Court Opinion

ID: 9428974
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:25:21.18922+00
Date Added: 2024-06-11T17:23:16.579047
License: Public Domain

Justice Powell,
dissenting.
Since 1799 the United States has permitted importers to post a customs bond in lieu of immediate payment of customs duties on imported goods. Today the Court holds that these goods stored in customs-bonded warehouses also are exempt from state property taxation. This holding would be unremarkable were it based on any evidence of congressional intent, but such support is lacking. The Court instead finds that state taxation is incompatible with the purposes of the federal customs-bonded warehousing system.
Customs-bonded storage enables importers to defer paying customs duties until the goods are ready for domestic sale or to avoid paying duties altogether if the goods are reexported. The Court correctly observes that Congress’ ultimate purpose has been to encourage imports and enhance the position of the United States as a center of international trade. I am not persuaded, however, that nondiscriminatory state taxation of customs-bonded goods is incompatible with this purpose.
The Court attributes significance to the “pervasive” system of customs regulation of stored goods, ante, at 153, but fails to explain how this affects a State’s power to tax. The purpose of the regulation is to guarantee the security of federal revenues. The owner of customs-bonded goods eventually must pay the customs duties or reexport the goods. The warehousing system enables the Federal Government to monitor the removal of bonded goods for sale or export and ensure that duties are paid when due. A State’s imposition of an ad valorem tax does not impair this function. The “pervasive” regulation of the manner in which customs-bonded goods are stored and withdrawn, therefore, is simply immaterial to the validity of state taxation of those goods.
*156The Court also argues that state taxation of customs-bonded goods would frustrate the congressional purpose of encouraging foreign trade with the United States. It asserts that appellees’ taxes are large enough “to offset substantially the very benefits Congress intended to confer by remitting the duty.” Ibid. It seems to me that the word “offset” in this context is misused. If a State were to impose a special tax on property stored in customs-bonded warehouses, perhaps such a tax could be viewed as “offsetting” the benefits of storage. An importer deciding whether to use the warehouses would weigh the amount saved through remission of duties against the amount expended to pay the property tax. In this case, however, the county and city, acting pursuant to state law, impose the same ad valorem taxes no matter where the property is stored. An importer deciding whether to bring imported goods into Texas therefore knows that while the goods are in storage he will have to pay the property tax whether or not he uses a customs-bonded warehouse. The value to him of using customs-bonded storage is the full amount of the savings from deferral or avoidance of duties — precisely the benefit Congress expressly has provided in order to encourage merchants to bring business to the United States.
The Court accepts appellant’s argument that a tax exemption for goods in customs-bonded warehouses reduces importers’ costs and thereby furthers the federal interest in encouraging trade. But the Court itself acknowledges that state legislation should be pre-empted only where “necessary” to achieve a congressional purpose. Ibid. No showing has been made that this standard is met here. Duty-free storage and exemption from state property taxation are independent policies for promoting foreign trade. Congress quite reasonably may choose one policy, as it has done, without choosing the other.
The Court relies primarily on McGoldrick v. Gulf Oil Corp., 309 U. S. 414 (1940), in which the Court invalidated a *157city tax on the sale of fuel oil from a customs-bonded manufacturing warehouse to foreign-bound vessels. McGoldridc does not control this case. As the Court concedes, see ante, at 152, McGoldrick did not hold that the warehousing system and customs regulations alone mandated pre-emption of state taxation. Rather, a key factor was that Congress expressly had exempted from federal taxation the imported petroleum that was refined in the bonded warehouses for sale to foreign-bound vessels as ships’ stores. The explicit congressional purpose “to enable American refiners to meet foreign competition,” 309 U. S., at 427, provided a basis on which to infer congressional intent to pre-empt state taxation. There is no analogous federal tax exemption here, nor any evidence of congressional intent to encourage meeting of foreign competition. All that exists is the warehousing system itself, and for the reasons stated above I find this insufficient.
Nor do I find merit in appellant’s constitutional arguments. Appellees’ taxes do not violate the Commerce Clause, as they are “applied to an activity with a substantial nexus with the taxing State, [are] fairly apportioned, [do] not discriminate against interstate commerce, and [are] fairly r lated to the services provided by the State.” Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 279 (1977). Nor do these nondiscriminatory ad valorem taxes violate the Import-Export Clause, Art. I, §10, cl. 2. See Michelin Tire Corp. v. Wages, 423 U. S. 276 (1976).
Appellant notes that Michelin Tire left open the possibility that even nondiscriminatory property taxes may not be imposed on goods that still are in transit. But appellant’s copiers were stored for up to three years, and under current law they could have been stored for up to five years. 19 U. S. C. § 1557(a) (1976 ed., Supp. V). The only conceivable basis for the view that these goods remain “in transit” is that Congress has so provided. I cannot agree that Congress has endowed customs-bonded goods with indefinite immunity from nondiscriminatory state-authorized local property taxation. *158During their prolonged period of storage, appellant’s goods benefited from police and fire protection and the various other services provided by the county and city. “[T]he State is simply making the imported goods pay their own way, as opposed to exacting a fee merely for 'the privilege of moving through a State.’” Washington Revenue Dept. v. Association of Washington Stevedoring Cos., 435 U. S. 734, 764 (1978) (Powell, J., concurring in part and concurring in result) (quoting Michelin Tire Corp. v. Wages, supra, at 290). The Import-Export Clause never was intended to exempt imported goods in these circumstances.
I would affirm the judgment of the Texas Court of Civil Appeals.