The Interplay of Chevron Deference and Charming Betsy

Assume that a U.S. agency modifies its interpretation of a federal statute to respond to an adverse WTO decision. In so doing, consistent with the Charming Betsy doctrine, its interpretation is brought into conformity with WTO jurisprudence with respect to one stage–the investigation stage–of the administrative proceeding. But the agency does not alter its interpretation of the federal statute with respect to other stages of the administrative proceeding. Does Chevron deference to administrative agencies allow for inconsistent interpretations of the same federal statute?

That was the question of first impression presented to the United States Court of Appeals for the Federal Circuit in Dongbu Steel v. United States. Its answer was unequivocal: The United States may alter its interpretation of a statute to respond to an adverse WTO decision, but to interpret the statute differently in one context but not another is unreasonable.

“An agency action is arbitrary when the agency offers insufficient reasons for treating similar situations differently…. [T]he government proffers a single explanation for [it’s] inconsistent interpretation: The methodology for investigations was changed in response to an adverse WTO report….

Commerce is entitled to change its interpretation to respond to an adverse WTO decision… [But] the political branches’ decision to comply with the WTO ruling only as to investigations does not mean that it is lawful to give inconsistent constructions to the same statutory language. Rather, Commerce’s interpretation of the statute must comply with domestic law including reasonably interpreting statutes. In other words, the government’s decision to implement an adverse WTO report standing alone does not provide sufficient justification for the inconsistent statutory interpretations….

In the absence of sufficient reasons for interpreting the same statutory provision inconsistently, Commerce’s action is arbitrary.”

I have previously written about the interplay of Charming Betsy and Chevron deference here. In that article I noted that “where the administrative interpretation of an ambiguous statute is consistent with the WTO obligation, courts reviewing the interpretation have upheld it under Chevron deference.” But Dongbu Steel raises the issue of the Charming Betsy doctrine applied in such a way that it is unreasonable under Chevron.

The interplay of Charming Betsy and Chevron deference means that the decision to interpret a statute consistent with an adverse WTO report will have broader ramifications than previously understood. Compliance with a WTO decision in one context may require altering government behavior in other contexts, not because the WTO decsion reaches that other context, but because Chevron requires it. Under Chevron, agency action is arbitrary and capricious unless the agency offers a sufficient explanation for treating similar situations differently.