1. On the records in these two cases,
held that
manufacturing corporations which imported materials for their own
use in their current manufacturing operations had so acted upon
them as to cause them to lose their distinctive character as
"imports" within the meaning of that term as used in the
Import-Export Clause of the Constitution, and that, therefore, the
materials had become subject to state taxation.
Hooven &
Allison Co. v. Evatt, 324 U. S. 652,
distinguished. Pp.
358 U. S.
536-550.
2. In the
Youngstown case, a manufacturer of iron and
steel imported iron ore for use in its own manufacturing process.
Upon arrival at destination, these ores were stored in "ore yards"
adjacent to the furnaces. The daily ore needs of the plant were
taken from those "ore yards" and conveyed to "stock bins," from
which the ores were fed into the furnaces. Ohio assessed an
ad
valorem tax based on the average value of the ore in these
"ore yards" during the tax year.
Held: since these ores
were not only needed, imported, and irrevocably committed to
supply, but were actually being used to supply, the daily
requirements of the manufacturing plant, they had lost their
distinctive character as "imports," and all tax immunity as such.
Pp.
358 U. S.
536-538,
358 U. S.
545-547.
3. In the
Plywood case, a manufacturer of veneered wood
products imported "green" lumber "in bulk" and veneers "in bundles"
for use in its own manufacturing process. Upon arrival at
destination, the lumber was stacked in yards "adjacent" to its
manufacturing plant in such a way as to facilitate air-drying. From
time to time, so much of the lumber as was about to be put into
veneered products was taken from the stacks and placed in a kiln,
where
Page 358 U. S. 535
the drying was completed. The imported veneers were received "in
bundles," and kept in that form in piles, separated as to specie,
in the manufacturer's plant for use as needed in the day-to-day
operations of the plant. The City assessed a tax against petitioner
based upon the value of one-half of the imported lumber and veneers
then on hand.
Held: the lumber and veneers that were taxed
were not only needed, imported, and irrevocably committed to
supply, but actually were being used to supply, the daily
requirements of the manufacturing plant, and they had lost their
distinctive character as "imports," and all tax immunity as such.
Pp.
358 U. S.
538-540,
358 U. S.
547-548.
4. In the
Plywood case, the fact that the veneers were
received in "bundles" which were not opened until the veneers were
put into the daily manufacturing operations of the plant does not
require a different result. Pp.
358 U. S.
548-549.
5. In the
Youngstown case, the fact that a tax was
levied by Ohio on domestic ores stored on public docks in Ohio,
whereas merchandise belonging to a nonresident when "held in a
storage warehouse for storage only" was exempted from taxation, did
not deny to appellant, a resident of Ohio, the equal protection of
the laws guaranteed by the Fourteenth Amendment.
Allied Stores
v. Bowers, ante, p.
358 U. S. 522. Pp.
358 U. S.
550-551.
166 Ohio St. 122, 140 N.E.2d 313, affirmed. 2 Wis.2d 567, 87
N.W.2d 481, affirmed.
Page 358 U. S. 536
MR. JUSTICE WHITTAKER delivered the opinion of the Court.
The principal question presented by these cases is whether
appellant in No. 9, the Youngstown Sheet and Tube Company, and
petitioner in No. 44, United States Plywood Corporation, have so
acted upon the materials which they have imported for use in their
manufacturing operations as to cause them to lose their distinctive
character as "imports" within the meaning of that term as used in
the Import-Export Clause, Art. 1, § 10, cl. 2, of the United States
Constitution. [
Footnote 1] The
Supreme Courts of the States concerned have held that these
manufacturers have done so. Our task is to decide whether, on the
particular facts involved, those holdings violate the Import-Export
Clause of the Constitution.
The facts in the
Youngstown case are stipulated. In
essence, they are that Youngstown, an Ohio corporation, operates an
industrial plant in or near Youngstown, Ohio, where it manufactures
iron and steel. In addition to the use of domestic ores, it imports
iron ores from five countries "for ultimate use in [its] open
hearth [and] blast furnaces" in its manufacturing processes. The
imported ores arrive in shiploads "in bulk" either at an Atlantic
or a Lake Erie port of entry where they are unloaded from the ship
into railroad cars, and are thereby transported to Youngstown's
plant in Ohio. The plant is enclosed by a wire fence. Within the
enclosure and "adjacent to [the] manufacturing facilities" are
several "ore yards" for the storage of supplies of ore. [
Footnote 2] Each ore yard consists
Page 358 U. S. 537
of "two parallel walls, on which there [is] a movable ore
bridge." When the imported ores arrive at this final destination,
they are unloaded into one of the ore yards, but, because the ore
from each country is different from the others, and each is
imported for a different use, the ores are kept segregated as to
the country of origin by being "placed in a separate pile in a
separate area of the ore yard." The daily manufacturing needs for
ore are taken from these piles. As needed, ores are conveyed from
the particular pile or piles selected to "stock bins" or "stock
houses," holding one or two days' supply and located in close
proximity to the furnaces, from which the ores are fed into the
furnaces. As ore from a particular "pile" in the ore yard is thus
taken and consumed, other like ore is similarly imported from the
same country and is brought to the plant and unloaded on top of the
remainder of that particular pile. This course is continuously
repeated. Youngstown endeavors to maintain "a supply of imported
ores to meet its estimated requirements for a period of at least
three months." The ores are not imported "for resale," but "for use
in manufacturing [at the Ohio plant]."
