Source: https://www.legalcrystal.com/case/98363/empresa-siderurgica-s-a-vs-county-merced
Timestamp: 2019-04-25 14:24:15+00:00

Document:
A cement plant in California was sold to a foreign purchaser for export. An export license was obtained, and a letter of credit in favor of the seller deposited here. Title passed and possession was taken for the purchaser. A common carrier was employed to dismantle the plant and prepare it for shipment. As the dismantling proceeded, shipments were labeled with the purchaser's name as consignee and delivered to a rail carrier. When 12% had been shipped, 10% had been prepared for shipment, 34% had been dismantled but not prepared for shipment, and 44% had not been dismantled, a municipality, acting under a California statute, levied a personal property tax on the portion which had not actually been shipped.
Held: This was not a tax on an export contrary to Art. I, § 10, Cl. 2 of the Constitution. Pp. 337 U. S. 155 -157.
(a) The process of exportation begins upon entrance of the articles into the export stream. P. 337 U. S. 157 .
(b) It is not enough that, on the tax date, there was a purpose and plan to export the property; nor that, in due course, the plan was fully executed. P. 337 U. S. 157 .
(c) The fact that the dismantler was a licensed carrier for interstate and foreign commerce and that its employment included the loading of the property on railroad cars for shipment to the seaboard does not here require a different result. P. 337 U. S. 157 .
32 Cal.2d 68, 194 P.2d 527, affirmed.
In a suit for refund of a municipal personal property tax paid under protest, a state court granted judgment for the plaintiff. The State Supreme Court reversed. 32 Cal.2d 68, 194 P.2d 527. On appeal to this Court, affirmed, p. 337 U. S. 157 .
There was a cement plant in Merced County, California, which was sold to petitioner -- a corporation of Colombia -- for export to South America. An export license was obtained and a letter of credit in favor of the seller deposited here. Title passed, and possession was taken for the purchaser. A company which was a common carrier was employed to do the dismantling and packaging for shipment. As the dismantling proceeded, shipments were labeled with appellant's name as consignee and delivered to a rail carrier.
Respondent, acting under a California statute, [ Footnote 1 ] levied a personal property tax on the property for the tax year 1945-1946. The tax date was March 5, 1945. On that date, 12 percent of the plant had been shipped out of the county. That portion was relieved of the tax. The balance was taxed. That included the 10 percent which had been dismantled and crated or prepared for shipment, 34 percent which had been dismantled but not crated or prepared for shipment, and 44 percent which had not been dismantled. But before the end of January, 1946, all the property had been shipped by rail to a port and was en route to South America by ocean carrier.
that this tax was laid on an export, and was therefore unconstitutional. It paid the tax under protest and brought this suit to recover it. The trial court, holding that the entire plant was an export on the tax assessment day, granted judgment for appellant. The Supreme Court of California reversed. 32 Cal.2d 68, 194 P.2d 527. The case is here on appeal. 28 U.S.C. § 1257(2).
Under that test, it is not enough that there is an intent to export, or a plan which contemplates exportation, or an integrated series of events which will end with it. See Turpin v. Burgess, 117 U. S. 504 ; Cornell v. Coyne, 192 U. S. 418 . The tax immunity runs to the process of exportation and the transactions and documents embraced in it. Fairbank v. United States, 181 U. S. 283 ; United States v. Hvoslef, 237 U. S. 1 ; Thames & Mersey Marine Ins. Co. v. United States, 237 U. S. 1 9. Delivery of packages to an exporting carrier for shipment abroad ( Spalding & Bros. v. Edwards, 262 U. S. 66 ) and the delivery of oil into the hold of the ship furnished by the foreign purchaser to carry the oil abroad ( Richfield Oil Corp. v.
State Board, supra ) have been held sufficient. It is the entrance of the articles into the export stream that marks the start of the process of exportation. Then there is certainty that the goods are headed for their foreign destination and will not be diverted to domestic use. Nothing less will suffice.
So, in this case, it is not enough that, on the tax date, there was a purpose and plan to export this property. Nor is it sufficient that, in due course, that plan was fully executed. The part of the plant that is taxed was dismantled, but it had not been delivered to any carrier for export or otherwise started on its journey on the tax date. It might still have been diverted into the domestic market. The fact that any such diversion would entail a breach of contract, that a part of the plant had already started on its export journey, that an export license had been obtained and a letter of credit deposited in this country increases the expectation on the tax date that exportation of the entire plant would eventuate. But that prospect, no matter how bright, does not start the process of exportation. On the tax date, the movement to foreign shores had neither started nor been committed.
