Philip Morris USA, Inc. v. Vilsack, No. 12-2498 (4th Cir. 2013)

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Justia Opinion Summary

Phillip Morris sought review of the USDA's decision regarding the implementation of the Fair and Equitable Tobacco Reform Act (FETRA), 7 U.S.C. 518 et seq. Phillip Morris challenged the USDA's decision to use 2003 tax rates instead of current tax rates in calculating how these assessments were to be allocated across manufacturers of different tobacco products. The court concluded that USDA's decision was a permissible interpretation of FETRA; there was no clear indication in the text of the statute, or in Congress's prior or subsequent action, that Congress intended for USDA to take a different course; and there was similarly no basis for concluding that USDA filled that gap with an unreasonable interpretation. Accordingly, the court affirmed the district court's grant of USDA's motion for summary judgment.

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PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2498 PHILIP MORRIS USA, INCORPORATED, Plaintiff - Appellant, v. THOMAS J. VILSACK, Secretary of Agriculture; UNITED STATES DEPARTMENT OF AGRICULTURE, Defendants Appellees, CIGAR ASSOCIATION OF AMERICA, INCORPORATED, Intervenor/Defendant Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Richmond. Henry E. Hudson, District Judge. (3:11-cv-00087-HEH) Argued: September 19, 2013 Decided: November 20, 2013 Before DUNCAN and THACKER, Circuit Judges, and Gina M. GROH, United States District Judge for the Northern District of West Virginia, sitting by designation. Affirmed by published opinion. Judge Duncan wrote the opinion, in which Judge Thacker and Judge Groh joined. ARGUED: Lauren R. Goldman, MAYER BROWN, LLP, New York, New York, for Appellant. Sydney Foster, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Daniel Gordon Jarcho, MCKENNA, LONG & ALDRIDGE, LLP, Washington, D.C., for Appellees. ON BRIEF: Dan Himmelfarb, Richard P. Caldarone, MAYER BROWN LLP, Washington, D.C., for Appellant. Neil H. MacBride, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia; Stuart F. Delery, Acting Assistant Attorney General, Mark B. Stern, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. 2 DUNCAN, Circuit Judge: Philip Morris brings this appeal seeking review of a United States Department implementation ( FETRA ). of of the Agriculture Fair and decision Equitable regarding Tobacco Reform the Act Pub. L. 108-357 § 601, 118 Stat. 1418, 1521 (2004) (codified at 7 U.S.C. §§ 518 et seq.). FETRA instructs USDA to levy certain assessments against manufacturers and importers 1 of tobacco products. Philip Morris challenges USDA s decision to use 2003 tax rates instead of current tax rates in calculating how these assessments are to be allocated across manufacturers of different tobacco products. The district court concluded that USDA s decision was based upon a reasonable interpretation of FETRA and granted USDA s motion for summary judgment. For the reasons that follow, we affirm. I. In 2004, Congress enacted FETRA to end the system of quotas and other States had Adjustment price supports enjoyed Act of since 1938. that tobacco the It passage chose, growers of in the however, the United Agricultural to ease the transition from the old quota system by replacing it with a 1 For brevity s sake, we will refer solely to manufacturers. Manufacturers may therefore be taken to mean manufacturers and importers. 3 temporary system of periodic payments to tobacco growers and other holders of tobacco quotas. are to cease in 2014. The payments began in 2005 and See 7 U.S.C. §§ 518a & 518b. created the Tobacco Trust Fund to fund these payments. FETRA The fund is administered by the Commodity Credit Corporation ( CCC ), a government corporation administered by USDA, and funded with CCC assets as well as tobacco products. the assessments imposed 7 U.S.C. § 518e. permissibility of USDA s on manufacturers of At issue in this case is chosen method for making those assessments. A. Each amount of year, funds FETRA that requires must be USDA to raised determine through the the total assessment process in order to make the payments required for that year under 7 U.S.C. §§ 518a & 518b and to cover other fund expenses. 7 U.S.C. § 518d(b)(2). Then, USDA is to follow a two-step procedure to determine what portion of that total amount is to be paid by each manufacturer of tobacco products. In the first step of that procedure, USDA is instructed to calculate the percentages of the total national assessment to be paid collectively by the manufacturers of each class of tobacco product: cigarettes, cigars, snuff, chewing tobacco, and pipe tobacco. roll-your-own tobacco, 7 U.S.C. § 518d(c). Then, at step two, USDA is to determine each manufacturer s individual 4 liability by multiplying its market share within each class by that class s total assessment burden as calculated in step one. 7 U.S.C. §§ 518d(e),(f). USDA performs these calculations in an initial determination at the beginning of each year, and then collects the resulting amounts from manufacturers in quarterly payments. seems Described at this level of abstraction, the procedure simple, but this veneer of simplicity dissolves under closer examination. 