1. Goods purchased at interior points for export do not lose
their character as goods in foreign commerce and become subject to
state taxation because, after shipment to the exporter to a
domestic port, they are temporarily stored there for reasons of
expedition and economy preparatory to their loading on the vessels
of foreign consignees. P.
279 U. S.
101.
2. An exporter bought oil in interior states to fill orders from
abroad; had it shipped by rail in tank cars to a port in Louisiana,
on bills of lading to the exporter at export rates; pumped it from
the car tanks into storage tanks at the port, and from these
delivered it into the ships of foreign consignees, the title
passing from the exporter to them upon such delivery. The oil in
each tank car, and as stored, was not segregated or destined to any
particular cargo or shipment abroad, but it was all bought and held
to fill foreign orders previously received; none of it was or could
be otherwise disposed of at that port; none of it was subjected to
any treatment of manufacture there, and the storage was but a
necessary meaon of securing prompt transshipment and avoiding
demurrage charges, by accumulating the oil from the tank cars
pending the arrival of a foreign consignee's ship, or to make up a
full cargo for one already waiting.
Held that the
continuity of the journey was not broken by the storage, and that a
Louisiana tax on the oil while so stored was unconstitutional.
166 La. 378 reversed.
Page 279 U. S. 96
Certiorari, 278 U.S. 595, to review a decree of the Supreme
Court of Louisiana which reversed a decree of a district court
enjoining the levying of a tax, in he suit of the Petroleum Company
against a sheriff, an assessor, and the Louisiana Tax
Commission.
Page 279 U. S. 98
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
This was a petition by the Carson Petroleum Company, a
corporation of Delaware, to enjoin Leon C. Vial, sheriff and tax
collector of the Parish of St. Charles, Laouisiana. R. A. De Broca,
assessor for the parish, and the Louisiana Tax Commission, from
laying and levying against it an alleged illegal assessment of
duties on a quantity of oil in storage tanks at St. Rose in the
parish. They were
ad valorem duties levied on all the
property of the petitioner subject to taxation. The taxation was
objected to because it was deemed an interference with interstate
and foreign commerce.
The district court granted the injunction on the ground that the
oil was in transit from another state to a foreign country and was
halted only temporarily at St. Rose, and had no situs in the parish
or state. The Supreme Court of Louisiana reversed the decree and
ordered that the tax be collected with the penalties imposed by
law.
Page 279 U. S. 99
166 La. 378. There is no dispute about the facts. We avail
ourselves of the statement made by the Chief Justice of the Supreme
Court of Louisiana, which is a clear and fair presentation of the
case:
"The Petroleum Import & Export Corporation is a subsidiary
of the Carson Petroleum Company, and owns and operates the system
of tanks and pumping equipment for receiving the contents of the
railroad tank cars of oil into the tanks owned by the Petroleum
Import & Export Corporation and afterwards loading it into
ships for export. The Port of New Orleans has no facility or
equipment for assembling or receiving from railroad tank cars
cargoes of oil and loading it aboard ships for export. The tanks
and equipment at St. Rose, a few miles above New Orleans, were
constructed for that purpose. No oil is sold at St. Rose except
what is exported. The only business conducted there is the
unloading of oil from railroad tank cars into the storage tanks and
the loading of the oil from the storage tanks aboard the tankers
for shipment to England, France, and other foreign ports. The oil
is bought by the Carson Petroleum Company from the refiners in the
Mid-Continent Field, comprising Kansas, Oklahoma and Texas, and is
shipped to St. Rose, Louisiana, in railroad tank cars consigned to
the Carson Petroleum Company. The shipments are not on through
bills of lading, but on an export rate, which is lower than the
domestic rate. T he oil is a higher grade of gasoline than is used
in this country generally, and is made especially for export,
because the automobiles in England, France and other foreign
countries require a higher grade of gasoline than that which is
used in this country. The Carson Petroleum Company takes orders for
cargoes of oil from the foreign buyers, who charter the vessels to
transport the oil from St. Rose to the foreign ports. The company
always has orders on hand in excess of the quantity of oil at St.
