In a major ruling, the Supreme Court overturned their decision in Chevron v. Natural Resources Defense Council that gave federal agencies great leeway in interpretation of laws. Instead of deferring to agencies, judges may now substitute their own interpretation of the law, making it easier to overturn agency regulations across the federal government.

What is Chevron Deference

In 1984, the Supreme Court decided Chevron v. Natural Resources Defense Council – the case involved the Environmental Protection Agency’s (EPA) interpretation of the Clean Air Act. The Court ruled that since the law was ambiguous, the EPA (and other federal agencies) should have leeway to interpret the statute. Further, Chevron said that and that courts should uphold the agency’s interpretation, even if the agency’s reading differs from what the court believes is the best statutory interpretation, as long as it is reasonable.

This principle became known as “Chevron deference” and came to be one of the most consequential decisions in Administrative Law. In the 40 years since Chevron, federal courts have cited the decision more than 18,000 times.

The Supreme Court’s Decision Overturning Chevron

In a 6-3 ruling, the Supreme Court threw out the “Chevron deference” principle, calling it inconsistent with the Administrative Procedure Act – the federal law that governs the procedures federal agencies must follow and how courts are to review actions by the agencies. The decision stated that it is the responsibility of the courts to decide what the laws mean, not the agencies, and that Congress expects courts to handle statutory questions.

The decision also stated that, going forward, courts must exercise “their independent judgment in deciding whether an agency has acted within its statutory authority.” In other words, instead of granting broad deference to the agencies, judges may use their own interpretation of the law to determine whether the agency acted within the bounds of the law. As a practical matter, it will now be easier for courts to overturn regulations promulgated by federal agencies.

Prior Cases

In the majority opinion, the justices stated that previous cases that relied on the Chevron principle should be upheld – including the decision in the original Chevron v. Natural Resources Defense Council case.

What Happens Now?

In the opinion, the Justices seemed to signal that the precedent in place before the Chevron decision is still valid. That doctrine is Skidmore – based on the case Skidmore v. Swift case which involved the interpretation of the Fair Labor Standards Act. Under Skidmore, courts may still grant deference to an agency’s interpretation of a law, but only to the extent that the agency can persuade the court based on the agency’s thoroughness, consistency over time, and sound reasoning.

Implications for Customs Law

There are 47 federal agencies whose regulations may impact the import and export of goods. For the last 40 years, these agencies have been given broad discretion to interpret laws and implement rules as they see fit. Going forward, the courts no longer have to defer to these agencies, and may more easily overturn their rules and regulations.

Diaz Trade Law will continue to monitor how courts rule on trade-related regulations going forward. Questions? Get in touch with us today to learn more about how these developments may impact your business.