1. The tax imposed by § 601 of the Revenue Act of 1932 on
importation of crude petroleum is, by force of the provisions of
that section, to be treated as a duty imposed by the Tariff Act of
1930, which, in turn, incorporated by reference customs regulations
relating to the entry of merchandise in bonded manufacturing
warehouses for exportation or disposition as ships' stores; section
630 of the Revenue Act (amendment of 1933) exempts from tax any
article sold for use as fuel, ships' stores, etc., on vessels
actually engaged in foreign trade, and, read in conjunction with
the Tariff Act, provides that articles manufactured from imported
articles and laden for use on vessels engaged in foreign commerce
under customs regulations are to be duty free and considered or
held to be exported for the purpose of drawback provisions of § 601
of the Revenue Act and § 309(b) of the Tariff Act. P.
309 U. S.
423.
2. Under these provisions, oil imported in bond in the crude
form into a State, converted into fuel oil in a bonded warehouse,
and withdrawn duty free for sale for fuel to a vessel engaged in
foreign trade is, from the time of importation until the moment of
lading on the vessel, segregated from the common mass of
Page 309 U. S. 415
property within the State and subject to the supervision and
control of federal customs officials. P.
309 U. S.
425.
3. A customs regulation providing that "imported goods in a
bonded warehouse are exempt from taxation under the general laws of
the several States" was incorporated in the Tariff Act of 1930 by
reference, and, when applied to the facts of the present case,
states only what is implicit in the Congressional regulation of
commerce presently involved. Pp.
309 U. S. 426,
309 U. S.
429.
4. The provisions of the Revenue Act of 1932, read with those of
the Tariff Act of 1930 and with other statutes and regulations,
afford a comprehensive scheme for the regulation of the importation
of crude petroleum and of its control while in the course of
manufacture in bond into fuel oil, and its delivery as ships'
stores to vessels in foreign commerce, all calculated to insure the
devotion of the manufactured oil exclusively to that purpose. P.
309 U. S.
426.
5. The statutes and regulations, taken together, operate as
regulations of foreign commerce. P.
309 U. S.
427.
6. The purpose of the exemption from the tax laid upon
importation of crude petroleum when it or its product is used as
ships' stores by vessels engaged in foreign commerce is, first, to
encourage importation of crude oil for such use, and thus to enable
American refiners to meet foreign competition and to recover trade
which had been lost by the imposition of the tax, and, secondly, to
promote foreign commerce through the sale of tax free fuel to
vessels engaged in it. P.
309 U. S.
427.
7. The adoption of these means of regulating and promoting
foreign commerce was within the Congressional power. P.
309 U. S.
427.
8. The laying of a duty on imports, although an exercise of the
taxing power, is also an exercise of the power to regulate foreign
commerce. The exemption of imports from the duty or the allowance
of a drawback when they are devoted to particular purposes or uses,
or when they are exported or otherwise sent out of the country, is
likewise a regulation of foreign commerce. P.
309 U. S.
428.
9. New York City sales tax imposed on sales to vessels engaged
in foreign commerce of fuel oil manufactured from imported crude
petroleum in bond,
held invalid as an infringement of the
Congressional regulation of the commerce. Pp.
309 U. S.
423-428.
281 N.Y. 647; 22 N.E.2d 480, affirmed.
Certiorari, 308 U.S. 545, to review the affirmance of a judgment
reversing a ruling of the Comptroller of the City of New York which
applied the city sales tax to fuel oil sold in bond to vessels
engaged in foreign commerce. The writ of certiorari was dismissed,
ante, p. 2, because it did not appear that the judgment
below did not rest upon an adequate nonfederal ground. A petition
for rehearing based on an amended remittitur of the New York Court
of Appeals, 282 N.Y. 612, 25 N.E.2d 392, was granted, the judgment
of dismissal vacated, p. 692.
See 256 App.Div. 207, 9
N.Y.S.2d 544.
MR. JUSTICE STONE delivered the opinion of the Court.