Rose, and buys the oil in the Mid-Continent Field for the
purpose
Page 279 U. S. 100
of filling orders already received from the foreign buyers. The
oil in each railroad tank car, however, is not segregated or
assigned or destined to any particular cargo or shipment abroad,
but is pumped into the large storage tanks, having the capacity of
many tank cars, and is held in the tanks until a ship arrives, or
until a sufficient quantity of oil is accumulated to make up a
cargo. A ship carries from two to three million gallons; hence, it
takes 300 to 500 railroad tank cars, or 10 to 16 trains of tank
cars, to make up a cargo of oil. The buyers are allowed a ten
percent leeway on the quantity of oil bought for each shipment,
which, as we understand, means that, if the capacity of the ship is
either more or less than the quantity of oil contracted for, the
buyer can demand a delivery of the ship's capacity at the contract
price of the oil per gallon, provided the quantity shall be not
more than ten percent above or below the quantity contracted for. A
delivery of the oil thus sold is made by loading the oil aboard the
ship chartered by the buyer. Until the oil is thus loaded aboard a
ship, it belongs to the Carson Petroleum Company, and is insured in
the name of the company, loss payable to the company. There are
times when an accumulation of oil in the tanks is awaiting the
arrival of a ship, and, at other times, a ship is awaiting the
accumulation of a sufficient quantity of oil to make up a cargo. In
order to save demurrage on ships, which amounts to $1,500 or $2,000
per day on a ship, the Carson Company endeavors to have a
sufficient quantity of oil on hand at St. Rose to fill each order
promptly on arrival of the ship. On account of the demurrage
charges on tank cars, as well as on steamships, it would be
impracticable to carry on the export oil business by any other
method than by storing the oil in large storage tanks as the train
loads of oil arrive, and shipping from the accumulation when the
ships arrive. The oil is shipped from the storage tanks in the same
condition in which it was received from the tank
Page 279 U. S. 101
cars, without being treated in any way. The oil is never kept on
hand at St. Rose any longer than is necessary. The quantity on hand
is always awaiting either the arrival of a ship or the accumulation
of a sufficient quantity to load a ship."
The oil company asserts that the interstate and foreign shipment
of the oil, from the refineries in the Mid-Continent Field into and
across the state and across the sea to the foreign ports is a
continuous interstate and foreign shipment, notwithstanding the
stoppage and storage of the oil at St. Rose, where it had to await
either the arrival of a ship or the accumulation of a sufficient
quantity of oil to load a ship. On the other hand, the state
authorities claim that there were two separate shipments -- the one
which ended when the tank cars arrived and were unloaded at St.
Rose and the foreign shipment, which began when the oil was loaded
aboard ship for a foreign port. Hence they contend that, while the
oil was stored in the tanks at St. Rose, under the protection of
the state and local government, it was subject to state and local
taxation even though intended and prepared for exportation.
The crucial question to be settled in determining whether
personal property or merchandise moving in interstate commerce is
subject to local taxation is that of its continuity of transit. The
leading case is that of
Coe v. Errol, 116 U.
S. 517, in which Mr. Justice Bradley for this Court laid
down the principles that should be applied. It was a case of
floating logs. There were two lots, one where the logs were cut in
Maine and were floated down the Androscoggin on their way to
Lewiston, Maine, but, after starting on the trip, were detained for
a season in New Hampshire by low water. It was held that they were
free from local taxation in New Hampshire because they had begun
the interstate trip, and the cause of detention was to be found in
the necessities of the passage and trip back to Maine, which was
held to be continuous.
Page 279 U. S. 102
This ruling, which was by the state court of New Hampshire, was
approved by this Court. But, in respect to the other lot, this
Court found that the logs were gathered in New Hampshire in what
the court termed an "entrepot," looking to ultimate transportation
to another state, but that, when taxed, they had not started on
their final and continuous journey, and hence were not in
interstate commerce and were taxable.
