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Court Rules Against Use of Guidance to Change Regulation

Tuesday, January 30, 2018
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit has upheld the Court of International Trade’s ruling in Glycine & More Inc. v. U.S. and GEO Specialty Chemicals Inc. that the Department of Commerce erred in using a guidance document to amend a regulation adopted by formal notice-and-comment procedure.

This case involves a request for administrative review of the antidumping duty order on glycine from China that was subsequently withdrawn after the 90-day deadline. DOC regulations state that the department may extend this time limit if it decides it is reasonable to do so. According to the CAFC, the history of this regulation establishes DOC’s understanding of the circumstances under which an extension would be reasonable, which reflect concerns for not wasting departmental resources, for giving parties an opportunity to know the results of prior administrative reviews when applicable, and for not conducting undesired reviews, among other considerations.

Despite this record, the court said, in August 2011 DOC published a notice that “dramatically changed its approach” by stating that it would not consider extending the 90-day deadline unless the requestor demonstrated that an extraordinary circumstance had prevented it from submitting a timely withdrawal request. Before this notice, the CAFC stated, the regulation was understood to provide the DOC with wide discretion to use judgment regarding the facts and circumstances presented and to apply a reasonableness test in deciding whether to extend the deadline. After the notice, only extraordinary circumstances would do, and the DOC’s discretion was to be applied narrowly to the case and only when an applicant for extension could prove such extraordinary circumstances exist. As a result, “parties seeking untimely withdrawals would no longer be able to get an extension based on what might be reasonable under the circumstances in light of the concerns previously identified and employed by Commerce.”

The court concluded that the DOC notice “represented an incompatible departure from the clear meaning of the regulation.” It “was not simply an interpretive statement regarding an ambiguity in the regulation or a general statement of policy” but instead was “intended to effectively rewrite the substantive meaning of the regulation without going through the necessary notice-and-comment rulemaking.” Judicial deference to the guidance would thus essentially permit the DOC “under the guise of interpreting a regulation to create de facto a new regulation.”

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