Opinion ID: 109835
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Heading Rank: 3

Heading: The Import-Export Clause

Text: Having decided that the Commerce Clause does not per se invalidate the application of the Washington tax to stevedoring, we must face the question whether the tax contravenes the Import-Export Clause. Although the parties dispute the meaning of the prohibition of Imposts or Duties on Imports or Exports, they agree that it differs from the ban the Commerce Clause erects against burdens and taxation on interstate commerce. Brief for Petitioner 32-33; Brief for Respondents 9-10; Tr. of Oral Arg. 13, 22. The Court has noted before that the Import-Export Clause states an absolute ban, whereas the Commerce Clause merely grants power to Congress. Richfield Oil Corp. v. State Board, 329 U. S. 69, 75 (1946). On the other hand, the Commerce Clause touches all state taxation and regulation of interstate and foreign commerce, whereas the Import-Export Clause bans only Imposts or Duties on Imports or Exports. Michelin Tire Corp. v. Wages, 423 U. S. 276, 279, 290-294 (1976). The resolution of the Commerce Clause issue, therefore, does not dispose of the Import-Export Clause question.
In Michelin the Court upheld the application of a general ad valorem property tax to imported tires and tubes. The Court surveyed the history and purposes of the Import-Export Clause to determine, for the first time, which taxes fell within the absolute ban on Imposts or Duties. Id., at 283-286. Previous cases had assumed that all taxes on imports and exports and on the importing and exporting processes were banned by the Clause. See, e. g., Department of Revenue v. James B. Beam Distilling Co., 377 U. S. 341, 343 (1964); Richfield Oil Corp. v. State Board, 329 U. S., at 76; Joseph v. Carter & Weekes Stevedoring Co., 330 U. S., at 445 (Douglas, J., dissenting in part); Anglo-Chilean Corp. v. Alabama, 288 U. S. 218, 226-227 (1933); License Cases, 5 How. 504, 575-576 (1847) (opinion of Taney, C. J.). Before Michelin, the primary consideration was whether the tax under review reached imports or exports. With respect to imports, the analysis applied the original-package doctrine of Brown v. Maryland, 12 Wheat. 419 (1827); see, e. g., Department of Revenue v. James B. Beam Distilling Co .; Anglo-Chilean Corp. v. Alabama ; Low v. Austin, 13 Wall. 29 (1872), overruled in Michelin Tire Corp. v. Wages . So long as the goods retained their status as imports by remaining in their import packages, they enjoyed immunity from state taxation. With respect to exports, the dispositive question was whether the goods had entered the export stream, the final, continuous journey out of the country. Kosydar v. National Cash Register Co., 417 U. S. 62, 70-71 (1974); Empresa Siderurgica v. County of Merced, 337 U. S. 154, 157 (1949); A. G. Spalding & Bros. v. Edwards, 262 U. S. 66, 69 (1923); Coe v. Errol, 116 U. S. 517, 526, 527 (1886). As soon as the journey began, tax immunity attached. Michelin initiated a different approach to Import-Export Clause cases. It ignored the simple question whether the tires and tubes were imports. Instead, it analyzed the nature of the tax to determine whether it was an Impost or Duty. 423 U. S., at 279, 290-294. Specifically, the analysis examined whether the exaction offended any of the three policy considerations leading to the presence of the Clause: The Framers of the Constitution thus sought to alleviate three main concerns . . . : the Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power; import revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States; and harmony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely flowing through their ports to the other States not situated as favorably geographically. Id., at 285-286 (footnotes omitted). The ad valorem property tax there at issue offended none of these policies. It did not usurp the Federal Government's authority to regulate foreign relations since it did not fall on imports as such because of their place of origin. Id., at 286. As a general tax applicable to all property in the State, it could not have been used to create special protective tariffs and could not have been applied selectively to encourage or discourage importation in a manner inconsistent with federal policy. Further, the tax deprived the Federal Government of no revenues to which it was entitled. The exaction merely paid for services, such as fire and police protection, supplied by the local government. Although the tax would increase the cost of the imports to consumers, its effect on the demand for Michelin tubes and tires was insubstantial. The tax, therefore, would not significantly diminish the number of imports on which the Federal Government could levy import duties and would not deprive it of income indirectly. Finally, the tax would not disturb harmony among the States because the coastal jurisdictions would receive compensation only for services and protection extended to the imports. Although intending to prevent coastal States from abusing their geographical positions, the Framers also did not expect residents of the ports to subsidize commerce headed inland. The Court therefore concluded that the Georgia ad valorem property tax was not an Impost or Duty, within the meaning of the Import-Export Clause, because it offended none of the policies behind that Clause. A similar approach demonstrates that the application of the Washington business and occupation tax to stevedoring threatens no Import-Export Clause policy. First, the tax does not restrain the ability of the Federal Government to conduct foreign policy. As a general business tax that applies to virtually all businesses in the State, it has not created any special protective tariff. The assessments in this case are only upon business conducted entirely within Washington. No foreign business or vessel is taxed. Respondents, therefore, have demonstrated no impediment posed by the tax upon the regulation of foreign trade by the United States. Second, the effect of the Washington tax on federal import revenues is identical to the effect in Michelin. The tax merely compensates the State for services and protection extended by Washington to the stevedoring business. Any