nonspecific statutory language, Congress invokes its “ability to delegate power under broad general directives.”
Binational Panels Under USMCA Will Be Impacted by Loper Bright
The demise of Chevron will also impact challenges to Commerce and the ITC determinations in trade remedy cases brought before binational panels convened under the North America Free Trade Agreement (NAFTA) and the United States-Mexico-Canada Agreement (USMCA). For example, NAFTA Article 1904.1 provides that “each Party shall replace judicial review of final antidumping and countervailing duty determinations with binational panel review.” Panels constituted under Article 1904(2) of the NAFTA review final determinations by Commerce and the ITC to determine if they are in accordance with the laws of the importing country, in this case, the United States.
Like a reviewing court, the binational panels must determine if the agency’s determination is based on substantial evidence and in accordance with law. In the past, binational NAFTA/USMCA panels have consistently cited and followed the two-stage approach provided by Chevron, giving deference to Commerce’s statutory interpretations. Just like a reviewing court post Chevron, NAFTA/USMCA panels will not be able to defer to the agency’s interpretation of an ambiguous statute and will need to employ the traditional tools of statutory construction to interpret the relevant trade laws.
Takeaway
Deference to the relevant trade agencies’ expert opinions still exists in some form, although the agencies may need to provide more analysis to support their determinations. Anticipating the potential overturn of Chevron, trade courts had already started to move away from Chevron deference, focusing on the broader standard of review applicable in trade cases: whether decisions are based on substantial evidence and in accordance with law (as written). However, the demise of Chevron has opened the door to new legal challenges by companies seeking to invalidate various aspects of agency determinations in the trade context, given the agencies’ loss of substantial deference related to their statutory interpretations.