Acting under Ohio statutes which provide,
inter alia,
that "All personal property located and used in business in this
state [shall be] subject to taxation . . . ," [
Footnote 3] and that
"Personal property is 'used' within the meaning of 'used in
business' . . . when stored or kept on hand as material, parts,
products, or merchandise . . . , [
Footnote 4]"
the Tax Commissioner of Ohio proposed to assess an
ad
valorem tax against Youngstown based on the average value of
the iron ores in its ore yards during the tax year ended January 1,
1954. [
Footnote 5] Youngstown
contested the proposed
Page 358 U. S. 538
assessment. It contended, among other things, that the imported
ores had not lost their character as imports, and were therefore
immune from state taxation under Art. I, § 10, cl. 2 of the United
States Constitution.
After exhaustion of administrative proceedings, the case reached
the Supreme Court of Ohio. It held that the
"protection [of the Import-Export Clause cannot] extend to such
iron ore (1) after it has been commingled with other iron ore
imported at a different time, even though such other iron ore is of
the same grade and was imported from the same place, and (2) after
portions of such iron ore have been removed for use in
manufacturing."
It then entered judgment sustaining the tax, 166 Ohio St. 122,
140 N.E.2d 313, 317, and we noted probable jurisdiction of
Youngstown's appeal. 355 U.S. 911.
The facts in the
United States Plywood Corporation case
were found in detail by the trial court, and those findings are not
challenged here. In essence, they are that United States Plywood
Corporation (petitioner) operates an industrial plant in Algoma,
Wisconsin, where it manufactures veneered wood products. It uses
both domestic and imported lumber and veneers in its manufacturing
processes. The imported lumber is shipped in railroad cars directly
from Canada to petitioner's plant. It is unfinished, and is
received in bulk or as loose, individual pieces or boards. It is
also "green" when received, and therefore must be dried before it
can be used by petitioner. Upon arrival at destination, it is
unloaded and carted to petitioner's storage yard, located
"adjacent" to
Page 358 U. S. 539
its plant, where it is stacked in the open in such a way as to
allow the air freely to circulate through the stacks for the
"dominant purpose" of air-drying it. This method does not so
completely dry the lumber as to make kiln-drying unnecessary, but
it does materially reduce the time and expense of that process.
From time to time, so much of the lumber as is about to be put into
veneered products is taken from the stacks and placed in a kiln
where the drying is completed and the lumber readied for use. The
veneers are imported from three countries. They are received in
bundles, and are kept in that form in piles, separated as to
specie, in petitioner's plant for use as needed in the day-to-day
operations of the plant.
On the assessment date of May 1, 1955, the Assessor of the City
of Algoma, acting under what is now Wis.Stat.1957, § 70.01, W.S.A.,
assessed a tax against petitioner based upon the value of one-half
of the imported lumber and veneers then on hand. Petitioner paid
the tax and then sued in the state court for its recovery. The
trial court also found that air-drying the lumber "was part of
[petitioner's] manufacturing practices," and that, when stacked for
air-drying, the lumber "entered the process of manufacture," and
thus lost its character as an "import," and therefore all of it
might lawfully have been taxed by the city. The court further found
that the lumber and veneers had been imported by petitioner "for
use in manufacturing" at its Algoma plant, and that their
importation journeys definitely had ended; that the lumber and
veneers that were taxed (one-half of the amounts on hand) had been
irrevocably committed to "use in manufacturing" at that plant, were
"necessarily required to be kept on hand to meet [petitioner's]
current operational needs," were being "used in manufacturing," and
had therefore lost their character as "imports," and were subject
to local taxation. It then entered judgment for the city,
sustaining the tax, and, on petitioner's appeal, the
Page 358 U. S. 540
Supreme Court of Wisconsin affirmed. 2 Wis.2d 567, 87 N.W.2d
481. Because of the importance of the constitutional question
presented, we granted certiorari. 356 U.S. 957.
The Constitution confers on Congress the power to lay and
collect import duties, Art. I, § 8, and provides that
"No State shall, without the Consent of the Congress, lay any
Impost or Duties on Imports or Exports, except what may be
absolutely necessary for executing it's inspection Laws. . . ."
Art. I, § 10, cl. 2. That these provisions were intended to
confer on the National Government the exclusive power to tax the
act of importation is plain from their terms. And, early in our
national history, Chief Justice Marshall held, in the landmark case
of
Brown v.