indirect effect on the demand for imported goods because of the tax on the value of loading and unloading them from their ships is even less substantial than the effect of the direct ad valorem property tax on the imported goods themselves. Third, the desire to prevent interstate rivalry and friction does not vary significantly from the primary purpose of the Commerce Clause. See P. Hartman, State Taxation of Interstate Commerce 2-3 (1953). [19] The third Import-Export Clause policy, therefore, is vindicated if the tax falls upon a taxpayer with reasonable nexus to the State, is properly apportioned, does not discriminate, and relates reasonably to services provided by the State. As has been explained in Part II-C, supra, the record in this case, as presently developed, reveals the presence of all these factors. Under the analysis of Michelin, then, the application of the Washington business and occupation tax to stevedoring violates no Import-Export Clause policy and therefore should not qualify as an Impost or Duty subject to the absolute ban of the Clause.
The Court in Michelin qualified its holding with the observation that Georgia had applied the property tax to goods no longer in transit. 423 U. S., at 302. [20] Because the goods were no longer in transit, however, the Court did not have to face the question whether a tax relating to goods in transit would be an Impost or Duty even if it offended none of the policies behind the Clause. Inasmuch as we now face this inquiry, we note two distinctions between this case and Michelin. First, the activity taxed here occurs while imports and exports are in transit. Second, however, the tax does not fall on the goods themselves. The levy reaches only the business of loading and unloading ships or, in other words, the business of transporting cargo within the State of Washington. Despite the existence of the first distinction, the presence of the second leads to the conclusion that the Washington tax is not a prohibited Impost or Duty when it violates none of the policies. In Canton R. Co. v. Rogan, 340 U. S. 511 (1951), the Court upheld a gross-receipts tax on a steam railroad operating exclusively within the Port of Baltimore. The railroad operated a marine terminal and owned rail lines connecting the docks to the trunk lines of major railroads. It switched and pulled cars, stored imports and exports pending transport, supplied wharfage, weighed imports and exports, and rented a stevedoring crane. Somewhat less than half of the company's 1946 gross receipts were derived from the transport of imports or exports. The company contended that this income was immune, under the Import-Export Clause, from the state tax. The Court rejected that argument primarily on the ground that immunity of services incidental to importing and exporting was not so broad as the immunity of the goods themselves: [21] The difference is that in the present case the tax is not on the goods but on the handling of them at the port. An article may be an export and immune from a tax long before or long after it reaches the port. But when the tax is on activities connected with the export or import the range of immunity cannot be so wide. . . . The broader definition which appellant tenders distorts the ordinary meaning of the terms. It would lead back to every forest, mine, and factory in the land and create a zone of tax immunity never before imagined. Id., at 514-515 (emphasis in original). In Canton R. Co. the Court did not have to reach the question about taxation of stevedoring because the company did not load or unload ships. [22] As implied in the opinion, however, id., at 515, the only distinction between stevedoring and the railroad services was that the loading and unloading of ships crossed the waterline. This is a distinction without economic significance in the present context. The transportation services in both settings are necessary to the import-export process. Taxation in neither setting relates to the value of the goods, and therefore in neither can it be considered taxation upon the goods themselves. The force of Canton R. Co. therefore prompts the conclusion that the Michelin policy analysis should not be discarded merely because the goods are in transit, at least where the taxation falls upon a service distinct from the goods and their value. [23]
Another factual distinction between this case and Michelin is that here the stevedores load and unload imports and exports whereas in Michelin the Georgia tax touched only imports. As noted in Part III-A, supra, the analysis in the export cases has differed from that in the import cases. In the former, the question was when did the export enter the export stream; in the latter, the question was when did the goods escape their original package. The questions differed, for example, because an export could enter its export package and not secure tax immunity until later when it began its journey out of the country. Until Michelin, an import retained its immunity so long as it remained in its original package. Despite these formal differences, the Michelin approach should apply to taxation involving exports as well as imports. The prohibition on the taxation of exports is contained in the same Clause as that regarding imports. The export-tax ban vindicates two of the three policies identified in Michelin. It precludes state disruption of the United States foreign policy. [24] It does not serve to protect federal revenues, however, because the Constitution forbids federal taxation of exports. U. S. Const., Art. I, § 9, cl. 5; [25] see United States v. Hvoslef, 237 U. S. 1 (1915). But it does avoid friction and trade barriers among the States. As a result, any tax relating to exports can be tested for its conformance with the first and third policies. If the constitutional interests are not disturbed, the tax should not be considered an Impost or Duty any more than should a tax related to imports. This approach is consistent with Canton R. Co., which permitted taxation of income from services connected to both imports and exports. The respondents' gross receipts from loading exports, therefore, are as subject to the Washington business and occupation tax as are the receipts from unloading imports.