1. Congress s instructions for determining each class s total assessment burden are sparse. FETRA provides specific percentages of the assessment burden to be allocated to each of the six classes of tobacco product in fiscal year 2005. U.S.C. § 518d(c)(1). But for subsequent years, the 7 statute instructs only that these percentages are to be adjusted to reflect changes in the share of gross domestic volume held by each class of product. 7 U.S.C. § 518d(c)(2). Gross domestic volume, in turn, is defined as the volume of product removed into commerce 2 and subject to federal excise taxes or import tariffs at the time of removal. 7 U.S.C. § 518d(a)(2)(A). 2 FETRA uses the Internal Revenue Code removal : the removal of tobacco products or or tubes, or any processed tobacco, from the internal revenue bond . . . , or release from and shall also include the smuggling or (Continued) 5 definition for cigarette papers factory or from customs custody, other unlawful Volumes of different classes measured in different units. are measured in sticks, volume of units of domestic tobacco product are Volumes of cigarettes and cigars but volumes products are measured in pounds. (prescribing of all other tobacco See 7 U.S.C. § 518d(g)(3) measurement sales ); of 26 to be U.S.C. used § in 5701 calculating (prescribing excise tax rates per stick for cigars and cigarettes, and per pound for determined the other that, in § 518d(c)(1), classes arriving Congress of at converted tobacco the these product). initial USDA allocations volumes into a in common unit--dollars--by multiplying each class s volume by the maximum excise tax rate applicable to that class. To arrive at a percentage for each class, the resulting dollar amount for each class was then divided by the sum of all dollar amounts across all six classes. See Tobacco Transition Assessments, 70 Fed. Reg. 7007-01, 7007 (February 10, 2005) (codified at 7 C.F.R. pt. 1463). The statute itself, however, does not explain that this is how the initial allocations were determined or explicitly indicate that future allocations are to be arrived at in this way. importation of such articles into the United States. § 5702(j). 6 26 U.S.C. 2. Step two of subdividing the manufacturers the of FETRA allocation step-one tobacco procedure inter-class products within deals allocation with each among class. As a starting point, FETRA provides that the total assessment for each class of tobacco product is to be allocated among the manufacturers of that class based on each manufacturer s share of gross domestic volume. 7 U.S.C. § 518d(e)(1). More specifically, this allocation is to be calculated by multiplying each manufacturer s market share within a class by that class s total allocation from step one. 7 U.S.C. § 518d(f). A manufacturer s market share, in turn, is to be its share of the volume of domestic sales for that class of product. 7 U.S.C. § 518d(a)(3). Compared volume, calculate to FETRA its skeletal provides volume of treatment considerable domestic of gross detail sales. about FETRA domestic how devotes to two subsections to the latter, one for determining it and another for measuring instructed to it. 7 calculate U.S.C. volume of §§ 518d(g),(h). domestic USDA sales based is upon gross domestic volume, forms relating to a manufacturer s volume of removals and taxes information. 7 U.S.C. while § 518(e)(1) paid, and any other §§ 518d(g)(1),(g)(2),(h)(2). instructs USDA 7 to base its relevant Thus, intra-class allocations on gross domestic volume, § 518(g) indicates that other factors are to be considered as well. B. In February implementing the 2005, FETRA U.S.C. § 518d. 7007-01 of USDA promulgated methodology assessment a final codified rule at 7 Tobacco Transition Assessments, 70 Fed. Reg. (February 10, 2005) (codified at 7 C.F.R pt. 1463). That rule provided that USDA would determine each year s interclass allocation on the basis of each class s share of the excise taxes paid . . . . [b]ased upon the reports filed by domestic manufacturers and importers of tobacco products with the Department of the Treasury and the Department of Homeland 7 C.F.R. § 1463.5(a) (2005). 3 Security. With this interpretation in place, Congress incorporated the FETRA methodology into another statute, the Family Smoking Prevention and Tobacco Control Act ( FSPTCA ), Pub. L. 111-31, 123 Stat. 1776 methodology (2009). to That determine manufacturers of tobacco Administration to fund the statute the relies user products exercise 3 fee to of upon to be the FETRA paid by the Food and Drug its newly conferred USDA reiterated this language--that it would use excise taxes paid --in its briefs in an unrelated case before the Eleventh Circuit. Swisher Int l, Inc. v. Schafer, 550 F.3d 1046 (11th Cir. 2008). 