United States v. Haggar Apparel Co.

1999-04-21

Headline: Court says judges must apply Chevron deference to Treasury customs rules, making it harder for importers to avoid duties for post-assembly treatments like permapressing.

Holding: The Court held that Treasury-issued customs regulations are subject to Chevron deference and, if a reasonable interpretation of an ambiguous tariff provision, must be given judicial deference, and it vacated and remanded the lower court judgment.

Real World Impact:

Courts must defer to reasonable Treasury customs regulations in duty refund cases.
Importers may find it harder to claim duty exemptions for post-assembly treatments.
The case returns Haggar’s claim to lower courts for review under Chevron standards.

Topics: customs duties, imports and tariffs, agency deference, manufacturing operations

Summary

Background

Haggar Apparel, a clothing maker, imported men’s trousers assembled at its Mexican plant from fabric cut in the United States. The fabric had a chemical resin applied in the United States. After sewing and a regular press in Mexico, workers baked the garments 12–15 minutes to activate the resin. Customs denied a duty exemption under the tariff provision that exempts articles only assembled abroad or given operations incidental to assembly, because a regulation (19 CFR §10.16(c)) treats permapressing as a non-incidental chemical treatment. Haggar sued in the Court of International Trade, which rejected the regulation; the Federal Circuit affirmed, and the Supreme Court reviewed the legal question.

Reasoning

The main question was whether Treasury customs regulations must be treated under the familiar Chevron framework that gives agencies deference when a statute is ambiguous. The Court held that the statutory scheme authorizes the Treasury and Customs Service to issue regulations that courts should consider and that a trade court must apply Chevron when appropriate. The Court concluded the regulation cannot be ignored and that the Court of International Trade is not exempt from Chevron analysis. The Supreme Court did not decide whether the specific permapressing regulation is itself a reasonable interpretation; it vacated the Court of Appeals’ judgment and remanded the case so lower courts can apply Chevron and decide the regulation’s reasonableness.

Real world impact

The ruling means judges should give controlling weight to reasonable Treasury customs rules in refund and classification cases. Importers who perform post-assembly chemical or heat treatments may face greater difficulty winning duty exemptions. Because the case was remanded, the final outcome on Haggar’s garments remains open pending further review.

Dissents or concurrances

Justice Stevens, joined by Justice Ginsburg, agreed the regulation was valid and would have reversed the Court of Appeals, finding the regulation a reasonable elaboration of the statute.