In some lower courts, such as the U.S. Court of International Trade (CIT), Congress has authorized interested parties to challenge final actions rendered by federal agencies. Under well-established administrative law principles, interested parties may not raise new arguments on appeal and, instead, must “exhaust” their administrative remedies with the federal agency before seeking judicial review. For disputes before the CIT, Congress has adopted this exhaustion requirement (among others) by statute. See 28 U.S.C. § 2637(d) (“In any civil action not specified in this section, the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.”).
In China Kingdom (Beijing) Import & Export Co. v. United States, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) addressed an issue at the cross-section of subject matter jurisdiction and exhaustion: does a federal court retain subject matter jurisdiction over a dispute if the party challenging the agency action failed to exhaust its administrative remedies? Yes, says the Federal Circuit.
In an opinion joined by Judges Dyk and Chen, Judge Wallach acknowledged that the Federal Circuit improperly suggested in at least three prior decisions that “the requirement to exhaust administrative remedies” has “jurisdictional effect,” perhaps based in part on unclear statements that appeared in various decisions from the Supreme Court of the United States. Slip Op. at 15. Nevertheless, Judge Wallach noted that none of those decisions addressed the precise issue at hand—whether the exhaustion requirement in § 2637(d) “is jurisdictional.” Id.
From there, Judge Wallach, after examining the relevant statute’s text and legislative history, “clarif{ied} that the requirement to exhaust administrative remedies under § 2637(d) is not jurisdictional.” As to the statute’s text, Judge Wallach explained that the discretion conferred by Congress to the CIT in the “where appropriate” clause of § 2637(d) indicates that the CIT could retain subject matter jurisdiction over a dispute even when a party fails to exhaust its administrative remedies. Id. at 16. That bestowal of discretion, Judge Wallach noted, “is at odds with traditional notions of jurisdiction,” which typically lack such flexibility. Id. As to the legislative history, he stated that “Congress has not evinced a contrary intent.” Id.
Bottom Line: Put simply, the CIT and the Federal Circuit retain the authority to hear a trade dispute, even if a party does not exhaust all of its remedies with the relevant agency before seeking judicial relief. Of course, the ability of the CIT and the Federal Circuit to entertain such non-exhausted arguments does not guarantee the claims’ success on appeal. In fact, in China Kingdom, the Federal Circuit rejected appellant’s non-exhausted arguments on the merits. Id. at 17–24.