Case ID: us-ct-cl_41/html/0389-01.html
Source: Caselaw Access Project
Author: {"author": "Howry, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THE ANHEUSER-BUSCH BREWING COMPANY v. THE UNITED STATES.
    [No. 23254.
    Decided May 7, 1906.]
    
      On the Proofs.
    
    Brewers of beer made for exportation import corks band cut in Spain, paying the duty thereon. The corks are subject to certain processes necessary to fit them for the preserving of beer made for exportation. The brewers claim a rebate on the corks so exported. The question in the case is whether corks made in Spain and modified by various processes in this country “ are materials used in the manufacture or production ” of an article entitled to drawback when exported.
    I.'Imported bottle corks hand cut in Spain are not “ imported materials used in the manufacture or production of articles entitled to dranohaclc of customs duty when exported ” within the meaning of the Act 1st July, 1890 (20 Stat. L., p. 617), though they are sterilized, cleansed, softened, and coated by distinct and peculiar processes so as to adapt them to be used in the bottling of beer for exportation.
    II.Kaw materials may be subject to successive processes of manufacture, each one of which is complete in itself, but several of which may be required to make the final production' — as logs sawed into boards, boards made into boxes, etc. The process or processes must produce some new article by the application of labor to raw materials in order to entitle the importer of the materials to a drawback.
    III.The mere cleaning of Spanish corks by washing and steaming and making the corks soft and elastic does not produce a new article ; bathing the corks in glycerine so as to stop their seams, and giving them a coating so as to prevent the beer from acquiring a cork taste, does not produce a new article. Imported corks, though improved and modified and adapted to a specific purpose which they were not originally so well adapted to, are still corks.
    IY. The cases relating to drawback reviewed. ■
    