8 jurisdiction to regulate them. Id. § 919(b)(2)(B)(ii) (codified at 21 U.S.C. § 387s(b)(2)(B)(ii)). Congress also passed the Children s Health Program Reauthorization Act of 2009 ( CHIPRA ). 111-3, 123 Stat. 8. As well as expanding Insurance Pub. L. No. federal health insurance programs for children, that bill also increased the excise taxes on every class of tobacco product. CHIPRA § 701. The cigar industry, through the Cigar Association of America, mounted a lobbying campaign to persuade Congress not to increase excise taxes on cigars on the grounds that the tax itself would be burdensome and that the change in rates would increase the cigar industry s FETRA assessment burden. This campaign reached a J.A. great lobbying equalized many congressional effort, the it tax $50.33 per thousand. would rates for members. seem, did not cigarettes 4 and 167. succeed. small But the CHIPRA cigars at CHIPRA §§ 701(a)(1), (b)(1). Though the rates were equalized, the relative change in rates was much larger for cigars than cigarettes. 4 While the The Internal Revenue Code defines two categories of cigarette, large and small. For the years at issue here, however, no large cigarettes were actually removed. See, e.g., Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury, Statistical Report: Tobacco (Dec. 2005) (indicating that no large cigarettes were removed in 2004 or 2005). (Reports for other years also show that no large cigarettes were removed.) We will therefore use cigarette to refer only to small cigarettes. 9 rate for cigarettes was increased to $50.33 from $19.50 per thousand, 26 U.S.C. § 5701(b)(1) (2000); CHIPRA § 701(b)(1), the rate for small cigars increased to $50.33 from only $1.828 per thousand, 26 U.S.C. § 5701(a)(1) (2000); CHIPRA § 701(a)(1). The tax rate for large cigars was also greatly increased: the rate increased from $48.75 per thousand cigars to $402.60 per thousand cigars. 5 26 U.S.C. § 5701(a)(2) (2000); CHIPRA § 701(a)(3). C. As described above, the FETRA inter-class allocation calculates each class s share of the burden by multiplying the removed volume applicable of excise each tax class rate. of USDA s product by regulations the at maximum the time CHIPRA was enacted provided that inter-class allocations would be determined on the basis of each class s share of the excise taxes paid, which implied that USDA would use current tax rates in performing these calculations. 6 Therefore the tax rate changes in CHIPRA would have substantially reduced the burden 5 The act expresses this rate as 40.26 cents per cigar. CHIPRA § 701(a)(3). 6 Beyond this implication, however, USDA never explicitly took a position on how future changes in the excise tax rates would be reflected in the inter-class allocation process. The tobacco excise tax rates had remained constant during the life of the FETRA program until the enactment of CHIPRA. 10 allocated to the cigarette industry and shifted manufacturers of other types of tobacco products. it to The cigar industry in particular would have seen a marked increase in its liability. After the passage of CHIPRA, however, USDA promulgated a technical amendment to 7 C.F.R. § 1463.5 to make clear that it would continue to use the 2003 tax rates--the rates applied by Congress in setting the fiscal year 2005 allocations. Tobacco Transition Payment Program; Tobacco Transition Assessments, 75 Fed. Reg. 76921-01 (Dec. 10, 2010) (to be codified at 7 C.F.R pt. 1463). This amendment altered the text of the regulation such that USDA would calculate each class s share of the year s assessment on the basis of each class s share of the excise taxes paid using for all years the tax rates that applied in fiscal year 2005. 7 C.F.R. § 1463.5(a)(2010) (emphasis added). USDA published an extensive explanation of the amendment, 75 Fed. Reg. at 76921-01, which it summarized as follows: [USDA] is modifying the regulations for the Tobacco Transition Payment Program (TTPP) to clarify, consistent with current practice and as required by the Fair and Equitable Tobacco Reform Act of 2004 (FETRA), that the allocation of tobacco manufacturer and importer assessments among the six classes of tobacco products will be determined using constant tax rates so as to assure that adjustments continue to be based solely on changes in the gross domestic volume of each class. This means that [USDA] will continue to determine tobacco class allocations using the Federal excise tax rates that applied in fiscal year 2005. These are the same tax rates used when TTPP was 11 implemented and must be used to ensure, consistent with FETRA, that changes in the relative class assessments are made only on the basis of changes in volume, not changes in tax rates. This technical amendment does not change how the TTPP is