The Comptroller of the City of New York determined that
respondent was subject to a New York City tax laid upon sales in
1934 and 1935 of fuel oil manufactured in New York City from crude
petroleum which had been imported from a foreign country to New
York and there sold and delivered as ships' stores to vessels
engaged in foreign commerce. Upon certiorari to review the
Comptroller's determination, the Appellate Division of the New York
Supreme Court held that the taxing statute, as applied, infringed
the power of Congress to regulate foreign commerce, which it had
exercised by statutes regulating the control and disposition of the
imported oil. 256 App.Div. 207, 9 N.Y.S.2d 544.
The New York Court of Appeals affirmed without opinion, 281 N.Y.
647, 22 N.E.2d 480, but, by its amended remittitur, declared that
the affirmance was upon the ground, and none other, that the tax,
as applied,
Page 309 U. S. 421
violated the commerce clause of the Federal Constitution,
Article I, § 8, Clause 3, Article I, § 10, Clause 2, which commands
that no state shall lay any imposts or duties on imports or
exports, and Article VI, Clause 2, making the "Constitution, and
the Laws in Pursuance thereof . . . the supreme Law of the Land."
[
Footnote 1] We granted
certiorari upon a petition which challenged the several grounds of
decision as defined by the amended remittitur of the Court of
Appeals, the questions presented being of public importance.
The taxing enactment, Local Law No. 24 of 1934, p. 164,
published as Local Law No. 25, is that of the municipal assembly of
the City of New York, adopted pursuant to authority of Chapter 815
of the New York Laws of 1933, Ex.Sess., as amended by Chapter 873
of New York Laws of 1934, Ex.Sess. Its details were recently
discussed in our opinion in
McGoldrick v. Berwind-White Coal
Mining Co., ante, p.
309 U. S. 33, and
it is unnecessary to repeat them here. It suffices to say that it
lays a tax on purchasers for consumption of tangible personal
property at the rate of 2 percent. of the sales price. The tax is
conditioned upon events occurring within the state, either transfer
of title or possession of the purchased property, or an agreement
within the state, "consummated there" for the transfer of title or
possession. The duty of collecting the tax and paying it over to
the Comptroller is imposed on the seller,
Page 309 U. S. 422
who must pay it whether he collects it or not, in addition to
the duty imposed upon the buyer to pay the tax to the Comptroller
when not so collected.
The material facts are not in dispute. In 1934 and 1935,
respondent's predecessor imported crude petroleum from Venezuela
and made customs entry of it for its own manufacturing warehouse in
New York City, pursuant to its bonds known as "Proprietor's
Manufacturing Warehouse Bond, Class 6," given to the United States
under the warehouse laws of the United States and treasury
regulations. The bonds were given for the purpose of enabling the
importer, under statutes of the United States and treasury
regulations, to bring the petroleum into the United States to
manufacture it while in bond into fuel oil and then to withdraw it
for export or other lawful purpose free of the import duty which
would otherwise be payable. The bonds were conditioned, among other
things, upon compliance with laws and regulations relating to the
custody and safekeeping of the imported merchandise and its
products held in bond, and to its lawful withdrawal from the
warehouse under permit of the collector of the customs within the
time permitted by law.
The tax in question was laid on the sale of bunker "C" fuel oil,
manufactured in respondent's bonded warehouse from the imported oil
and delivered alongside foreign bound vessels in New York City
which purchased the oil as ships' stores for consumption as fuel in
propelling them in foreign commerce.
Petitioner argues that the tax imposed on the purchaser for
consumption of the fuel oil after it had been changed radically by
manufacture from the imported oil, and after it had been withdrawn
from the bonded warehouse, is not a prohibited tax on imports, and
does not contravene any policy which the laws of the United States
have sanctioned.
Page 309 U. S. 423
For present purposes, we may assume, without deciding, that, had
the crude oil not been imported in bond, it would, upon its
manufacture, have become a part of the common mass of property in
the state, and so would have lost its distinctive character as an
import and its constitutional immunity as such from state taxation.
See Gulf Fisheries Co. v. MacInerney, 276 U.
