A cement plant in California was sold to a foreign purchaser for
export. An export license was obtained, and a letter of credit in
favor of the seller deposited here. Title passed and possession was
taken for the purchaser. A common carrier was employed to dismantle
the plant and prepare it for shipment. As the dismantling
proceeded, shipments were labeled with the purchaser's name as
consignee and delivered to a rail carrier. When 12% had been
shipped, 10% had been prepared for shipment, 34% had been
dismantled but not prepared for shipment, and 44% had not been
dismantled, a municipality, acting under a California statute,
levied a personal property tax on the portion which had not
actually been shipped.
Held: This was not a tax on an export contrary to Art.
I, § 10, Cl. 2 of the Constitution. Pp.
337 U. S.
155-157.
(a) The process of exportation begins upon entrance of the
articles into the export stream. P.
337 U. S.
157.
(b) It is not enough that, on the tax date, there was a purpose
and plan to export the property; nor that, in due course, the plan
was fully executed. P.
337 U. S.
157.
(c) The fact that the dismantler was a licensed carrier for
interstate and foreign commerce and that its employment included
the loading of the property on railroad cars for shipment to the
seaboard does not here require a different result. P.
337 U. S.
157.
32 Cal. 2d 68,
194 P.2d 527, affirmed.
In a suit for refund of a municipal personal property tax paid
under protest, a state court granted judgment for the plaintiff.
The State Supreme Court reversed.
32 Cal. 2d 68,
194 P.2d 527. On appeal to this Court,
affirmed, p.
337 U. S.
157.
Page 337 U. S. 155
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
There was a cement plant in Merced County, California, which was
sold to petitioner -- a corporation of Colombia -- for export to
South America. An export license was obtained and a letter of
credit in favor of the seller deposited here. Title passed, and
possession was taken for the purchaser. A company which was a
common carrier was employed to do the dismantling and packaging for
shipment. As the dismantling proceeded, shipments were labeled with
appellant's name as consignee and delivered to a rail carrier.
Respondent, acting under a California statute, [
Footnote 1] levied a personal property tax on
the property for the tax year 1945-1946. The tax date was March 5,
1945. On that date, 12 percent of the plant had been shipped out of
the county. That portion was relieved of the tax. The balance was
taxed. That included the 10 percent which had been dismantled and
crated or prepared for shipment, 34 percent which had been
dismantled but not crated or prepared for shipment, and 44 percent
which had not been dismantled. But before the end of January, 1946,
all the property had been shipped by rail to a port and was en
route to South America by ocean carrier.
Article I, § 10, Cl. 2 of the Constitution provides in part
that
"No State shall, without the Consent of the Congress, lay any
Imposts or Duties on Imports or Exports, except what may be
absolutely necessary for executing its inspection Laws. . . ."
Appellant claimed
Page 337 U. S. 156
that this tax was laid on an export, and was therefore
unconstitutional. It paid the tax under protest and brought this
suit to recover it. The trial court, holding that the entire plant
was an export on the tax assessment day, granted judgment for
appellant. The Supreme Court of California reversed.
32 Cal. 2d 68,
194 P.2d 527. The case is here on appeal. 28 U.S.C. § 1257(2).
". . . goods do not cease to be part of the general mass of
property in the state, subject, as such, to its jurisdiction, and
to taxation in the usual way, until they have been shipped, or
entered with a common carrier for transportation, to another state,
or have been started upon such transportation in a continuous route
or journey."
Coe v. Errol, 116 U. S. 517,
116 U. S. 527.
That test was fashioned to determine the validity under the
Commerce Clause of a nondiscriminatory state tax. But, as we noted
in
Richfield Oil Corp. v. State Board, 329 U. S.
69,
329 U. S. 79, it
is equally applicable to cases arising either under Art. I, § 10,
Cl. 2 (The Import-Export Clause) or under Art. I, § 9, Cl. 5, which
prohibits Congress from laying any tax on "Articles exported from
any State." [
Footnote 2]
Under that test, it is not enough that there is an intent to
export, or a plan which contemplates exportation, or an integrated
series of events which will end with it.
See Turpin v.
Burgess, 117 U. S. 504;
Cornell v. Coyne, 192 U. S. 418. The
tax immunity runs to the process of exportation and the
transactions and documents embraced in it.