Maryland, 12 Wheat. 419, that one who had imported
goods for the purpose of selling them had, "by payment of the duty
to the United States, [acquired the] right to dispose of his
merchandise, as well as to bring it into the country" (
id.
at
25 U. S. 442),
and that the State could not tax it "while remaining the property
of the importer, in his warehouse, in the original form or package
in which it was imported." [
Footnote 6]
Id. at
25 U. S. 442.
But he made very clear that ". . . there must be a point of time
when the prohibition ceases, and the power of the State to tax
commences."
Id. at
25 U. S. 441.
Elaborating this concept, he said:
"The constitutional prohibition on the States to lay a duty on
imports . . . may certainly come in conflict with their
acknowledged power to tax persons
Page 358 U. S. 541
and property within their territory. The power, and the
restriction on it, though quite distinguishable when they do not
approach each other, may yet . . . approach so nearly as to perplex
the understanding. . . . Yet the distinction exists, and must be
marked as the cases arise. Till they do arise, it might be
premature to state any rule as being universal in its application.
It is sufficient for the present to say generally that, when the
importer
has so acted upon the thing imported that it has
become incorporated and mixed up with the mass of property in the
country, it has perhaps lost its distinctive character as an
import, and has become subject to the taxing power of the State. .
. ."
Id. at
25 U. S.
441-442. (Emphasis added.)
While Chief Justice Marshall did not undertake definitively to
state just what acts or conduct of the importer would be deemed to
have "so acted upon the thing imported" as to cause it to be "mixed
up with the mass of property in the county [and to lose] its
distinctive character as an import," he did specify some of the
acts that would so result. He held that the goods lose their
character as imports when the importer (1) "sells them," [
Footnote 7] or (2) "[breaks] up his
packages, and [travels] with them as an itinerant pedlar."
Id. at
25 U. S. 443.
More important to the question confronting us, he also held (3)
that goods brought into this country by an importer "for his own
use" and here "used" by him are to be regarded as a
Page 358 U. S. 542
part of "the common mass" of property, and are not immune from
state taxation. [
Footnote
8]
In
Hooven & Allison Co. v. Evatt, 324 U.
S. 652, it was held that goods imported for "use" share
the same immunity as goods imported for "sale," and that goods
imported "for manufacture [do not] lose their character as imports
any sooner or more readily than imports for sale" (
id. at
324 U. S.
667); but
"when [the imported goods are] used for the purpose for which
they are imported, they cease to be imports and their tax exemption
is at an end."
Id. at
324 U. S.
665.
Thus, though
Brown v. Maryland, supra, holds that goods
brought into the country by an importer "for his own use" are not
exempted from state taxation by the Import-Export Clause, and
Hooven & Allison Co. v. Evatt, supra, holds that they
are, both agree that, when the imported goods are "used for the
purpose for which they are imported, they cease to be imports and
their tax exemption is at an end."
Hooven & Allison Co. v.
Evatt, supra, at
324 U. S. 665.
Compare Brown v. Maryland, supra, 12 Wheat. at
25 U. S.
441-443.
Page 358 U. S. 543
Do the facts as stipulated and found in the cases before us,
when considered in the light of applicable legal principles, show
that these manufacturers
have so acted upon the imported
materials as to cause them to lose their distinctive character
as "imports" by irrevocably committing them, after their
importation journeys have definitely ended, to "use in
manufacturing" at the plant and point of final destination, and by
"entering" and "using" them "in manufacturing" at that place? The
manufacturers, relying upon their understanding of the
Hooven case, argue that they do not, but we have concluded
that they do.
In
Hooven, the taxpayer had imported bales of hemp and
other fibers which it stored in its warehouse at its factory in
Ohio with the intention of eventually using them in the manufacture
of cordage and similar products. Ohio sought to lay an
ad
valorem tax on the bales of fibers so stored in the taxpayer's
warehouse. The taxpayer contended that the bales of fibers were
"imports," and thus immune from state taxation under the
Import-Export Clause of the Constitution. The Supreme Court of
Ohio
"thought that
Brown v. Maryland, supra, laid down a
rule applicable only to imports for the purpose of sale, and that
imports for use became, upon storage, even if still in the original
package, so intermingled with the common mass of property within
the state as to be subject to the state power of taxation"
(324 U.S. at
324 U. S.
655), and, upon that ground, upheld the tax. This Court,
holding that the tax immunity applies to goods imported for "use,"
as well as for "sale," that the bales of fibers would not lose
their character as imports "until [they were] put to the use for
which [they were] imported" (
id. at
324 U. S.
665), and that the fibers were not shown by the record
in that case to have been "subjected to manufacture
Page 358 U. S. 544
when they were placed in [the taxpayer's] warehouse in their
original packages" (
id. at
324 U. S.
667), reversed the judgment. But the record there did
not present, and this Court did not reach or decide, the question
we have here. Indeed, the Court expressly reserved it. It said:
"[I]t is unnecessary to decide whether, for purposes of the
constitutional immunity, the presence of some fibers in the factory
was so essential to current manufacturing requirements that they
could be said to have entered the process of manufacture, and hence
were already put to the use for which they were imported, before
they were removed from the original packages. Even though the
inventory of raw material required to be kept on hand to meet the
current operational needs of a manufacturing business could be
thought to have then entered the manufacturing process, the
decision of the Ohio Supreme Court did not rest on that ground, and
the record affords no basis for saying that any part of
petitioner's fibers, stored in its warehouse, were required to meet
such immediate current needs. Hence we have no occasion to consider
that question."