S. 124,
276 U. S. 126;
Waring v. Mayor of
Mobile, 8 Wall. 110;
F. May & Co. v. New
Orleans, 178 U. S. 496;
New York ex rel. Edward & John Burke v. Wells,
208 U. S. 14.
Respondent rests its argument on different considerations growing
out of the control over the foreign commerce involved in the
importation of the oil and its ultimate disposition as ships'
stores of vessels engaged in foreign commerce, which Congress has
exercised in pursuance of a national policy with which, it is
insisted, the tax conflicts. Expression of this policy, it is
urged, is to be found in the statutes of the United States, read in
light of their legislative history, exempting the imported oil from
federal taxation, otherwise imposed, if it is sold for use as fuel
on vessels engaged in the foreign trade, and in the measures taken
in statutes and regulations to make that policy effective by
segregating the oil under the direction of customs officers of the
United States from the time of its importation until it is
delivered to the purchasing vessel.
The provisions of the Revenue Act of 1932 laying a tax on the
importation of crude petroleum and granting exemptions, and the
related provisions of the Tariff Act of 1930 and the applicable
treasury regulations, support this contention.
Section 601(a), (c)(4) of the Revenue Act of 1932, 47 Stat. 169,
260, lays a tax "with respect to the importation" of crude
petroleum of one-half cent per gallon unless otherwise provided by
treaties of the United States, and declares, § 601(b), that the tax
imposed
"shall be levied, assessed, collected, and paid in the same
Page 309 U. S. 424
manner as a duty imposed by the Tariff Act of 1930, and shall be
treated for the purposes of all provisions of law relating to the
customs revenue as a duty imposed by such Act. . . ."
Section 630 of the Revenue Act of 1932, added by amendment of
June 16, 1933, 48 Stat. 256, declares that no tax under § 601 shall
be laid "upon any article sold for use as fuel supplies, ships'
stores . . . or . . . equipment on vessels . . . actually engaged
in foreign trade . . . ," and provides that
"articles manufactured or produced with the use of articles upon
the importation of which tax has been paid under this title, if
laden for use as supplies on such vessels, shall be held to be
exported for the purposes"
of the drawback provision of § 601(b).
Section 309(a) of the Tariff Act of 1930, 46 Stat. 590, 690,
authorizes the withdrawal, duty free, under regulations of the
Secretary of the Treasury, of articles from bonded manufacturing
warehouses for supplies to vessels of the United States engaged in
foreign trade, and directs that no such article shall be landed at
any port or place in the United States or its possessions. By
virtue of the terms already noted of §§ 601 and 630 of the Revenue
Act of 1932, these provisions were extended to articles sold for
fuel to vessels engaged in foreign trade, and the provisions of
statutes and regulations relating to withdrawal from manufacturing
bonded warehouses [
Footnote 2]
for export were thus extended to similar withdrawals of fuel oil
for disposition as ships' stores. [
Footnote 3]
Page 309 U. S. 425
It will be noted that the tax imposed on importation of crude
petroleum by § 601 of the Revenue Act of 1932 is, by force of its
own provisions, to be treated as a duty imposed by the Tariff Act
of 1930, which, in turn, has incorporated by reference customs
regulations relating to the entry of merchandise in bonded
manufacturing warehouses, its manufacture there, and its withdrawal
from bonded warehouses for exportation or disposition as ships'
stores; [
Footnote 4] that §
630, read in conjunction with § 601(b) and the related provisions
of the Tariff Act of 1930 (§ 309(b)) provides that articles
manufactured from imported articles and laden for use on vessels
engaged in foreign commerce under customs regulations are to be
duty free and considered or held as exported for the purpose of the
drawback provisions of both § 601 of the Revenue Act of 1932 and §
309(b) of the Tariff Act of 1930.
From the time of importation until the moment when the bunker
"C" oil is laden on vessels engaged in foreign trade, the imported
petroleum and its product, the fuel oil, is segregated from the
common mass of goods and
Page 309 U. S. 426
property within the state, and is subject to the supervision and
control of federal customs officers. [
Footnote 5] It cannot lawfully be removed from the
manufacturing warehouse except for delivery for use as fuel to a
vessel engaged in foreign commerce, and it cannot lawfully be
diverted from such destination and use, and cannot, after delivery
to the vessel, be landed in the United States. Throughout, the oil
is subject to the obligation of respondent's bonds that it shall
remain under such supervision and control, and shall not be
diverted from its ultimate destination as ships' stores.
Article 942 of the Customs Regulations of 1931 provides that
"merchandise in bonded warehouse is not subject to levy,
attachment, or other process of a State court . . , " and that
"imported goods in bonded warehouse are exempt from taxation under
the general laws of the several States." These regulations,
continued in Customs Regulations of 1937, Art. 940, appeared as
Art. 731, Regulations of 1915, and Art. 850 of Regulations of 1923.