Fairbank v. United
States, 181 U. S. 283;
United States v. Hvoslef, 237 U. S.
1;
Thames & Mersey Marine Ins. Co. v. United
States, 237 U. S. 19.
Delivery of packages to an exporting carrier for shipment abroad
(
Spalding & Bros. v. Edwards, 262 U. S.
66) and the delivery of oil into the hold of the ship
furnished by the foreign purchaser to carry the oil abroad
(
Richfield Oil Corp. v.
Page 337 U. S. 157
State Board, supra) have been held sufficient. It is
the entrance of the articles into the export stream that marks the
start of the process of exportation. Then there is certainty that
the goods are headed for their foreign destination and will not be
diverted to domestic use. Nothing less will suffice.
So, in this case, it is not enough that, on the tax date, there
was a purpose and plan to export this property. Nor is it
sufficient that, in due course, that plan was fully executed. The
part of the plant that is taxed was dismantled, but it had not been
delivered to any carrier for export or otherwise started on its
journey on the tax date. It might still have been diverted into the
domestic market. The fact that any such diversion would entail a
breach of contract, that a part of the plant had already started on
its export journey, that an export license had been obtained and a
letter of credit deposited in this country increases the
expectation on the tax date that exportation of the entire plant
would eventuate. But that prospect, no matter how bright, does not
start the process of exportation. On the tax date, the movement to
foreign shores had neither started nor been committed.
Some reliance is apparently placed on the fact that the
dismantler was a licensed carrier for interstate and foreign
commerce, and that its employment included the loading of the
property on railroad cars for shipment to the seaboard. But the
dismantler had not, in this case, started the movement of the
property to the carrier. Hence, we need not determine whether that
intermediate transportation would be part of the export
process.
Affirmed.
[
Footnote 1]
Rev. & Tax.Code 1939, Div. I, §§ 103, 106, 201, 202(e),
405.
[
Footnote 2]
The meaning of "export" is the same under the two Clauses.
See Richfield Oil Corp. v. State Board of Equalization,
329 U. S. 69,
329 U. S. 83,
and cases cited.
MR. JUSTICE FRANKFURTER, dissenting.
Though figures of speech may aid analysis, they do not dispense
with the need for it. When a State seeks to tax what is to leave
the United States, we may agree
Page 337 U. S. 158
that its privilege to do so ceases when the export enters "the
export stream." But the problem for decision is to determine when
that point has been reached. The Export-Import Clause of the
Constitution (Art. I, § 10) embodies on phase of the accommodation
between the States and the Union; it can be applied only by
considering the bearing of a particular exertion of State power on
the fulfillment or frustration of its purpose. A mechanistic
formula, whether derived from phrases in
Coe v. Errol,
116 U. S. 517, or
elsewhere culled, advances us little toward the solution of such a
concrete problem.
The case before us is peculiarly ill fitted for mechanical
disposition; it presents unusual circumstances giving rise to
unusual contentions. It involves the sale to a Colombian purchaser
of what the contract of sale describes as "all machinery,
equipment, removable structures, removable facilities, spare parts,
supplies and miscellaneous items comprising" the Yosemite Portland
Cement Plant located at Merced, California, but "excluding the land
upon which the plan is situated" and various other specified items.
The appellant urges that the objects of this sale, which are
collectively referred to by the contract as "the cement plant,"
should be regarded as interdependent parts of an organic whole like
a 200-inch telescope or a cyclotron. Since no such part has a
separate usefulness comparable to its usefulness as a supporting
member of the structure or as a link in the productive process for
which the structure is designed, shipment of part -- in this case
14 of an eventual total of 123 carloads -- makes virtually certain
that the rest will follow. In the case of such an export, so runs
the argument, it is a degree of certainty fully equivalent to the
certainty marked by delivery to a common carrier of a bulk cargo,
like oil or grain or timber, for whatever part of a cargo of the
latter sort has not actually left the country can
Page 337 U. S. 159
even then be diverted and separately sold without loss in value
either to the diverted or to the exported part. It is the degree of
certainty, moreover, and not conformity to a prescribed ritual like
delivery to a carrier, that is significant:
"The certainty that the goods are headed to sea and that the
process of exportation has started may normally be best evidenced
by the fact that they have been delivered to a common carrier for
that purpose. But the same degree of certainty may exist though no
common carrier is involved."