Id. at
324 U. S.
667.
Unlike
Hooven, these are not cases of the mere storage
in a warehouse of imported materials intended for eventual use in
manufacturing but not found to have been essential to current
operational needs. Here, the Ohio and Wisconsin courts have, in
effect, held that the stipulated and found facts show that the
imported materials that were taxed by those States were so
essential to current manufacturing requirements that they must be
said to have entered the process of manufacture, and those courts
have rested their judgments, in major part at least, on that
ground. Our question therefore is precisely the one which the Court
did not reach or consider in the
Hooven case.
Page 358 U. S. 545
We are therefore confronted with the practical, albeit vexing,
problem of reconciling the competing demands of the constitutional
immunity of imports and of the State's power to tax property within
its borders. The design of the constitutional immunity was to
prevent "[t]he great importing States [from laying] a tax on the
non-importing States," to which the imported property is or might
ultimately be destined, which would not only discriminate against
them, but also "would necessarily produce countervailing measures
on the part of those States whose situation was less favourable to
importation."
Brown v. Maryland, supra, at
25 U. S. 440.
See Madison, Debates in the Federal Convention of 1787,
August 28, 1787 (Hunt & Scott ed.).
And see, e.g., Cook v.
Pennsylvania, 97 U. S. 566;
Richfield Oil Corp. v. State Board, 329 U. S.
69,
329 U. S. 76-77.
The constitutional design was then to immunize imports from
taxation by the importing States, and all others through or into
which they may pass, so long as they retain their distinctive
character as imports. Hence, that design is not impinged by the
taxation of materials that were imported for use in manufacturing
after all phases of the importation definitely have ended and the
materials have been "put to the use for which they [were] imported"
(
Hooven & Allison Co. v. Evatt, supra, at
324 U. S.
657), for, in such a case, they have lost their
distinctive character as imports, and are subject to taxation. And
inasmuch as
"the reconciliation of the competing demands of the
constitutional immunity and of the state's power to tax is an
extremely practical matter"
(
Hooven & Allison Co. v. Evatt, supra, at
324 U. S.
668), we must approach the question whether these
materials had been "put to the use for which they [were] imported"
(
id. at
324 U. S. 657)
with full awareness of realities, and treat with them in a
practical way.
The stipulation in the
Youngstown case shows that the
imported ores were essential to the operation of Youngstown's
Page 358 U. S. 546
Ohio plant; that Youngstown had imported them "for use in
manufacturing" and "to meet its estimated [manufacturing]
requirements" at that plant; that the ores had arrived at their
destination, had been placed in "piles" in the "ore yards" of that
plant, and their importation journey definitely had ended; that the
ores were irrevocably committed to "use in manufacturing" at that
plant and point of final destination; and that the daily ore needs
of the plant were conveyed from the "piles" in the "ore yards" to
"stock bins" or "stock houses," holding one or two days' supply,
from which they were fed into the furnaces. Does not the
stipulation thus show that the ores were not only needed, imported,
and irrevocably committed to supply, but were actually being used
to supply, the daily requirements of the plant? It seems to us that
these stipulated facts inescapably establish that Youngstown had
"so acted upon the [imported ores]" (
Brown v. Maryland,
supra, at
25 U. S. 441),
by using them "for the purpose for which they [were] imported,"
that they must be held "to have then entered the manufacturing
process" (
Hooven & Allison Co. v. Evatt, supra, at
324 U. S. 665,
324 U. S. 667)
and to have lost their distinctive character as "imports," and all
tax immunity as such.
Youngstown does not deny that so much of the ores as have been
conveyed from the "piles" in the "ore yards" to the "stock bins" or
"stock houses" have lost their distinctive character as imports. Is
there any real basis of distinction? The only possible differences
are in the sizes of the piles and their distances from the
furnaces. Surely the size of the pile is not material. Just as
surely, the short distance between the smaller piles in the "stock
bins" or "stock houses" and the larger piles in the ore yards is
not a real distinction. If the larger piles stood on higher ground
adjoining the "stock bins" and "stock houses," so that the ores
might feed by gravity from the
Page 358 U. S. 547
former to the latter, there would be no practical difference
from the actual facts involved, but it could not be argued that the
ores in the one are any less certainly being used in the processes
of manufacture than the ores in the other. It seems entirely plain
that the ores in the smaller piles in the "stock bins" and "stock
houses" are no more definitely and irrevocably committed to use, or
being used at the plant than are the ores in the larger piles in
the ore yards from which the smaller ones are constantly kept
supplied.