They were thus in force when the Tariff Act of 1930 was adopted,
and were incorporated by reference,
cf. McCaughn v. Hershey
Chocolate Co., 283 U. S. 488,
283 U. S. 492,
by the provisions of §§ 309, 311, already noted, which also adopted
the earlier provisions of § 1351, and declared that articles
manufactured from imported materials in bonded warehouse should be
placed there under regulations prescribed by the Secretary of the
Treasury.
The provisions of the Revenue Act of 1932, read with those of
the Tariff Act of 1930 and with the statutes and regulations which
we have mentioned, thus afford a comprehensive scheme for the
regulation of the importation of the crude petroleum, and of its
control while in the
Page 309 U. S. 427
course of manufacture in bond into fuel oil and its delivery as
ships' stores to vessels in foreign commerce, all calculated to
insure the devotion of the manufactured oil exclusively to that
purpose.
The statutes and regulations, taken together, operate as
regulations of foreign commerce, as the legislative history shows
they were intended to do. The Tariff Act of 1930, of which § 601 of
the Revenue Act of 1932 is, in effect, a part, is entitled,
"An Act to provide revenue, to regulate commerce with foreign
countries, to encourage the industries of the United States, to
protect American labor, and for other purposes."
The obvious tendency of the exemption, from the tax laid upon
importation of crude petroleum, when it or its product is used as
ships' stores by vessels engaged in foreign commerce, is to
encourage importation of the crude oil for such use, and thus to
enable American refiners to meet foreign competition and to recover
trade which had been lost by the imposition of the tax. That
tendency, and the tendency of the sale of tax free fuel to vessels
engaged in foreign commerce to promote the commerce, were
considerations to be taken into account by Congress in fixing the
terms of the statute, and its adoption as a means of regulating and
promoting foreign commerce was within the Congressional power.
Board of Trustees v. United States, 289 U. S.
48.
That such was the purpose of the present legislation is
confirmed by its history. Senate Report No. 58, 73d Cong., 1st
Sess., on the bill which was enacted as § 630 of the Revenue Act of
1932, exempting fuel placed on vessels engaged in foreign commerce
from the tax, declared, page 3:
"It is believed that the amendment will enable the American
manufacturers to compete more favorably with their foreign
competitors for this business without any substantial loss of
revenue, since the effect of the present act is to force purchases
abroad."
It
Page 309 U. S. 428
added that the provisions for drawback of the tax on importation
"also relieves American manufacturers from a competitive
disadvantage." From statements made on the floor of the Senate by
the sponsor of the bill, it appears that one purpose of the
exemption was to increase the trade in fuel oil in American ports
which had been lost through purchase of fuel in foreign ports by
vessels engaged in foreign commerce following the imposition of the
tax by § 601(c)(4). 77 Cong.Rec. Part III, 3212-3214.
The laying of a duty on imports, although an exercise of the
taxing power, is also an exercise of the power to regulate foreign
commerce,
Hampton & Co. v. United States, 276 U.
S. 394,
276 U. S. 411;
Board of Trustees v. United States, supra, 289 U. S. 58.
The exemption of imports from the duty or the allowance of a
drawback when they are devoted to particular purposes or uses, or
when they are exported or otherwise sent out of the country, is
likewise a regulation of foreign commerce,
See Gibbons v.
Ogden, 9 Wheat. 1,
22 U. S. 201-202;
Groves v.
Slaughter, 15 Pet. 449,
40 U. S. 505.
Customs regulations to insure the devotion of the imports to the
intended use are likewise within the Congressional power, since
such regulations are not only necessary or appropriate to protect
the revenue, but are means to the desired end -- the regulation of
foreign commerce by insuring that the particular class of exempted
imports are used for the purposes for which the exemption is
allowed.