implemented by [USDA], but rather clarifies the wording of the regulation to directly address this point. Id. D. The technical amendment first had an effect in USDA s allocation of the fiscal year 2011 national assessment. Morris contends that, because USDA used the Philip pre-CHIPRA tax rates, it calculated that the cigarette industry would pay 91.6% of the national assessment instead of 78.5%, the maximum that would have been allocable to it had the then-current rates been applied. In the The cigar class was allocated 7.1% instead of 19.5%. first manufacturers quarterly of assessment cigarettes instead of $188 million. assessed to share. class, Philip paid of that year, approximately therefore, $219 million Of this $219 million, $99 million was Morris by virtue of its cigarette market Had USDA allocated only $188 million to the cigarette Philip Morris s individual assessment would have been significantly lower. Philip Morris assessments for Agriculture under appealed the 7 next this two U.S.C. assessment, quarters, 518d(i). to USDA as the well as Secretary denied all the of three appeals on the basis that the appeal process could only be used 12 to assert mathematical or factual errors, not to challenge the assessment formula itself. Philip Morris also petitioned USDA for a rulemaking that would, in amendment effect, to 7 repeal C.F.R. the December § 1463.5, 75 10, Fed. Reg. require USDA to always use current tax rates. that petition. 2010 technical 76921-01, and USDA rejected See 76 Fed. Reg. 71934-02 (Nov. 21, 2011). Finally, Philip Morris brought this lawsuit, arguing that USDA s December 10, 2010 technical amendment was inconsistent with FETRA. It sought an order vacating that amendment, restraining USDA from collecting assessments in excess of what Philip Morris would have paid had current tax rates been applied, and directing USDA to refund the excessive payments Philip Morris had already made. At summary judgment, however, the district court concluded that USDA s methodology faithfully adjust[s] the percentage of the total amount required to be assessed against each class of tobacco product . . . as directed by 7 U.S.C. § 518d(c)(2) and reasonably congressional intent underlying FETRA. v. Vilsack, Accordingly, 896 it F. Supp. granted 2d USDA s This appeal followed. 13 512, motion reflects the Philip Morris USA Inc. 524 for (E.D. Va. summary 2012). judgment. II. In determining whether USDA s decision to use only the tax rates applicable in 2005 is permissible, we conduct the two-step analysis articulated in Chevron, U.S.A., Inc. v. Resources Defense Council, Inc., 467 U.S. 837 (1984). ask whether Congress question at issue. has directly Id. at 842. spoken to v. Dir., (quoting O.W.C.P, 480 We first the precise At step one, we employ the traditional rules of statutory construction. Co. Natural F.3d 278, 293-94 Elm Grove Coal (4th Cir. 2007) Brown & Williamson Tobacco Corp. v. FDA, 153 F.3d 155, 162 (4th Cir. 1998)). In so doing, we consider the overall statutory scheme, legislative history, the history of evolving congressional regulation in the area, and . . . other relevant statutes. Id. At this stage, the court gives no weight to the agency s interpretation. 270, 274 (4th Cir. Mylan Pharm., Inc. v. FDA, 454 F.3d 2006). If the court determines that Congress s intent is clear, then the inquiry ends and Congress s intent is given effect. See Chevron, 467 U.S. at 843. If we conclude that Congress has not clearly answered the question at issue, interpretation construction of of we the the then consider statute is governing whether based the upon a Id. at statute. agency s permissible 843. To elucidate the gaps and ambiguities in the programs created by Congress is one of the core functions 14 of an administrative agency, a function that we invokes in drafting such a presume statute. Congress Id. at intentionally 843-44. We therefore will not usurp an agency s interpretive authority by supplanting its interpretation construction is not with arbitrary, contrary to the statute. our own, so capricious, Id. at 844. long or as the manifestly A construction meets this standard if it represents a reasonable accommodation of conflicting policies that were committed to the agency s care by the statute. Id. at 485 (quoting United States v. Shimer, 367 U.S. 374, 383 (1961)). When an agency s decision constitutes a change in position, the court must be satisfied that such a change in course was made as a genuine exercise of the agency s judgment. Such a change does not, however, require greater justification than the agency s initial decision. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). We defer to the agency s new position no less than the old, so long as we are satisfied that the agency s change in position was intentional and considered. It is not the court s role to evaluate whether the agency s reasons for its new position are better than its reasons for the old one. Id. We review the district court s factual and legal conclusions on an administrative record de novo. Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 189 (4th Cir. 2009). 15 A. We begin our Chevron step one analysis with this most basic observation: nowhere does FETRA explicitly say that USDA is required to use any tax rate at all in computing an inter-class assessment allocation, much less that it must use the rates that were applicable in any particular year. The statute s only overt references to taxes or tax rates can be found in 7 U.S.C. §§ 518d(a)(2)(B) & (h)(2)(B). Section 518d(a)(2)(B) requires that gross domestic volume only include tobacco product that is taxable when removed. Section 518d(h)(2)(B) requires that manufacturers of tobacco products submit copies of forms related to their excise tax payments. Significantly, neither of these provisions the deal directly with computation of inter-class assessment allocations. Instead it was USDA that discovered, through mathematical reverse engineering, that Congress had used the excise tax rates applicable in 2003 to compute the initial assessment allocation in § 518d(c)(1). USDA determined that it could reproduce the numbers in that paragraph by obtaining volume information from publically available statistical reports published by the Treasury Department 7 and multiplying those volumes by the maximum 7 See, e.g., Alcohol and Tobacco Tax and Trade Bureau, Department of the Treasury, Statistical Report: Tobacco (Dec. 2005). 16 excise tax rate applicable to each class of product. This process generated dollar amounts that, when taken as percentages of the total dollar amount across all six classes, corresponded with the percentages in § 518d(c)(1). But even at Chevron step one, we must not confine ourselves to a merely superficial reading of the statute. We must also make use of our traditional tools of statutory construction to determine whether Congress s intent is revealed in more subtle-though still unambiguous--ways. Elm Grove Coal, 480 F.3d at 293-94. Notwithstanding the lack of any overt reference to a current-tax-rate requirement, Philip Morris argues that such a requirement is implied from the overall structure of the statute and by subsequent congressional action. together various provisions relating It does so by cobbling to FETRA s intra-class allocation procedure and by speculating about the policy goals of Congress s chosen method allocation calculations. for performing the inter-class Philip Morris s reading of FETRA may be a plausible one, but its burden is far higher than showing plausibility. To disturb USDA s decision at Chevron step one, it must persuade us that USDA s decision is contrary to the unambiguously expressed intent of Congress. done. 17 This it has not 1. Philip adjust the Morris class argues shares that based Congress upon commanded changes in currently taxable removals in § 518d(a)(2)(B). the USDA to share of Therefore, it argues, it follows that Congress intended USDA to use current rates. Appellants Br. Morris s premise correct, is necessarily follow. at 27 (emphasis but its omitted). conclusion Philip does not It might have made sense to use the same edition of the Internal Revenue Code to determine what products are to be included in gross domestic volume and to determine how volumes are to be translated into percentages. But there is nothing incoherent about taking a different approach. To conclude otherwise would invert the standard we apply under Chevron step one: we vacate an agency s decision if Congress clearly manifested a contrary intent, not when Congress could have but did not clearly manifest its approval. In this light, congressional silence might actually cut the other way. Section 518d(a)(2)(B) exemplifies language that Congress could have used in § 518d(c), but conspicuously did not, to make clear that current tax rates were to be used in calculating the assessment allocations. 2. Philip Morris argues that Congress clearly indicated that it expected USDA to always use current rates in the inter-class 18 allocations by requiring manufacturers to submit forms that relate to . . . the payment of [tobacco product excise taxes]. But FETRA only instructs USDA to use these forms as a part of the intra-class allocation process. The requirement that manufacturers submit these forms appears in § 518d(h), which is entitled Measurement of volume of domestic sales. Consistent with this characterization, FETRA only requires that USDA actually use the forms in one place: § 518d(g)(1). This paragraph directs USDA to compute volume of domestic sales, not gross domestic volume, based on information provided by the manufacturers and importers . . . as well as any other relevant information. . . . Id. And, as we have noted, FETRA only instructs USDA to use volume of domestic sales for one purpose: computation of a manufacturer s market share to determine the intra-class allocations at step two of the FETRA assessment procedure. §§ 518d(a)(3),(f). 