      The Reporters’ statement of the case:
    The following are the facts of the case as found by the court :
    I. Plaintiff is, and has been continuously for a period long-preceding the dates hereinafter mentioned, a corporation created, organized, and doing business under the laws of the State of Missouri, engaged in the business of brewing, manufacturing, bottling, .and selling fermented liquors, both for domestic consumption and for export, having its brewery and principal place of business in the city of St. Louis, in the State of Missouri.
    II. By section 25 of the act of Congress entitled “An act to reduce the revenue and equalize duties on imports, and for other purposes,” approved October 1, 1890 (26 Stat., 611), it is provided as follows:
    “ That where imported materials on which duties have been paid are used in the manufacture of articles manufactured or produced in the United States, there shall be allowed on the exportation of such articles a drawback equal in amount to the duties paid on the materials used, less one per centum of such duties: Provided, That when the articles exported are • made in part from domestic materials, the imported materials, or the parts of the articles made from such materials, shall so appear in the completed articles that the quantity or measure thereof may be ascertained: And frovided further, That the drawback on any articles allowed under existing law shall be continued at the rate herein provided. That the imported materials used in the manufacture or production of articles entitled to drawback of customs duties when exported shall in all cases where drawback of duties paid on such materials is claimed, be identified, the quantity of such materials used and the amount of duties paid thereon shall be ascertained, the facts of the manufacture or production of such articles in the United States and their exportation therefrom shall be determined, and the drawback due thereon shall be paid to the manufacturer, producer, or exporter, to the agent of either or to the person to Avhom such manufacturer, producer, exporter, or agent shall in writing order such drawback paid, under such regulations as the Secretary of the Treasury shall prescribe.”
    By section 22 of the act entitled “An act to reduce taxation, to provide revenue for the Government, and for other purposes,” which took effect on the 28th day of August, 1894 (28 Stat., 551), the provisions of said section 25 .of the act approved October 1, 1890, were enacted word for word and remained in force until the 24th day of July, 1897 (30 Stat., 211), when, by section 30 of the act approved on that date, entitled “An act to provide revenue for the Government and to encourage the industries of the United States,” they were again reenacted word for word and are- still in force.
    III. That while said acts of October 1, 1890, and August 28, 1894, and July 24, 1897, were in force and operation the claimant herein, being engaged in the regular, ordinary, and usual course of its business aforesaid, exported from the United States a large quantity of beer brewed and manufactured by it, which exj>ortation thereof was in bottles duly corked by it with corks so as to preserve the beer; that such corks so used by it in the bottles in which such beer was exported were imported from Spain, a foreign country (and on which corks duty had been paid to the United States, according to law, at the rate of 15 cents per pound, under the provisions of paragraph 416 of the act of Congress approved July 24,1897), they being corks over three-fourths of an inch in diameter, measured at the larger end. The corks so imported from Spain were subjected to treatment by claimant.
    The corks so used by the claimant in the making and shipment of its export beer were corks imported into this country from Spain, where they were cut by hand, without steaming.. After these corks were received by claimant in its brewery in St. Louis, and while in the same state in which they were imported from Spain, they were carefully examined and all that were not fit for use in the export trade were rejected. The good ones were then selected and assorted according to sizes, and were branded with the date, the name of the brewer, the name of the beer, and a special private mark to show what firm the cork came from. All this was done by unskilled labor.
    The selected corks were put into a machine, or air fan, the unpatented invention of a man in the employ of the claimant, and all dust, meal, bugs, and worms were removed therefrom. They were then thoroughly cleansed by washing and steaming, removing the tannin and germs and making, the corks soft and elastic, and they were next exposed to blasts of air in a machine, the unpatented invention of the same employee, until they were absolutely dry.
    Following this they were put for a few seconds into a bath of glycerin and alcohol, the proportions of which are a trade secret which the claimant has the right to use, and then they were dried by a special system. This bath closed up all the seams, holes, and crevices, and gave the corks a coating which prevented the beer from acquiring a cork taste. The corks were then dried by absorption of the chemicals that had covered them. If the corks had been used without the application of this chemical bath, the beer would have acquired a taste of cork which.would have injured the market for it.
    The whole process took from one day to three days, the longest part of it being the drying after the fchemical bath.
    The bath made it easier to put the cork into the bottle and take it out. The pores and apertures of the cork were thoroughly closed by the bath, and thus the escape of the gases contained in the beer was prevented.
    The steaming of the corks, or pasteurizing them, destroyed all the germs in them that would damage or spoil the beer if they were not pasteurized. This pasteurizing also destroyed the yeast that might have been in the beer.
    If the corks had but little or no elasticity and did not fit the bottles perfectly, the gas would escape while the beer was yet in the brewery, or'in transportation, or in the place of market, and the beer would be flat, stale, worthless, and unmarketable.
    When the corks had been dried, they were soft, elastic and pliable, free from all foreign substances and germs, perfectly air-tight, and fitted for use in bottling beer for export. They were next taken to the building in claimant’s brewery which was used for bottling purposes, wliere they were again soaked or wetted by steaming them for a short time, so they would fit snugly and easily in the bottles.
    'The bathing,-or treatment by the bath, and the washing and steaming of the corks Avere all done by skilled labor.
    After the beer had been put in the bottles and they had been corked, the filled bottles were put- in a large vat, where they were pasteurized by- heating to the right temperature for a sufficient length of time and cooled again. If the corks, had not been treated as aboAre described, the carbonic-acid gas would have escaped in the heating or pasteurizing process, because there Avas a powerful gas pressure toward the cork during all that process. If that gas had escaped, the beer would have become flat.
    The corks, so treated by this process and put in the bottles of beer, could only be removed therefrom by means of a corkscrew or other instrument of force, which removal would damage or destroy the cork so it could not be used afterwards for the same purpose.
    The hand-cut corks which come from Spain have all been cut out of the wood without steaming it beforehand. The corks that are cut in the United States are cut from the wood that has been steamed first, thus depriving 'them of much of their elasticity. Because the Spanish hand-cut corks are cut without having been steamed in the first instance, they are far safer and better corks to be made for and used in bottling export beer than corks cut in the United States after being-steamed.
    Without the careful selection and thorough treatment of corks, beer can not with safety be exported from the United States to foreign countries.
    When the corkwood reaches the United States it is steamed in order to get an increased volume out of it. The steaming of the corlrwood makes it open something like a sponge. The steaming swells the cork, and those who do the steaming get more corks out of it, but how much more does not appear. But the steaming takes away its elasticity, and the cork cut after steaming is not so good or so perfect as one cut from the dry wood in the first place.
    Corks cut after steaming will shrink, and that fact makes them inferior corks. Cork dealers in the United States also put it through various treatments, such as polishing it and using-chemicals to make it look bright and have a good color. They do not attempt to close up the pores in the cork, nor run it through machinery to shake or wash the dust or impurities out of it. They put the cork on the market as the machine cuts it after it has been steamed. Corks so cut and treated in the United States would not be fit for use in the exportation of beer, for they would damage the beer through contact, and much stale beer would result from the escape of the carbonic-acid gas by reason of the imperfect corking, and the beer would not be marketable.
    