In
Champlain Realty Co. v. Brattleboro, 260 U.
S. 366, logs gathered on the West River in Vermont for a
destination in New Hampshire were held not taxable in Vermont,
though detained for a considerable time by a boom at Brattleboro to
await subsidence of high water in the Connecticut River. It was
held that as the interruption was only to promote the safe or
convenient transit, the continuity of the interstate trip was not
broken, as shown in
State v. Engle, 34 N.J.Law, 425;
State v. Carrigan, 39 N.J.Law, 35, and in
Kelley v.
Rhoads, 188 U. S. 1, where
sheep driven 500 miles from Utah to Nebraska, traveling 9 miles a
day, were held immune from taxation in Wyoming, where they stopped
and grazed on their way.
In
Hughes Bros. Timber Co. v. Minnesota, 272 U.
S. 469, pursuant to a contract of sale, logs cut were
gathered on the Swamp River in Minnesota by the vendors and were
floated by river to Lake Superior, there loaded onto the vendee's
vessels and transported to their destination in Michigan. This
Court said, p.
272 U. S.
475:
"The conclusion in cases like this must be determined from the
various circumstances. Mere intention by the owner ultimately to
send the logs out of the state does not put them in interstate
commerce, nor does preparatory gathering for that purpose at a
depot. It must appear that the movement for another state has
actually begun and is going on. Solution is easy when the shipment
has been delivered to a carrier for a destination in another
Page 279 U. S. 103
state. It is much more difficult when the owner retains complete
control of the transportation, and can change his mind and divert
the delivery from the intended interstate destination, as in the
Champlain Company case. The character of the shipment in
such a case depends upon all the evidential circumstances looking
to what the owner has done in the preparation for the journey and
in carrying it out. The mere power of the owner to divert the
shipment already started does not take it out of interstate
commerce if the other facts show that the journey has already begun
in good faith and temporary interruption of the passage is
reasonable and in furtherance of the intended transportation, as in
the
Champlain case. Here, the case is even stronger in
that the owner and initiator of the journey could not, by his
contract, divert the logs after they had started from Swamp river
without a breach of contract made by him with his vendee, who, by
the agreement of sale, divided with him the responsibility for the
continuous interstate transportation."
The principle of continuity of journey is shown in
Railroad
Commission v. Worthington, 225 U. S. 101,
where coal from the Ohio mines intended for transportation on the
lakes and stored for some weeks or months on docks in Cleveland for
delivery beyond the lakes was held to be subject to interstate
rates. So, in
Western Oil Co. v. Lipscomb, 244 U.
S. 346, in which, speaking of the effect of billing and
rebilling in causing a break in the trip, it was said, p.
224 U. S.
349:
"Ordinarily, the question whether particular commerce is
interstate or intrastate is determined by what is actually done,
and not by any mere billing or plurality of carriers, and where
commodities are in fact destined from one state to another, a
rebilling or reshipment en route does not of itself break the
continuity of the movement or require that any part be classified
differently from the remainder.
Page 279 U. S. 104
As this Court often has said, it is the essential character of
the commerce, not the accident of local or through bills of lading,
that is decisive."
An instance of interruption of railroad transportation is
Bacon v. Illinois, 227 U. S. 504.
Bacon, the owner of the grain and the taxpayer, had bought it in
the South and had secured the right from the railroads transporting
it to remove it from their custody to his private grain elevator in
Illinois, where, for his own purpose, he proceeded to inspect,
weigh, clean, clip, dry, sack, grade, or mix it, and had power
under his contract with the carriers either to change its
ownership, consignee, or destination, or to restore the grain,
after the processes mentioned, to the carriers to be delivered at
the destination in another state according to his original
intention. The question was whether the removal of the grain to his
private elevator interrupted the continuity of the transportation
and made the grain subject to local taxation there. It was held
that it did; that the grain was locally dealt with in the interest
of the owner while it was in his custody, and was subject to his
complete disposition for a collateral business purpose of his
own.