None of respondents' additional arguments convinces us that the Michelin approach should not be applied in this case to sustain the tax. First, respondents contend that the Import-Export Clause effects an absolute prohibition on all taxation of imports and exports. The ban must be absolute, they argue, in order to give the Clause meaning apart from the Commerce Clause. They support this contention primarily with dicta from Richfield Oil, 329 U. S., at 75-78, and with the partial dissent in Carter & Weekes, 330 U. S., at 444-445. Neither, however, provides persuasive support because neither recognized that the term Impost or Duty is not self-defining and does not necessarily encompass all taxes. The partial dissent in Carter & Weekes did not address the term at all. Richfield Oil's discussion was limited to the question whether the tax fell upon the sale or upon the right to retail. 329 U. S., at 83-84. The State apparently conceded that the Clause precluded all taxes on exports and the process of exporting. Id., at 84. The use of these two cases, therefore, ignores the central holding of Michelin that the absolute ban is only of Imposts or Duties and not of all taxes. Further, an absolute ban of all taxes is not necessary to distinguish the Import-Export Clause from the Commerce Clause. Under the Michelin approach, any tax offending either of the first two Import-Export policies becomes suspect regardless of whether it creates interstate friction. Commerce Clause analysis, on the other hand, responds to neither of the first two policies. Finally, to conclude that Imposts or Duties encompasses all taxes makes superfluous several of the terms of Art. I, § 8, cl. 1, of the Constitution, which grants Congress the Power To lay and collect Taxes, Duties, Imposts and Excises. In particular, the Framers apparently did not include Excises, such as an exaction on the privilege of doing business, within the scope of Imposts or Duties. See Michelin, 423 U. S., at 291-292, n. 12, citing 2 M. Farrand, The Records of the Federal Convention of 1787, p. 305 (1911), and 3 id., at 203-204. [26] Second, respondents would distinguish Michelin on the ground that Georgia levied a property tax on the mass of goods in the State, whereas Washington would tax the imports themselves while they remain a part of commerce. This distinction is supported only by citation to the License Cases, 5 How., at 576 (opinion of Taney, C. J.). The argument must be rejected, however, because it resurrects the original-package analysis. See id., at 574-575. Rather than examining whether the taxes are Imposts or Duties that offend constitutional policies, the contention would have the Court explore when goods lose their status as imports and exports. This is precisely the inquiry the Court abandoned in Michelin, 423 U. S., at 279. Nothing in the License Cases, in which a fractioned Court produced nine opinions, prompts a return to the exclusive consideration of what constitutes an import or export. Third, respondents submit that the Washington tax imposes a transit fee upon inland consumers. Regardless of the validity of such a toll under the Commerce Clause, respondents conclude that it violates the Import-Export Clause. The problem with that analysis is that it does not explain how the policy of preserving harmonious commerce among the States and of preventing interstate tariffs, rivalries, and friction, differs as between the two Clauses. After years of development of Commerce Clause jurisprudence, the Court has concluded that interstate friction will not chafe when commerce pays for the governmental services it enjoys. See Part II, supra. Requiring coastal States to subsidize the commerce of inland consumers may well exacerbate, rather than diminish, rivalries and hostility. Fair taxation will be assured by the prohibition on discrimination and the requirements of apportionment, nexus, and reasonable relationship between tax and benefits. To the extent that the Import-Export Clause was intended to preserve interstate harmony, the four safeguards will vindicate the policy. To the extent that other policies are protected by the Import-Export Clause, the analysis of an Art. I, § 10, challenge must extend beyond that required by a Commerce Clause dispute. But distinctions not based on differences in constitutional policy are not required. Because respondents identify no such variation in policy, their transit-fee argument must be rejected.
The Washington business and occupation tax, as applied to stevedoring, reaches services provided wholly within the State of Washington to imports, exports, and other goods. The application violates none of the constitutional policies identified in Michelin. It is, therefore, not among the Imposts or Duties within the prohibition of the Import-Export Clause.