      In tbe manufacture of beer for export to other countries it was necessary to destroy the yeast in the beer to prevent second fermentation and the consequent ruin of the beer. In order to destroy the germs of yeast the finished beer was steamed to the degree necessary to destroy the germs, and for that purpose the beer was inclosed securely in a vessel to prevent the escape of the carbonic-acid gas, and of all such vessels a bottle made of glass was and is the one best adapted to the purpose aforesaid. And such steaming was also necessary to the perfect manufacture of beer for bottling, and to the perfect corking thereof it was essential and necessary that the cork as treated should be used .as herein described.
    IV. The claimant herein, relying upon the law and upon the earlier decisions of the Treasury Department thereunder, purchased from time to time large quantities of Spanish corks for use in the manufacture of bottled beer for the export trade, according to the .method and process herein-before mentioned, on all of which the duties imposed by law were paid at the time.of their importation, and 73,299.78 pounds of the same were used in the manner hereinbefore described, in the manufacture of bottled beer for the export trade, and such beer, after being put in bottles so corked with the corks before described, was thereupon exported to foreign ports in different quarters of the globe.
    The claimant duly entered the same at the custom-house at the port of St. Louis, in the State of Missouri, for exportation for the benefit of drawback, and made proof to the satisfaction of the collector of said port of the importation of said corks so used as aforesaid, and of the payment of duties thereon and the amount thereof, and of the fact that 73,299.78 liounds of the same had been used in the manufacture of bottled beer, as hereinbefore set forth, and it otherwise complied with the law and the regulations as prescribed by the Secretary of the Treasury for the establishment of the right to drawback. But the collector of the port, acting under and in obedience to the decision, of the Treasury Department, refused to allow the drawback on the corks aforesaid, and when the claimant applied to the Secretary of the Treasury for allowance of drawback under the provisions of section 30 of tlie act of July 24, 1897,'the Department denied the application under date of December 9, 1898, and so notified the surveyor of customs at the port of St. Louis, before and since which time the customs officers at that port have failed and refused to allow claimant drawback on the corks used by the claimant in the exportation of its bottled beer.
    V. On the entries so made for exportation of bottled beer, which bottles were corked exclusively as shown by the preceding findings, the total amount of drawback due the claimant from the 24th day of July, 1897, to April 17, 1903, is $10,995, being at the rate of 15 cents per pound for 73,299.78 pounds, as before stated.
    No other action than as aforesaid has been had on this claim in any of the Departments, or in the Congress or the courts of the United States.
    VI. The claimant is the sole owner of this claim, and no other person or corporation has any interest therein; and no assignment or transfer of the. claim, or of any part thereof, or interest therein, has been made.
    
      Mr. L. T. Mieliener for the claimant. Messrs. Dudley d? Michener and Messrs. Nagel <& Kirby were on the brief.
    