8 8 Philip Morris also points out that the forms relate to calculations concerning all manufacturers and importers [within a class] as a group. Appellants Brief at 35. But this is quite a selective quotation of § 518d(g)(1). What the statute actually says is that the forms are to be used in calculating the volume of domestic sales of a class of tobacco product . . . by all manufacturers and importers as a group. Id. The obvious purpose of this is to form the denominator of the fraction contemplated by § 518d(f)(2) in calculating market share. 19 Philip Morris argues that Congress cannot have intended to require the use of these forms only for the intra-class allocation because information about taxes paid is unnecessary for those calculations. This is so, it contends, because intra- class market share calculations will always be apples-to-apples (or cigar-to-cigar, etc.) comparisons. inter-class allocation that deals Therefore, unlike the with differing units of measurement, there is no need to use the excise tax rates as a conversion factor for intra-class calculations. This overlooks, however, the possibility that Congress intended for USDA to use these forms for some purpose other than unit conversion. They could be valuable, for example, in determining the volume of taxable products actually removed by each manufacturer. Indeed, the record indicates that USDA uses the forms in exactly this way. assumption were correct, the But even if Philip Morris s forms irrelevance would infirmity in FETRA, not in USDA s interpretation of it. the data Congress might be directed articulation that superfluous it it be used should in the does actually calculation not be amount used for be an That for which a clear some other to purpose. 3. Philip Morris s remaining step one arguments presuppose the existence of a textual basis 20 for concluding that Congress intended for USDA to always use current rates under 518d(c). But, for the reasons discussed above, we conclude otherwise. The only direct evidence of Congress s intent in this regard is its actual use of the then-current 2003 rates, in establishing the initial allocation under § 518d(c)(1). But this provides no basis for determining whether Congress intended that USDA would always use current rates or that it would always use 2003 rates. The minimal textual evidence is equally consistent with both methodologies. This conclusion step one arguments. dooms Philip Morris s remaining Chevron Most basically, Philip Morris argues that USDA must follow the methodology Congress used in establishing its initial allocation, and that this methodology was to use the excise taxes that applied in the year the products were removed. But, as we have just pointed out, there is no independent textual support for this contention. Philip Morris also argues that, in adjusting for changes in each class s share of gross domestic volume, Congress decided to use each class s then-current excise tax burden as the factor with which to convert volumes to shares. But this argument begs the same question. Likewise, we are not persuaded by Philip Morris s argument that Congress intended to further the policies underlying its choice of excise tax rates by 21 building them into the FETRA assessment allocation. There is no evidence in the text of FETRA or elsewhere to indicate that Congress intended to use FETRA as a vehicle to further tax policy writ large. equally supports the conclusion that Congress The record used the 2003 excise tax rates only because they were a useful mathematical expedient. Therefore, Congressional intent, having we found turn to no clear step two statement of the of Chevron analysis. B. The Chevron step two analysis brings us closer to the heart of this dispute. based upon reflects a a Here we examine whether USDA s decision is permissible reasonable reading balancing of of FETRA, the policy that Congress entrusted to USDA s care. 843-45. best. a reading that considerations Chevron, 467 U.S. at We do not evaluate which interpretation of FETRA is That is a responsibility delegated by Congress to USDA. Our task is simply to determine whether USDA s interpretation is reasonable in light of all we know about Congress s intent in passing it. Many Chevron of Philip analysis are Morris s arguments reiterations of at its step two step-one of the arguments. They are equally unavailing in the context of Chevron step two. In particular, as it did under Chevron step one, Philip Morris contends that USDA was entrusted with all of the complex 22 and important policy considerations that drive tax law generally. USDA s interpretation is unreasonable, it argues, because disregards it the considerations statutes involving tobacco excise taxes. reflected in other But as we concluded above, there is no evidence that Congress intended for FETRA to do anything more than provide a workable methodology for the allocation of assessments across manufacturers of tobacco product. Philip Morris does, however, present some independent steptwo arguments. It argues that USDA s decision is based upon an interpretation of FETRA at odds with the text of the statute, 9 that USDA s decision is inconsistent with its previous position, and that Congress subsequently entrenched this prior position, rendering it immune to further modification by the USDA. We consider each of these arguments in turn, and conclude that, as at step one, Philip Morris presents nothing more than a plausible alternative reading of FETRA. 