"[R]econciliation of the competing demands of the constitutional
immunity and of the state's power to tax [being] an extremely
practical matter"
(
Hooven & Allison Co. v. Evatt, supra, at
324 U. S.
668), taxability cannot depend upon whether the size of
the pile of stored materials or its distance from the place of
actual fabrication or consumption is a little more or a little
less.
In the
United States Plywood Corporation case, two
types of imported materials are involved -- unfinished "green"
lumber received "in bulk" and veneers received in "bundles." The
Assessor of the City of Algoma, believing that one-half of the
lumber and veneers on hand on the taxing date was necessarily
required to be kept on hand to meet the current operating needs of
petitioner's manufacturing plant, assessed an
ad valorem
tax upon the value of that one-half of the lumber and veneers. In
the ensuing litigation, the Wisconsin courts found that the
imported materials had been imported by petitioner "for use in
manufacturing" at its Algoma plant, had arrived at that place, and
that their importation journeys definitely had ended; that the
lumber and veneers that were taxed (one-half of the amounts on hand
on the taxing date) had been irrevocably committed to "use in
manufacturing" at that plant, were "necessarily required to be kept
on hand to meet [its] current operational needs," and were actually
being "used" to supply those
Page 358 U. S. 548
needs. These findings are amply supported by the evidence, and
are not contested here. We think they clearly show that the lumber
and veneers that were taxed were not only needed, imported, and
irrevocably committed to supply, but were actually being used to
supply, the day-to-day manufacturing requirements of the plant.
They thus establish that petitioner had "so acted upon the
[imported materials]" (
Brown v. Maryland, supra, at
25 U. S. 441)
that were taxed by using them "for the purpose for which they
[were] imported," that -- like the ores in the
Youngstown
case -- they must be held "to have then entered the manufacturing
process" (
Hooven & Allison Co. v. Evatt, supra, at
324 U. S. 665,
324 U. S.
667), and to have lost their distinctive character as
"imports," and all tax immunity as such.
The fact that the veneers were received in "bundles" which were
not opened until the veneers were put into the daily manufacturing
operations of the plant is not controlling under the facts and
findings here. Whatever may be the significance of retaining in the
"original package" goods that have been so imported for sale
(
Brown v. Maryland, supra; 75 U. S. The
Mayor, 8 Wall. 110,
75 U. S.
122-123;
Low v. Austin,
13 Wall. 29,
80 U. S. 32-33;
Cook v. Pennsylvania, 97 U. S. 566,
97 U. S. 573;
May & Co. v. New Orleans, 178 U.
S. 496,
178 U. S. 501,
178 U. S.
507-508), goods that have been so imported for use in
manufacturing are not exempt from taxation, though not removed from
the "original package," if, as found here, they have been "put to
the use for which they [were] imported."
Hooven & Allison
Co. v. Evatt, supra, at
324 U. S. 657.
Breaking the original package is only one of the ways by which
packaged goods that have been imported for use in manufacturing may
lose their distinctive character as imports. Another way is by
putting them "to the use for which they [were] imported."
Id. That the package has not been broken is therefore
Page 358 U. S. 549
only one of the several factors to be considered in factually
determining whether the goods are being "used for the purpose for
which they [were] imported."
Hooven & Allison Co. v. Evatt,
supra, at
324 U. S. 665.
Here, the fact that the bundles are not opened until the veneers
are put into the day-to-day manufacturing operations of the plant
was fully considered by the Wisconsin courts before they made the
finding that the veneers that were taxed were "necessarily required
to be kept on hand to meet [petitioner's] current operational
needs," and were actually being "used" to supply those needs.
Because of the views expressed, it is unnecessary to reach or
discuss the further finding and conclusion of the Wisconsin courts
that, when the "green" lumber was stacked by petitioner in the open
in a particular way for the "dominant purpose" of air-drying it,
the lumber "entered the process of manufacture," and, for that
reason also, lost its character as an import.
The materials here in question were imported to supply, and were
essential to supply, the manufacturer's current operating needs.
When, after all phases of their importation had ended, they were
put to that use and indiscriminate portions of the whole were
actually being used to supply daily operating needs, they stood in
the same relation to the State as like piles of domestic materials
at the same place that were kept for use and used in the same way.
The one was then as fully subject to taxation as the other. In
those circumstances, the tax was not on "imports," nor was it a tax
on the materials because they had been imported, but because, at
the time of the assessment, they were being used, in every
practical sense, for the purposes for which they had been imported.
They were therefore subject to taxation just like domestic property
that was kept at the same place in the same way
Page 358 U. S. 550
for the same use. We cannot impute to the Framers of the
Constitution a purpose to make such a discrimination in favor of
materials imported from other countries as would result if we
approved the views pressed upon us by the manufacturers.
Compare May & Co. v. City of New Orleans, 178 U.S. at
178 U. S.
509.