      Mr. Assistant Attorney-General Van Orsdel for the defendants.
   Howry, J.,

delivered the opinion of the court:

Plaintiff company is engaged at St. Louis, Mo., in the business of brewing and bottling beer for domestic consumption and export. It brings this action under the general juris-kliction of the court for drawback authorized to be paid under section 30 of an act approved July 24, 1897 (30 Stat. L., 211,. reenacting similar previous statutes), for $27,000 as amounts paid by it as duties for imported cork used in the export of its bottled beer, but claimed to 'be so changed by treatment as to be manufactured cork in this country after its importation from abroad.

The court is indebted to the learned counsel on both sides for the full and able presentation of everything calculated to make clear the issues. But since two recent cases in this court, pertaining to claims for drawback, were affirmed on appeal it is unnecessary to review the many decisions to which we are referred defining manufacturing, but rather to give, the results deduced from an examination of these cases as well as an examination of the statute under which the drawback is claimed.

Plaintiff imports cork from Spain and then treats it as set forth in the findings. After all the explanation the process-is simple. Selected corks, after being branded, are put into what the proof shows to be a machine or air fan, which is an unpatented invention, and all dust, meal, bugs, and worms removed. The corks are then thoroughly cleaned and washed by steaming, which removes the tannin and germs and makes them soft and elastic, and then are again exposed to blasts of air in the unpatented machine until dry. Following this they are put for a few seconds into a bath of glycerin and alcohol, the proportions of which are a trade secret, and thou dried by what is generally stated to be a special system, the nature of which is not shown. This bath closes up the seams and crevices when the corks receive a coating to prevent the beer from acquiring a cork taste. The corks are then dried by absorption of the chemicals covering them. The bath makes it easier to put the cork into the bottle and take it out, and the steaming of the corks destroys any germs that may be in them that would damage or spoil the beer if not sterilized.

In Tide Water Oil Co. (31 C. Cls. R., 90; 33 ibid., 514; 171 U. S., 210) the court of last resort in affirming this court has shown how raw materials may be subjected to successive prqcesses of manufacture, each one of which is complete in, itself, but several of which may be required to make the final product. “ Ordinarily,” the court said, the article so manufactured takes a different form, or at least subserves a different purpose from the original materials, and usually it is given a different name.” The illustrations given of logs first manufactured into boards, planks, joists, and scant-lings, and then by different processes fashioned into boxes, furniture, doors, windows, sashes, and trimmings, manufactured wholly or in part of wood, and of the steel springs of a watch made from iron ore and by a number of processes or transformations called distinct processes of manufacture receiving a different name are in point as to what constitutes manufacturing. Underlying these illustrations and the general statement relating to what constitutes the ultimate product in the successive steps necessary to make a manufactured thing, is the idea that the process is supposed to produce some new article by the application of skill and labor, to raw materials.

The mere cleaning of Spanish cork by washing and steaming, so as to remove the tannin and germs and to make the corks soft and elastic, certainly does not produce a new article. The few seconds’ bath of glycerin and alcohol to which the corks are subjected, as shown here, may give a coating so as to prevent beer from acquiring a cork taste; and this application may close up the crevices in the corks, but anybody can be called a cork manufacturer, if that is all to be done, as there is no skill applied to make the thing over. Certainly there is nothing in washing and steaming imported cork and in soaking the imported material in glycerin and alcohol (no matter in what proportion) that changes the imported cork into manufactured cork. The chemical change that should be wrought in the imported article to make the article manufactured by the washing and steaming and then applying glycerin and alcohol certainly does not take the imported stuff very far away from its natural form. It is, apparently, not new. Like imported shells (Hartranft v. Wiegmann, 121 U. S., 609), where the outer layer of the shell is cleaned by acid and the second layer is ground by an emery wheel, the corks so treated do not seem to be any more manufactured than shells treated with acid and rubbed. They are still corks, having a distinctive name and character and use as cork. If'the application of glycerin and alcohol be in such proportions as to make tliis application a trade secret, equally can it not be controverted that cork has been as effectually treated everywhere by means employed to prevent the escape of bottled carbonic-acid gas. This does ■ not constitute- manufacture nor make persons steaming and | washing cork and applying glycerin and alcohol (in any . kind of proportion) manufacturers.