Some reliance is apparently placed on the fact that the dismantler was a licensed carrier for interstate and foreign commerce, and that its employment included the loading of the property on railroad cars for shipment to the seaboard. But the dismantler had not, in this case, started the movement of the property to the carrier. Hence, we need not determine whether that intermediate transportation would be part of the export process.
Rev. & Tax.Code 1939, Div. I, §§ 103, 106, 201, 202(e), 405.
The meaning of "export" is the same under the two Clauses. See Richfield Oil Corp. v. State Board of Equalization, 329 U. S. 69 , 329 U. S. 83 , and cases cited.
that its privilege to do so ceases when the export enters "the export stream." But the problem for decision is to determine when that point has been reached. The Export-Import Clause of the Constitution (Art. I, § 10) embodies on phase of the accommodation between the States and the Union; it can be applied only by considering the bearing of a particular exertion of State power on the fulfillment or frustration of its purpose. A mechanistic formula, whether derived from phrases in Coe v. Errol, 116 U. S. 517 , or elsewhere culled, advances us little toward the solution of such a concrete problem.
"The certainty that the goods are headed to sea and that the process of exportation has started may normally be best evidenced by the fact that they have been delivered to a common carrier for that purpose. But the same degree of certainty may exist though no common carrier is involved."
Richfield Oil Corp. v. State Board, 329 U. S. 69 , 329 U. S. 82 .
"Contractor shall take at least one photograph of each machine or piece of equipment before dismantling said machine or piece of equipment, and shall also take at least one photograph after such machine or piece of equipment is dismantled. . . . All separations shall be made at the point of joinder, and there shall be no cutting or disassembling of any part of the Cement Plant which will have as its effect the weakening of the structure or parts when such structure or parts are reassembled. . . . The Contractor shall match-mark all parts of the plant and equipment. . . . "
Tending to look the other way is an itemized list of all the items to be exported which was attached to the export license issued to appellant by the War Production Board. Those items, ranging from thousand-ton kilns and locomotives to friction tape, seem to be things of a sort which are independently useful; each is assigned a dollar value and the total of all these separate values exactly equals the sale price of the "plant." Appellee insists, moreover, that so many parts of the original plant were excepted from the contract of sale that what was sold cannot be considered an organic unit.
"I think that the payment for the property and proceeding to change it from parts in place of a complete building, into a mass of disconnected materials made the completion of the exportation economically imperative. This was not a mere preparation of the plant for exportation; by such action and change the parts had 'been started upon such transportation' with the degree of certainty demanded by Coe v. Errol and the many cases which have endorsed it. . . ."
materials of the plant which, of course, could not be sold as the materials from which a plant could be built or used to reassemble the old one."
The appellant presented the same contentions to the Supreme Court of California. Without explicitly rejecting these contentions, it referred to the objects of export and of taxation merely as "the machinery and equipment of a cement plant" and alluded to the above-quoted portion of the Superior Court's opinion only as "another basis for the decision." Its opinion is open therefore to two very different interpretations.
1. The Supreme Court of California may have exercised a right under California law to draw its own inferences from uncontroverted facts and thus have found that what was called a "plant" was really only a collection of machinery and equipment. If that is what it did, we would not, of course, reinstate the findings of the Superior Court merely in order to raise an interesting question under the Export-Import Clause. Affirmance would be amply supported by bare citation of cases holding that intent to export, no matter how firm, is not by itself enough to confer immunity from taxation.
"Upon the facts as found by the Superior Court, it makes no difference to the taxing power of the County of Merced that parts of this integrated plant had left the country since the County is merely taxing the remaining parts."
Surely this is a doubtful proposition; it presents at any rate, a difficult question of the adjustment of local needs to the protection of exports from local interference.
Between these two possible interpretations of the situation before the Supreme Court of California therefore lies the difference between a simple question of Constitutional power and a very troublesome one. Since the record leaves in doubt whether the troublesome question is presented, to assume that it is presented and then to pass upon it would be to embrace unnecessarily what may be a hypothetical issue. We should therefore remand the case for the resolution of the crucial question of fact upon which depends what Constitutional issue we are called upon to decide. Cf. Hammond v. Schappi Bus Line, Inc., 275 U. S. 164 .

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