Youngstown also challenged a portion of the tax on the ground
that its domestic ores stored on public docks on the shore of Lake
Erie in Ohio were "merchandise . . . held in a storage warehouse
for storage only" within the meaning of § 5701.08(A), [
Footnote 9] and that, because the
section exempted nonresidents but taxed residents on stocks of
merchandise so held, it denied to Youngstown, a resident of Ohio,
the equal protection of the laws in violation of the Fourteenth
Amendment of the Constitution. The Supreme Court of Ohio answered
that contention by saying:
"For the reasons stated in
Allied Stores of Ohio, Inc. v.
Bowers, Tax Comm'r, ante, [166 Ohio St.] 116, the taxpayer's
contentions [in that respect] must be rejected. . . ."
Youngstown Sheet & Tube Co. v. Bowers, 166 Ohio St.
122, 124, 140 N.E.2d 313, 316. We have today affirmed the judgment
of the Supreme Court of Ohio in
Allied Stores of Ohio, Inc. v.
Bowers, ante, p.
358 U. S. 522,
and, for the reasons stated in our
Page 358 U. S. 551
opinion in that case, we hold that § 5701.08(A) and the
questioned tax laid thereunder did not violate the Equal Protection
Clause of the Fourteenth Amendment.
It follows that the judgment in each case must be
Affirmed.
MR. JUSTICE STEWART took no part in the consideration or
decision of these cases.
* Together with No. 44,
United States Plywood Corp. v. City
of Algoma, on certiorari to the Supreme Court of Wisconsin,
argued November 12-13, 1958.
[
Footnote 1]
Article I, § 10, cl. 2 of the United States Constitution, in
pertinent part, provides:
"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. . . ."
[
Footnote 2]
Exhibits in the record, though not giving measurements, indicate
that the nearest ore yard is located within two or three hundred
feet, and the most distant one is located within two or three
hundred yards, of the furnaces.
[
Footnote 3]
Title 57, Page's Ohio Rev.Code Ann.1953, § 5709.01.
[
Footnote 4]
Title 57, Page's Ohio Rev.Code Ann.1953, § 5701.08(A).
[
Footnote 5]
The Ohio taxing date is January 1, Title 57, Page's Ohio
Rev.Code Ann.1953, § 5711.03. But personal property held by a
manufacturer for use in manufacturing is valued for tax
purposes
"by taking the value of all [such] property . . . owned by such
manufacturer on the last business day of each month [that] the
manufacturer was engaged in business during the year, adding the
monthly values together, and dividing the result by the number of
months the manufacturer was engaged in such business during the
year."
Title 57, Page's Ohio Rev.Code Ann.1953, § 5711.16.
[
Footnote 6]
Chief Justice Taney, while still at the bar, had argued that
case for the State of Maryland. After coming to this Court, he had
occasion to say that the theory of that holding was that, while the
imported articles
"are in the hands of the importer for sale . . . , they may be
regarded as merely
in transitu, and on their way to the
distant cities, villages, and country for which they are destined
and where they are expected to be used and consumed, and for the
supply of which they were in truth imported."
License Cases,
5 How. 504,
46 U. S.
575.
[
Footnote 7]
The Court said that, when the imported goods are sold,
"the tax intercepts the import, as an import, in its way to
become incorporated with the general mass of property, and denies
it the privilege of becoming so incorporated until it shall have
contributed to the revenue of the State."
12 Wheat. at
25 U. S. 443.
That imported goods lose their character as "imports" upon being
sold is well settled.
License Cases,
5 How. 504,
46 U. S. 575;
Waring v. The
Mayor, 8 Wall. 110;
Low v.
Austin, 13 Wall. 29;
May & Co. v. New
Orleans, 178 U. S. 496.
[
Footnote 8]
Counsel for Maryland had argued that to permit state tax
immunity in that case would result in granting immunity to "an
importer who may bring in goods, as plate, for his own use, and
thus retain much valuable property exempt from taxation." In reply
to that argument, Marshall rejected the assumption that the
principles then announced would grant state tax exemptions to
imports that were being used or held for use by the importer. In
such a case, as in a case where the importer "[breaks] up his
packages, and [travels] with them as an itinerant pedlar," he
said,
"[T]he tax finds the article already incorporated with the mass
of property by the act of the importer. He has used the privilege
[
i.e., of importation and sale] he had purchased, and has
himself mixed them up with the common mass, and the law may treat
them as it finds them.
The same observations apply to plate, or
other furniture used by the importer."
12 Wheat. at
25 U. S. 443.
(Emphasis added.)
[
Footnote 9]
"As used in Title LVII of the Revised Code:"
"(A) Personal property is 'used' within the meaning of 'used in
business' . . . when stored or kept on hand as material, parts,
products, or merchandise; but merchandise or agricultural products
belonging to a nonresident of this state is not used in business in
this state if held in a storage warehouse for storage only. . .
."
Title 57, Page's Ohio Rev.Code Ann., 1953, § 5701.08(A).
