Opinion ID: 200320
Heading Depth: 3
Heading Rank: 1

Heading: The Role of the Federal Relations Act

Text: 29 Section 3 of the Federal Relations Act provides in part that any excise tax imposed by Puerto Rico may be levied and collected ... as soon as the [taxable items] are manufactured, sold, used, or brought into the island. 48 U.S.C. § 741a. The Secretary says that the parcel delivery requirements merely implement Puerto Rico's taxing authority under the Federal Relations Act. So, he argues, this case does not involve a state statute that is subject to preemption by a federal statute, but instead involves only the interface between two federal statutes, the FAA Authorization Act and the Federal Relations Act. The case would thus turn on whether the FAA Authorization Act impliedly repealed the Federal Relations Act. The Secretary says it did not. 30 Pointing to Congress's 1927 addition of the language that the excise tax may be levied as soon as taxable goods are brought into Puerto Rico, and that U.S. Customs and Postal Service officials are directed to assist the appropriate officials of the Puerto Rican government in the collection of these taxes, 14 48 U.S.C. § 741a, the Secretary contends that Puerto Rico has specific Congressional authorization to restrict the delivery of packages as necessary to collect the excise tax. 31 Taken alone, Section 3 would seem to strengthen the Secretary's hand in challenges to the tax and perhaps even its no delivery feature, at least as to those challenges based on the Commerce Clause. In practice, Puerto Rico has wielded a unique power as a result of the Federal Relations Act. In the years following the 1927 amendment, Puerto Rico succeeded in imposing a state tax on oil imported into bonded warehouses where New York failed — the critical distinction between the two taxes being the specific taxing authority of Puerto Rico under the Federal Relations Act. Compare West India Oil Co. v. Domenech, 311 U.S. 20, 25-27, 61 S.Ct. 90, 85 L.Ed. 16 (1940)(permitting Puerto Rico to impose tax on fuel oil imported into bonded warehouses because of Puerto Rico's taxing authority under 48 U.S.C. § 741a), with McGoldrick v. Gulf Oil Corp., 309 U.S. 414, 60 S.Ct. 664, 84 L.Ed. 840, (1940) (invalidating a New York sales tax imposed on crude oil imported into warehouses under bond because of its conflict with federal statutes occupying the field). The West India Court allowed Puerto Rico to impose the tax, despite federal statutes enacted after the Federal Relations Act and its 1927 amendment indicating Congress's intent to regulate bonded warehouses. See West India, 311 U.S. at 29, 61 S.Ct. 90 ([C]onsidering the relationship of general Congressional legislation to legislation specifically applicable to our territories, and possessions, repeals by implication are not to be favored and will not be adjudged unless the legislative intention to repeal is clear.). 32 Despite Section 3 of the Federal Relations Act's reach, there does not appear to be any evidence that Congress focused at all on the delivery bar issue, much less intended a specific endorsement of a scheme in which carriers were to be barred from making deliveries until they produced certificates that as a practical matter could not be done on a widespread basis. Congress intended that the 1927 amendment to the Federal Relations Act resolve existing controversy over whether taxes could be imposed on goods still in their original packaging. 15 See H.R.Rep. No. 1370, at 2 (1926); S.Rep. No. 1011, at 2 (1926) Previously, courts had held that U.S. Customs and Postal Service officials could not withhold delivery of incoming articles, as such tax collected in this manner is in effect a customs duty. Id. Puerto Rico was thus hindered in its efforts to levy the tax, and Congress amended Section 3 of the Federal Relations Act [f]or the purpose of righting this situation. Id. The change gave express authority to federal officials to aid in the collection of the tax, and clarified that incoming articles were subject to Puerto Rico's taxing jurisdiction as soon as they entered the island (whether arriving from the United States mainland or from foreign countries). It neutralized the regulatory effect of the customs laws and regulations in so far as they protected articles from local taxation after their arrival. West India, 311 U.S. at 28, 61 S.Ct. 90. 33 Just as Congress did not have in mind the authority claimed by Puerto Rico in this case, neither is there evidence that Congress had this scheme in mind when it enacted the FAA Authorization Act. We are left with two different federal statutes (the Federal Relations Act and the FAA Authorization Act), neither of which specifically address the issues raised in this case. As to these issues, therefore, neither statute has any automatic priority over the other. 34 In our view, the Federal Relations Act and the FAA Authorization Act can co-exist harmoniously. Our analysis proceeds down a well worn path: where two federal statutes are alleged to be in conflict, we look to whether they touch upon the same subject, and if so, whether we can give effect to both statutes. See Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 703 (1st Cir.1994). We are further guided by the familiar principle of construction that implied repeals are disfavored. Id. Here, the statutes at issue address two very different subjects: Puerto Rico's taxing authority on the one hand and deregulation of the air transportation industry on the other. 35 The Federal Relations Act does not suggest that Puerto Rico is empowered to impose restrictions on the delivery of packages by private carriers. The legislative history describing the purpose of the 1927 amendment includes the observation that Congress expected that the government of Puerto Rico would make use of this power so as not to unnecessarily place any barriers in the way of the free-trade conditions now existing between Puerto Rico and the mainland United States, which is [a] principal factor in the progress and prosperity of P[ue]rto Rico. H.R.Rep. No. 1370, at 2 (1926); S.Rep. No. 1011, at 2 (1926). We do not interpret the statute as conferring a broad authority to regulate the flow of packages in interstate commerce that conflicts with the FAA Authorization Act. To do so would be to manufacture a statutory conflict where none exists. 36 As a practical matter, it is not the case that the Secretary's exercise of his taxing authority necessitates the regulation of packages entering Puerto Rico. Packages arriving by U.S. mail are delivered without interference, and recipients are required to pay any applicable tax within 48 hours. See 13 P.R. Laws Ann. § 9068. The Secretary has introduced no evidence suggesting why this approach (or some other legislatively established process) would not be suitable for packages arriving by air carrier. Nor has he put forth a rational explanation for treating these two forms of delivery so differently. 16