Another case is that of
General Oil Co. v. Crain,
209 U. S. 211. The
company conducted a large oil business in Memphis, where it
gathered from the North much oil and maintained an establishment
for its distribution. It had tanks of various sizes, from which the
oil was put in barrels or other small vessels to be sold locally or
in other states, or to fill orders already received from customers
in Arkansas, Louisiana, and Mississippi. For years, the company had
unloaded its oil from its tank cars on arrival into large
stationary tanks indiscriminately, and had sold and distributed it
as required in its business. After a time, in order to escape the
local inspection tax, part of the oil was deposited in a stationary
tank No. 1,
Page 279 U. S. 105
marked "Oil already sold in Arkansas, Louisiana and
Mississippi," while the local oil and that yet to be sold was kept
in other tanks. The oil in No. 1 was divided according to the
orders already received into barrels and larger containers, to be
forwarded by rail to customers in the three states named. It was
contended that oil of tank No. 1 was on a continuous trip through
Memphis from sources in the North to the ascertained customers in
Arkansas, Louisiana, and Mississippi, and was not taxable at
Memphis. It was held that the doings of the company in thus
separating the oil after it reached Memphis into various amounts in
different containers was itself a local business in Memphis, and
that the delivery into Memphis of the oil and its subsequent
shipment made two separate interstate shipments and permitted local
taxation on the oil while it awaited the second shipment. The court
seemed to regard the redistribution of the oil at Memphis as a rest
interrupting the journey, and the Memphis yard for the tanks as an
assembling entrepot like that described by Mr. Justice in
Coe
v. Errol.
The court was divided, and there was very vigorous dissent. The
case has caused discussion, and it must be admitted that it is a
close one, and might easily have been decided the other way. The
result was probably affected by the impression created by the
original situation and the somewhat artificial rearrangement of
tanks in a large entrepot for redistribution of oil to avoid
previous taxability.
We do not think, in deciding the case at bar, that we should
give the
Crain case the force claimed for it by the court
below and by counsel for the state. Since its decision, this Court
had had to consider several cases where there was transshipment of
the commodity from local carriage in a state to a ship at an export
port and conveyance thence to a foreign destination. There has been
a liberal
Page 279 U. S. 106
construction of what is continuity of the journey, in cases
where the court finds from the circumstances that export trade has
been actually intended and carried through.
In
Southern Pacific Terminal Co. v. Interstate Commerce
Commission, 219 U. S. 498,
cotton oil cake and meal destined for export was bought by the
intending exporter in Texas, Oklahoma, and Louisiana. It was
shipped to him on bills of lading and waybills showing the point of
origin in those states and the destination at Galveston. The
purchases were made for export, there being no consumption of the
products at Galveston. His sales to foreign countries were
sometimes for immediate and sometimes for future delivery,
irrespective of whether he had the product on hand at Galveston. At
times, he had it on hand. At other times, orders must be filled
from cake or meal to be purchased in the interior or then in
transit to him. When the cake reached Galveston, it was ground into
meal and sacked by the exporter, and, for the meal thus ground and
such meal as had been bought in ground form, he took out ships'
bills of lading made to his order. The court said, p.
219 U. S.
526:
"The manufacture or concentration on the wharves of the Terminal
Company are but incidents, under the circumstances presented by the
record, in the transshipment of the products in export trade and
their regulation is within the power of the Interstate Commerce
Commission. To hold otherwise would be to disregard, as the
Commission said, the substance of things and make evasions of the
act of Congress quite easy. It makes no difference, therefore, that
the shipments of the products were not made on through bills of
lading, or whether their initial point was Galveston or some other
place in Texas. They were all destined for export, and, by their
delivery to the Galveston, Harrisburg, and San Antonio Railway,
they must be considered as having been delivered to a carrier for
transportation to their foreign destination, the
Page 279 U. S. 107
Terminal Company being a part of the railway for such purpose.
The case therefore comes under
Coe v. Errol, 116 U. S.
517, where it is said that goods are in interstate, and
necessarily as well in foreign, commerce when they have 'actually
started in the course of transportation to another state, or
delivered to a carrier for transportation.'"