Richfield Oil Corp. v. State Board, 329 U. S.
69,
329 U. S.
82.
The case was submitted to the Superior Court of Merced County on
an agreed statement of facts which leaves in doubt whether the
items comprising the "cement plant" were actually interdependent,
as appellant contends, or consisted merely of a collection of
machines and other pieces of equipment which could have been
individually installed without loss of usefulness in any other
cement plant. Tending to establish appellant's position are
provisions of the dismantling contract which indicate that the
existing structure was to be carefully taken apart like a Chinese
puzzle so that it could be fitted together again in Colombia
exactly the way it was before
"Contractor shall take at least one photograph of each machine
or piece of equipment before dismantling said machine or piece of
equipment, and shall also take at least one photograph after such
machine or piece of equipment is dismantled. . . . All separations
shall be made at the point of joinder, and there shall be no
cutting or disassembling of any part of the Cement Plant which will
have as its effect the weakening of the structure or parts when
such structure or parts are reassembled. . . . The Contractor shall
match-mark all parts of the plant and equipment. . . . "
Page 337 U. S. 160
Tending to look the other way is an itemized list of all the
items to be exported which was attached to the export license
issued to appellant by the War Production Board. Those items,
ranging from thousand-ton kilns and locomotives to friction tape,
seem to be things of a sort which are independently useful; each is
assigned a dollar value and the total of all these separate values
exactly equals the sale price of the "plant." Appellee insists,
moreover, that so many parts of the original plant were excepted
from the contract of sale that what was sold cannot be considered
an organic unit.
The Superior Court resolved this issue of fact in favor of the
interpretation urged by appellant and reached a conclusion based on
that interpretation:
"I think that the payment for the property and proceeding to
change it from parts in place of a complete building, into a mass
of disconnected materials made the completion of the exportation
economically imperative. This was not a mere preparation of the
plant for exportation; by such action and change the parts had
'been started upon such transportation' with the degree of
certainty demanded by
Coe v. Errol and the many cases
which have endorsed it. . . ."
"If the exportation of the materials of the plant was not before
assured, that became certain when the twelve percent of the corpus
of the building had been sent abroad. . . . Whatever possibility
there might have been that, after plaintiff had torn the plant down
and carried the parts off the premises that it would sell them or
re-erect them into a plant in California would be rendered
extremely improbable when it appeared that it had kept here only a
part of the
Page 337 U. S. 161
materials of the plant which, of course, could not be sold as
the materials from which a plant could be built or used to
reassemble the old one."
The appellant presented the same contentions to the Supreme
Court of California. Without explicitly rejecting these
contentions, it referred to the objects of export and of taxation
merely as "the machinery and equipment of a cement plant" and
alluded to the above-quoted portion of the Superior Court's opinion
only as "another basis for the decision." Its opinion is open
therefore to two very different interpretations.
1. The Supreme Court of California may have exercised a right
under California law to draw its own inferences from uncontroverted
facts and thus have found that what was called a "plant" was really
only a collection of machinery and equipment. If that is what it
did, we would not, of course, reinstate the findings of the
Superior Court merely in order to raise an interesting question
under the Export-Import Clause. Affirmance would be amply supported
by bare citation of cases holding that intent to export, no matter
how firm, is not by itself enough to confer immunity from
taxation.
2. The Supreme Court of California may have taken the view that
only delivery to a carrier of each successive part even of an
organic whole removed that part from the State's taxing power. This
would have been in effect to say,
"Upon the facts as found by the Superior Court, it makes no
difference to the taxing power of the County of Merced that parts
of this integrated plant had left the country since the County is
merely taxing the remaining parts."
Surely this is a doubtful proposition; it presents at any rate,
a difficult question of the adjustment of local needs to the
protection of exports from local interference.
Page 337 U. S. 162
Between these two possible interpretations of the situation
before the Supreme Court of California therefore lies the
difference between a simple question of Constitutional power and a
very troublesome one. Since the record leaves in doubt whether the
troublesome question is presented, to assume that it is presented
and then to pass upon it would be to embrace unnecessarily what may
be a hypothetical issue. We should therefore remand the case for
the resolution of the crucial question of fact upon which depends
what Constitutional issue we are called upon to decide.
Cf.
Hammond v. Schappi Bus Line, Inc., 275 U.
S. 164.