On June 28, 2024, the Supreme Court handed down its decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), striking down the 40-year-old concept of “Chevron deference,” which gave federal agencies the power to “reasonably” settle regulatory ambiguity in accordance with agency goals and policy, without interference from judicial interpretation. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Ironically, Chevron deference was born from the efforts of the 1984, pro-deregulation EPA to leniently enforce provisions of the Clean Air Act that addressed pollution at industrial facilities. Chevron U.S.A. pushed for a more business-friendly interpretation of the Clean Air Act, whereas environmental groups sought a stricter interpretation. The Supreme Court ruled for Chevron by giving the EPA the leeway to interpret its regulations per existing agency policy. From that day forward, and until just last week, agency interpretation of the law was, in many cases, incontestable.1
In reversing Chevron deference, the Supreme Court has shifted the balance of power away from agencies and back to the legislative branch and courts, thus removing longstanding agency authority over the interpretation of ambiguous rules. Without Chevron deference, federal courts may still give federal agencies the same deference, but now on a case-by-case basis after weighing factors such as “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.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). On the downside, whereas one may have been able to predict the outcome of a dispute with a government agency based on agency precedent or guidance, such precedent may now be challenged in court. On the plus side, the specter of questionable decisions made by an agency being subject to judicial review may cause that agency to be more careful of dismissing a challenge outright.
In the international trade arena, the Court of International Trade has faithfully followed Chevron deference in various matters, including AD/CVD reviews and certain CBP actions, particularly those limited to interpretations of tariff terms in regulations. BASF Corp. v. United States, 30 C.I.T. 227, 236. Perhaps thankfully, the vast and complicated body of law that addresses tariff classification has been exempt from the concept of Chevron deference and relies primarily on judicial interpretation of the facts of the case at hand. United States v. Mead Corp., 533 U.S. 218 (2001). However, Chevron deference was a bedrock rule for interpretation of agency action for many other facets of federal law that intersect with international trade, such as those by the FDA, EPA, USDA, and Fish & Wildlife Service.
With the Supreme Court’s decision to overrule Chevron deference, importers can petition a court to review statutory language without automatic deference to agency interpretation. This shift is expected to have significant impacts on the enforcement of trade laws as follows:
- Growing Uncertainty for Trade Requirements: The international trade community interacts with dozens of federal agencies whose actions were previously unchallengeable. Importers, customs brokers, exporters, NVOCCs, carriers, and other trade members are all governed by a multitude of agency regulations, which could now be challenged and changed in federal court. Although foundational trade principles are provided for by statute, most of the rules related to international trade are regulatory, and it is now uncertain whether and how they will survive.
- Additional and Repetitive Court Challenges: Companies are expected to flood the courts with challenges to agency decisions, especially in the AD/CVD arena where margins are especially high, arguing that these agencies’ interpretations are inconsistent with statutory language, leading to a rise in litigation and, consequently, judicial scrutiny over agency determinations.
- Inconsistency in Agency Decisions: With agency regulatory interpretation in the hands of the federal courts, we expect to see inconsistencies in how different courts give deference to the same agency’s decisions and regulatory interpretation. Further, court interpretations could differ across the various federal agencies that regulate U.S. industries, as they may inconsistently consider some factors more important than others based on different products and services.
- Heightened Trade Compliance Requirements: Companies are expected to face increased scrutiny and compliance requirements. As agencies become more cautious to avoid court action, they could demand more thorough compliance checks, increasing the workload for importers and brokers. Additionally, they may need to renegotiate terms with suppliers and customers due to increased legal risks and potential delays, affecting market competitiveness.
- Regulations Will Take Longer to Publish: Agencies are expected to become more cautious, and their regulatory justification more onerous, in issuing new regulations or enforcement actions, aware that their interpretations will not be given automatic deference under judicial review. For example, this could slow the implementation of new antidumping orders or the review of scope rulings.
The Supreme Court’s decision to terminate Chevron deference represents a substantial shift in the enforcement and interpretation of trade law. This ruling is likely to escalate legal disputes and decelerate the regulatory process as agencies adopt a more cautious approach.
Given the uncertainty surrounding its full impact, businesses engaged in international trade must brace for a more intricate regulatory environment and be prepared to litigate to safeguard their interests.
- This article is co-authored by the following members of Roberts & Kehagiaras LLP: Cameron W. Roberts, Partner; Jay A. Acayan, Partner; Josh Beker, Senior Associate; Harold Jackson, Associate; and Woongchan Yum, Law Clerk. Each author contributed significantly to the research, writing, and editing of this article. ↩︎