In
Texas & New Orleans R. Co. v. Sabine Tram Co.,
227 U. S. 111, the
question was whether the rates charged on shipments of lumber on
local bills of lading from one point in Texas to another, but
destined for export, were intrastate or foreign commerce. The
exporter purchased the lumber from other mills in Texas with which
to supply its sales in part. It did not know when any particular
car of lumber left the starting point into which ship or to what
particular destination the contents of the car would ultimately go,
or on which sale it would be applied, this not being found out
until its agent inspected the invoice mailed to and received by him
after shipment. The lumber remained after arrival at the shipping
port in the slips or on the dock until a ship chartered by the
exporter arrived, when the exporter selected the lumber suited for
that cargo and shipped it to its destination. There was no local
market for lumber at the port of shipment, the population of which
did not exceed 50, and the exporter had never done any local
business at that point. This Court held that the shipments to the
point of shipment from other points of Texas were in interstate and
foreign commerce, and should pay rates accordingly. The court said,
p.
227 U. S.
126:
"The determining circumstance is that the shipment of the lumber
to Sabine was but a step in its transportation to its real and
ultimate destination in foreign countries. In other words, the
essential character of the commerce, not its mere accidents, should
determine. It was to supply the demand of foreign countries that
the lumber was purchased, manufactured, and shipped, and to
give
Page 279 U. S. 108
it a various character by the steps in its transportation would
be extremely artificial. Once admit the principle, and means will
be afforded of evading the national control of foreign commerce
from points in the interior of a state. There must be transshipment
at the seaboard, and if that may be made the point of ultimate
destination by the device of separate bills of lading, the commerce
will be given local character though it be essentially
foreign."
Again, this Court said, p.
227 U. S.
130:
"And the shipment was not an isolated one, but typical of many
others, which constituted a commerce amounting in the year 1905 to
14,667,670 feet of lumber and in the year 1906, 39,554,000 feet.
Nor was there a break, in the sense of the interstate commerce law
and the cited cases, in the continuity of the transportation of the
lumber to foreign countries by the delay and its transshipment at
Sabine.
Swift & Co. v. United States, 196 U. S.
375. Nor, as we have seen, did the absence of a definite
foreign destination alter the character of the shipments."
See also Railroad Commission v. Texas & Pacific
Ry., 229 U. S. 336;
Spaulding & Bros. v. Edwards, 262 U. S.
66,
262 U. S. 70.
We do not think the
Sabine Tram case can be
distinguished from the one before us. It has been suggested that,
in the present case, there was a failure to fix the exact point of
destination abroad before shipment, and that this prevents the
continuity required in a continuous exportation. But there was the
same indefiniteness on this point in the
Sabine Tram case.
Then, it is said, there was no separation of the various shipments
of oil from the interior points to the tanks and thence to ships at
the port of shipment. But, in the
Sabine Tram case, cars
of lumber were sent to the transshipment point without regard to
the filling of one order or another. In both cases, the delay in
transshipment was due to nothing but the failure of the arrival of
the subject to be shipped at the same
Page 279 U. S. 109
time as the arrival of the ships at the port of transshipment.
The use of the tanks at the point of transshipment cannot be
distinguished from the storing of the lumber on the docks or in the
slips between them till the vessel to carry it should be ready. The
quickness of transshipment in both cases was the chief object each
exporter plainly sought. In both cases, the selection of the point
of shipment and the equipment at that point were solely for the
speedy and continuous export of the product abroad, and for no
other purpose. No lumber or oil was sold there but that to be
exported. There was no possibility of any other business there.
Whatever hesitation might be prompted in deciding this case, if the
Crain case stood alone, the effect of the decisions of
this Court since is such as to make it inapplicable to the case
before us.
The judgment is reversed.
MR. JUSTICE McREYNOLDS and MR. JUSTICE SANFORD are in favor of
affirming the judgment on the authority of
General Oil Co. v.
Crain, 209 U. S. 211.