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE HARLAN joins,
dissenting on the main issue.
As one follows the tortuous and anguished endeavors to establish
a free trade area within Western Europe, unhampered by interior
barriers, against the opposition of inert and narrow conceptions of
self-interest by the component nations, admiration for the
farsighted statecraft of the Framers of the Constitution is
intensified. Guided by the experience of the evils generated by the
parochialism of the new States, the wise men at the Philadelphia
Convention took measures to make for the expansive United States a
free trade area and to withdraw from the States the selfish
exercise of power over foreign trade, both import and export. They
accomplished this by two provisions in the Constitution: the
Commerce Clause and the Import-Export Clause.
The former reached its aim, as a matter of settled judicial
construction, by placing the regulation of commerce among the
States in the hands of Congress, except insofar as predominantly
local interests give the States concurrent power until displaced by
congressional legislation. This leeway to the States was
established by the decision in
Cooley v. Board of
Wardens, 12 How. 299, foreshadowed by Marshall's
decision in
Willson v. Black Bird Creek
Marsh Co., 2 Pet. 245. This permissive area for
state action has given rise, as we know too well, to multitudinous
litigation.
Page 358 U. S. 552
But, in dealing with foreign commerce, the Constitution left no
such leeway. It rigorously confined the States to what might be
"absolutely necessary," the only constitutional permission in terms
so drastically limited, and beyond this permission of what is
"absolutely necessary" state action was barred except by consent of
Congress as expressive of the national interest. Thus, hardly any
room was left by the Constitution for judicial construction of the
command,
"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. . . ."
This strict limitation on the States was still further qualified
by the requirement that the
"net Produce of all Duties and Imposts, laid by any State on
Imports or Exports, shall be for the Use of the Treasury of the
United States, and all such Laws shall be subject to the Revision
and Control of the Congress."
For one hundred and thirty-two years, in a course of decision
following Chief Justice Marshall's seminal discussion in
Brown v.
Maryland, 12 Wheat. 419, this Court has held,
without a single deviation, that a State may not tax imports from
foreign countries while retained by the importer in their original
"package" [
Footnote 2/1] or form
prior to the use of the goods or their sale. Today the Court, I
am
Page 358 U. S. 553
bound most respectfully to say, disregards this historic course
of constitutional adjudication by allowing the States of Wisconsin
and Ohio, and, therefore, all the States, to tax foreign imports
despite the prohibition of Art. I, § 10, cl. 2, that "No State
shall, without the Consent of the Congress, lay any Imposts or
Duties on Imports or Exports . . . ," as that clause has been
authoritatively interpreted by this Court. And it does so,
moreover, without overruling the decisions which the basis and
logic of this new reading of the Constitution can no longer
sustain. But they remain decisions of this Court. Thus, we are left
with a confusing series of conflicting cases amidst which the
States must blindly move in determining the extent of their
constitutional power to tax. This confusion is substituted for a
principle so plain of application that the controversies in this
Court over the meaning of this far-reaching constitutional
provision have numbered less than a dozen in our entire history. Of
course, I do not believe that we should overrule this consistent
course of decisions. But to do so would at least have the merit of
explicit announcement of a new legal policy, with its concomitant
repercussions on the conduct of our national economic life.
Since the legal analysis of the challenged taxes must derive
from due regard for the precise circumstances on which they are
based, it becomes necessary to set forth the facts of the two cases
now before us.
In No. 44,
United States Plywood Corp. v. City of
Algoma, petitioner, a New York corporation licensed to do
business in Wisconsin, attacks the validity of a tax levied by the
City of Algoma on its storage stock of imported lumber and veneers.
The veneers are imported from Canada, France, and the Belgian
Congo. From Canada comes birch veneer, and from France, French oak
veneer, and from Africa, species of veneer known as korina and
fuma. The veneers are shipped to petitioner
Page 358 U. S. 554
in wooden crates or in bundles secured by metal straps. After
arrival at petitioner's plant, the veneers are stored in a
warehouse in their original packages prior to their use in the
manufacture of veneered products. When used, the packages are
broken, and take their course through the factory. The lumber,
birch and cedar, is imported from Ontario, Canada. When received,
it is piled in the yard preparatory to use in manufacture.
The City of Algoma assessed for taxation one-half of the total
value of the imported lumber piled in the yard and the veneers
stored in their original packages in the warehouse, on tax day-May
1, 1955. The city said that at least that amount of the imported
materials was necessary to meet the "current operational
requirements" of petitioner, and thus was subject to state
taxation.
The State Supreme Court upheld the tax on the basis of the
finding below that the goods taxed were necessary for the "current
operational needs" of the plant. The tax on the lumber was
sustained on an alternative ground. Since the dominant purpose of
piling the lumber in the storage yard was to prepare it for
manufacture by air drying, the lumber had entered the process of
manufacture, and lost its immunity from state taxation. Most of the
Canadian lumber was received green, and, as a matter of good
business practice, it is customary to air dry such lumber before
running it through dry kilns to further remove moisture.