But it is shown that the corks are put into a machine or air fan to remove dust, meal, bugs, and worms. How effectually this is done or can be done, or how different from the means taken by others who bottle beer or other effervescing liquid, does not appear. It does appear that the company puts the corks it uses to bottle export beer into what it proves and the finding shows to be an air fan. But this air fan, called a machine, is an unpatented something not shown, to the court, nor is there any description given either of the machine or how it .can remove any substance contained in the imported cork. Without a description of the unpatented fan and without some means of knowing precisely what is accomplished by its use, we can not assume that the cork is treated by this company materially different from cork treated by any other company or person along the same lines or different lines. In neither case is it clear that the cork undergoes any material change, so that it can not be said to be an article manufactured in this country.

If the process described by plaintiff in the use of what they say is a machine accomplishes results so valuable, we do not think there would be much delay in applying for and obtaining a patent upon it. We do not mean to say that it may not have some effect upon the cork, because we have accepted its statement that it has. At the same time we are unable to see that,, after all the treatment given to the imported article, it is converted into an article manufactured in this country.

The difficulty with plaintiff’s case is that when through treating the cork the finished character of the product is not apparent. The line of demarkation in an unfinished article and an article so finished as to make the thing treated a manufactured article is not always easy of distinction. Wo are not, however, able to say that this company manufactures cork any more than we can say that shooks imported to be used in the manufacture of boxes are materials within the intent of the statute (171. U. S., supra); or that the cork treated by plaintiff is in any better position as the basis of a claim for drawback than bituminous coal imported, but consumed as fuel in this country (163 U. S., 499). Neither possesses the right to a drawback.

Foregoing considerations are sufficient to disallow the claim, because in case of doubt as to the interpretation of the statute the construction must be resolved in favor of the Government. (Swan & Finch Co., 190 U. S., 143.)

The other defense, that the corks in'question were not a part or ingredient of the beer exported and consequently not, in contemplation of law, exported at all, need not be more than briefly considered.

In Schlitz Brewing Company (35 C. Cls. R., 110; 36 ibid., 580; 181 U. S., 584) it is held that bottles and cork in which beer is bottled and exported for sale, though brought from abroad, are not imported materials used in the manufacture of such beer within the meaning of the drawback provisions of the customs-revenue laws. Plaintiff contends that the case at bar is dissimilar to that case, because here manufacture is shown, while there manufacture did not appear. But that case did include the claim for drawback of duties upon imported bottles and corks, and while it is true that the particular treatment of the corks imported shown here does not appear there, the court did say that bottles and corks were not imported materials at all, but finished products and usable for any liquor which the importer might choose to put in bottles. Such materials Avere “simply packages which the manufacturer (of beer), for purposes of export, sees fit and perhaps is required to make use of for the proper preservation of his product.” It is the beer manufactured that is exported for foreign competition. Certainly the manufacture of the beer for export is alone the object of the plaintiff’s business.

The use of corks to bottle the beer is a necessary part of the business, it is true, just as the use of the bottles is an essential part. But cork manufacturing in such' case, if it be manufacturing, is but the incident of the trade. The corks are washed, steamed, cleaned, fanned, and then dried; not to sell, but to put in bottles of beer for exportation. The beer is manufactured, bottled, and corked for export and use. The object of the drawback law was to build up an export trade and encourage manufactures in this country, where such manufactures are intended for exportation, by granting a rebate of duties upon the raw or prepared materials imported, and thus enabling the manufacturer to compete in foreign markets with the same articles manufactured in other countries. Tide Water Oil Company case (supra) so declares, and further that “ in determining whether the articles in question were wholly manufactured in the United States, this object should be borne steadily in mind.” So far as this record discloses, and so far as we have any knowledge of the subject, plaintiff is not competing in foreign markets in exporting the corks which hold its beer, because the corks are not sold as corks abroad. So, if this company has otherwise made out its case as to the claim of cork manufacture in this country, the method shown of treating and incidentally using the imported cork would hardly be said to encourage manufacture in this country within the meaning of the customs-revenue laws.

Petition dismissed.