The question remains whether the present tax conflicts with the
Congressional policy adopted by the Acts of Congress which we have
discussed. As we have seen, the exemption and drawback provisions
were designed, among other purposes, to relieve the importer of the
import tax so that he might meet foreign competition in the sale of
fuel as ships' stores. In furtherance of that end, Congress
provided for the segregation of the imported merchandise
Page 309 U. S. 429
from the mass of goods within the state, prescribed the
procedure to insure its use for the intended purpose, and, by
reference, confirmed and adopted customs regulations prescribing
that the merchandise, while in bonded warehouse, should be free
from state taxation. It is evident that the purpose of the
Congressional regulation of the commerce would fail if the state
were free at any stage of the transaction to impose a tax which
would lessen the competitive advantage conferred on the importer by
Congress, and which might equal or exceed the remitted import duty.
See New York v. Compagnie Generale Transatlantique,
107 U. S. 59,
107 U. S. 63.
The Congressional regulation, read in the light of its purpose, is
tantamount to a declaration that, in order to accomplish
constitutionally permissible ends, the imported merchandise shall
not become a part of the common mass of taxable property within the
state pending its disposition as ships' stores, and shall not
become subject to the state taxing power. The customs regulation
prescribing the exemption from state taxation, when applied to the
facts of the present case, states only what is implicit in the
Congressional regulation of commerce presently involved. The state
tax in the circumstances must fail as an infringement of the
Congressional regulation of the commerce.
Sinnot v.
Davenport, 22 How. 227;
New York v. Compagnie
Generale Transatlantique, supra, 107 U. S. 63;
cf. Kelly v. Washington, 302 U. S. 1,
302 U. S.
9-10.
It is unnecessary to consider whether the tax upon the sale of
the oil as ships' stores to vessels engaged in foreign commerce is,
in the circumstances of this case, an impost on imports or exports
or a duty of tonnage prohibited by Article I, § 10, Clauses 2 and 3
of the Constitution.
Affirmed.
MR. JUSTICE McREYNOLDS took no part in the decision of this
case.
[
Footnote 1]
Certiorari, which had been allowed by the Supreme Court of the
United States, December 4, 1939, 308 U.S. 545, before the amendment
of the remittitur by the New York Court of Appeals, was dismissed
January 15, 1940,
ante, p. 2, on the ground that, in the
absence of an explicit statement by the Court of Appeals that it
had annulled the assessment of the tax solely because of the
violation of the Federal Constitution, the Court was unable to find
that the decision of the highest court of the state did not rest
upon an adequate nonfederal ground. On motion for rehearing, based
on the amended remittitur of the Court of Appeals, the order of
dismissal was, on February 5, 1940, vacated and the cause restored
to the docket,
post, p. 692.
[
Footnote 2]
Article 829 of the Customs Regulations of 1929, in force when
the Tariff Act of 1930 was enacted and continued as Article 921 of
Customs Regulations of 1931 and as Article 919 of Customs
Regulations of 1937, defines Class 6 warehouses as those "for the
manufacture in bond, solely for exportation, of articles made in
whole or in part of imported materials. . . ."
[
Footnote 3]
Section 311 of the Tariff Act of 1930, 46 Stat. 691, under which
respondent's Class 6 bonded warehouse was established and operated,
provides for the manufacture in such warehouse of articles made
from imported materials and intended for exportation free of duty
under such regulations as the Secretary of the Treasury might
prescribe, and also declared that the provisions of § 1351 of Title
26 U.S.C. (§ 3433 of the Revised Statutes) should, so far as
practicable, apply to such bonded manufacturing warehouses. Section
1351 provides for the manufacture in bonded warehouse of articles
from imported materials under such rules as the Secretary may
prescribe, and under the direction of the proper customs officer,
and directs that no article so manufactured in a bonded
warehouse
"shall be taken therefrom except for exportation, under the
direction of the proper officer having charge thereof . . . whose
certificate, describing the articles . . . shall be received by the
collector of customs in cancellation of the bonds, or return of the
amount of foreign import duties."
See Articles 455, 457, and 960 of the 1931 Customs
Regulations.
[
Footnote 4]
See Articles 455 to 461, Customs Regulations of 1931,
cf. Articles 410-414, Regulations of 1915; Articles
433-437, Regulations of 1923 and Articles 464-470 of the 1937
Regulations.
[
Footnote 5]
See Ch. 16, Transportation in Bond and Merchandise in
Transit; Ch. 17, Customs Warehouses and Control of Merchandise
Therein, 1931 Customs Regulations.