9 We consider this under Chevron step two because Philip Morris s argument targets not the consistency of USDA s decision itself with the text of FETRA, but the permissibility of the statutory interpretation that underlies it. See Chevron, 467 U.S. at 843 ( [I]f the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. ). 23 1. Philip Morris argues that USDA s decision to continue using 2003 rates rests on an impermissible interpretation of phrase share of gross domestic volume in § 518d(c)(2). the USDA has interpreted that term to mean a given class s contribution to the total such that the share changes only in response to changes in actual volume produced. arguments. Philip Morris presents two First it argues that USDA s interpretation defines share of gross domestic volume as a volume and, thus, makes it synonymous with a different statutory term, volume of domestic sales. In the alternative, Philip Morris argues that USDA s interpretation impermissibly has uses defined different the term conversion as a rates percentage for but calculating this percentage at the two steps of the assessment process--2003 tax rates for the inter-class allocation, but current tax rates for the intra-class allocation. 10 These arguments are, however, unavailing. A volume is an actual number of objects in an absolute sense. But a share, as USDA has interpreted it, is an abstract relationship between a volume and a larger total volume. 10 USDA s interpretation It also argues that USDA is obliged to use the same conversion factor as Congress did in arriving at the initial class allocations in § 518d(c)(1). This argument fails for the reasons explained in part II.A.3 supra. 24 therefore defines share of gross domestic volume differently from volume of domestic sales. Share of gross domestic volume, as USDA has interpreted the term, also need not be a percentage. A percentage is a numerical representation the Therefore share of of a gross share, domestic not volume share as itself. USDA has interpreted it, need not incorporate any conversion factor at all. Philip Morris argues that USDA does, in fact, use taxes actually paid (and thus current tax rates) as factor in the intra-class allocation procedure. a conversion But USDA uses taxes paid as a proxy for the volume of product removed, not as a conversion factor to relate volumes to one another. Therefore, although USDA s interpretation may not be the most natural reading of the statute, it is a reasonable one, and that is all that Chevron requires. 2. As we noted earlier, prior to USDA s December 10, 2010 technical amendment, many members of Congress were informed that under USDA s regulations at the time, changes in excise rates would affect the FETRA assessment calculations. tax Philip Morris argues that Congress, in effect, legislated that view, rendering it impervious to modification by USDA, when it did two things. First, Congress passed CHIPRA, with its dramatic tax increase on cigar manufacturers, over the protestations of the 25 cigar industry that this change would increase its assessment burden under FETRA. Second, Congress passed FSPTCA, which gave the Administration Food and Drug the authority to regulate tobacco and, to fund these new duties, imposed user fees on manufacturers of tobacco products. In allocating these fees across users, it provides that [t]he applicable percentage of each class of tobacco product . . . for a fiscal year shall be the percentage determined under [FETRA] for each such class of product for such fiscal year. 21 U.S.C. § 387s(b)(2)(B)(ii). Therefore, Philip Morris argues, because Congress was aware of USDA s original disturbing that entrenched it. interpretation, interpretation, Thus, Philip it and sub Morris took action silentio contends, without ratified USDA s and prior interpretation now has, in effect, the force of a statute and USDA cannot deviate from it without congressional action. But we have never articulated such a standard entrenchment, and for good reason: it is far too low. Morris s formulation inadvertently were entrench frequently, resulting regulatory system--the flexibility. axiom their that the agency in standard, extensive signal of would much ossification virtue If Philip Congress interpretations for which too of our is its Such a standard would therefore contravene the agencies rules and must be policies given to 26 ample the latitude demands of to adapt changing circumstances. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 156-57 (2000) (quoting Motor Vehicle Mfrs. Assn. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)). Brown & Williamson provides a useful model of what sort of congressional action would be required to entrench an agency s interpretation. congressional In Brown & Williamson the question was whether action had ratified the FDA s prior conclusion that it lacked jurisdiction to regulate tobacco products. In concluding that it had, the Court devoted thirteen pages in the U.S. Reports to narrating the 35-year pattern of congressional action on the issue, id. at 143-156, of which the following is merely a summary: Congress has enacted several statutes addressing the particular subject of tobacco and health, creating a distinct regulatory scheme for cigarettes and smokeless tobacco. In doing so, Congress has been aware of tobacco s health hazards and its pharmacological effects. It has also enacted this legislation against the background of the FDA repeatedly and consistently asserting that it lacks jurisdiction under the [Food, Drug, and Cosmetic Act] to regulate tobacco products as customarily marketed. Further, Congress has persistently acted to preclude a meaningful role for any administrative agency in making policy on the subject of tobacco and health. Moreover, the substance of Congress regulatory scheme is, in an important respect, incompatible with FDA jurisdiction. Id. at 155-56. We are not aware of, and Philip Morris has not directed us to, any case where a court has found congressional entrenchment of an agency decision 27 on the basis of anything less. The circumstances surrounding Congress s enactment of CHIPRA and FSPTCA fall far short of this standard. 3. Finally, Philip Morris argues that USDA s current position-that it will continue to use 2003 rates in the inter-class allocation--is unreasonable because it is inconsistent with its prior position. Before the December 10, 2010 technical amendment, USDA s regulations indicated that it would use taxes paid under current rates. A mere change in position, however, would not in itself render USDA s established current that [a]n position initial instantly carved in stone. unreasonable. agency It is interpretation Chevron, 467 U.S. at 863. is well not Indeed, a change in an agency s position in itself is not even subject to a heightened level of scrutiny. Fox Television Stations, Inc., 556 U.S. at 514 (2009); E.E.O.C. v. Seafarers Int'l Union, 394 F.3d 197, 201 (4th Cir. 2005). Thus, without more, it is of little significance whether USDA s current position is the same as its original one. Philip Morris argues that USDA has denied position, but it misconstrues USDA s argument. changing its USDA has only argued that, prior to the December 10, 2010 technical amendment, it had never taken a position on whether future changes in tax rates would affect the FETRA assessment calculations. 28 There was no need to have done so because, before that point, the excise tax rates had not changed during the life of the FETRA program. This is a plausible interpretation, and because it is an agency s interpretation of its own regulation, we defer to it. See Auer v. Robbins, 519 U.S. 452, 461 (1997). USDA has not argued that the decision at issue in this case, the technical amendment s insertion of the words using for all years the tax rates that applied in fiscal year 2005, 7 C.F.R. § 1463.5(a)(2010), calculations. made no difference in the FETRA Quite the opposite: USDA s recognition of the difference between the original regulation and the amended one is precisely why it issued the technical amendment. Moreover, in response to Philip Morris s rulemaking petition, USDA issued a detailed determination explaining why it would continue to use 2003 rates proposed--an instead act of quite current rates, inconsistent as with Philip the Morris had that USDA view regarded the two approaches as equivalent. We defer constitutes a to an change agency s of interpretation--even position--so long as that if it decision resulted from a deliberate exercise of the agency s judgment and expertise. Fox Television Stations, Inc., 556 U.S. at 514 15. There can be no dispute on this record that the decision under review is a product of just that process. 29 III. We therefore conclude that USDA s decision to make use of only 2003 tax allocation rates under in 7 computing U.S.C. interpretation of FETRA. text of is a assessment permissible There is no clear indication in the statute, or that course. inter-class 518d(c)(2) the action, the in Congress s Congress intended for prior USDA to or take subsequent a different filled There is similarly no basis for concluding that USDA district that gap court s with an decision unreasonable granting interpretation. USDA s motion for The summary judgment is AFFIRMED. 30