United States v. Mead Corp
Congressional statute rules that the final classification of goods for tariff purposes should be fixed by Customs. Specifically section 1502(a) provides that the Secretary of the Treasury can promulgate rules necessary for the classification and assessment of duties. The Secretary sets these classifications via "ruling letters." These letters are subject to modification, should not be relied on, are not subject to notice and comment, do not have to be published, and do not have to be accompanied by any reasoning.
Mead Corp imports day planners and initially these planners were put in a certain class of items that lead to a 0% tax rate. They were eventually put in class of products that was taxed at 4%.
Mead challenged this classification in the United States Court of Appeals for the Federal Circuit. The court ruled that because the classification ruling are not "preceded by notice and comment as under the APA ... they do not carry the force of law and are not, like regulations, intended to clarify the rights and obligations of importers beyond the specific case under review." Therefore, Customs would not be given Chevron deference. It also disagreed with the classification of the day planners.
The court rejects that deference is either complete or not. Rather it varies depending on the "thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control."
First the court says that when Congress gives an agency the ability to engage in rule making and adjudication, Chevron deference is usually given. However, there still could be Chevron deference when "no such administrative formality was required and non was afforded."
In this case, Customs was not making their rules with administrative formality. Further, Congress gave no indication that it wanted to delegate authority to make regulations with the force of law. The court says that although the Customs's ruling letters may be interpretive and may have precedential value, this still not enough to get Chevron deference. Rather, in this case the precedential value of the letters is counterbalanced by the fact that Customs classifications are able to be reviewed by the Court of International Trade. This is at odds with Chevron.
The court then reiterates that the letters require no notice and comment, they are not binding on third parties, they cannot be relied on by third parties, and there are tens of thousands issued each year.