In No. 9,
Youngstown Sheet & Tube Co. v. Bowers,
appellant challenges the application of a personal property tax to
its stocks of imported iron ore stored at its plant in Youngstown,
Ohio. The facts were stipulated. Appellant purchases and imports
five grades of iron ore: Brazilian ore, Cuban ore, Mexican ore,
Liberian ore, and Seine River ore. These ores are loaded in bulk at
foreign ports into chartered vessels, each of which carries but a
single cargo of a single grade of ore. When
Page 358 U. S. 555
the vessels reach the port of entry, the ore is discharged into
railroad cars and transported in bulk to appellant's plant in
Youngstown. Upon arrival, the ore is unloaded into a storage yard
adjacent to the manufacturing plant. A separate storage pile in a
separate area of the storage yard is maintained for each grade of
imported ore, and such ore is not commingled with any other
property. A supply of ore necessary to meet estimated requirements
for at least three months is maintained. Since the ore is located
at some distance from stock bins and furnaces, when the need arises
for a particular grade of ore, it is taken from the grade stockpile
and transported to stock bins or stock houses preparatory to use in
the furnaces. When a shipment of bulk ore of a particular grade is
received, it is placed in the stockpile designated for that grade,
i.e., all imports of Brazilian ore are placed in the
Brazilian pile, etc. Hence, a stockpile of a particular grade may
be diminished by a particular day's need and augmented the next by
subsequently imported ore of the same grade.
Appellant conceded that the imported ores had lost their
immunity from taxation once they were removed from storage piles
and placed in stock bins. The Supreme Court of Ohio decided that
all the imported ore, including that remaining in the storage
piles, could be taxed by the State, and upheld the challenged
assessment. The Ohio court thought that the mere mingling of
imported ore with other imported ore of the same grade, coupled
with the fact that parts of each pile were taken for use in
manufacturing, had terminated the constitutional immunity and
subjected the entire stock of imported ore to state taxation.
Primary among the forces which led to the inclusion of Art. I, §
10, cl. 2, the Import-Export Clause, in the Constitution was the
deeply felt necessity of vesting exclusive power over foreign
economic relations and foreign
Page 358 U. S. 556
commerce in the new National Government. [
Footnote 2/2] The importance of control over duties,
imposts, and subsidies as an instrument of foreign trade and as a
protection for the encouragement and growth of domestic
manufactures was recognized as a matter of course by the Framers.
For the effective exercise of this control, it was necessary that
the Government speak with one voice when regulating commercial
intercourse with foreign nations. Orderly and effective policy
would be impossible if thirteen States, each with their distinctive
interests, and often conflicting, one with another, were allowed to
exercise their own initiative in the regulation of foreign economic
affairs. And so the States were prohibited from such regulation --
they were forbidden, except by leave of Congress, to lay any duties
on imports or on exports. Second only to this goal in importance
was the need to secure to the National Government an important
source of revenue. [
Footnote 2/3]
The Framers assumed that, for many years, duties on foreign imports
would be the prime source of national funds -- the revenue on whose
constant flow the operations of government would depend. It
therefore was essential to the fiscal wellbeing of the new country
to ensure exclusive access to this revenue to the National
Government. Subordinate to these goals in importance was the desire
to prevent the seaboard States, possessed of important ports of
entry, from levying taxes on goods flowing through their ports to
inland States. [
Footnote 2/4] It
was important not to allow these States to take advantage of their
favorable geographical position in order to exact a price for the
use of their ports from the consumers dwelling in
Page 358 U. S. 557
less advantageously situated parts of the country. This fear of
the use of geographical position to exact a form of tribute found
an especially forceful expression in the absolute prohibition
against duties on exports by either Nation or States.
The Import Clause was a result of the desire to safeguard these
national goals and realize these necessities. Thus, the
considerations governing its interpretation marked out for it a
special path in the stream of constitutional adjudication -- a
course which diverged in many respects from the history of the
Commerce Clause: that broad grant of power designed primarily to
assure national control over commercial trade among the States. The
often difficult, and continually delicate, considerations of the
economic impact of a challenged tax, of the directness of its
burden upon commerce, of its potential or actual discrimination
against interstate trade, which have been of controlling importance
to the proper evaluation of state taxes challenged under the
Commerce Clause, are not the pertinent factors in assessing the
constitutional validity of a tax charged with being in violation of
the bar of Art. I, § 10, cl. 2. In the taxation of imports, the
grant of power to the National Government is exclusive; the
prohibition of the States, absolute. [
Footnote 2/5] Thus, the
Page 358 U. S. 558
objects of relevant inquiry have been carefully circumscribed.
Once it is clear, as a matter of economic fact, that a State has
levied a tax upon foreign goods, this Court has always found it
necessary to answer only one further question. The question was put
by Chief Justice Marshall in 1827 in
Brown v. Maryland:
have the goods retained their status as imports in the hands of the
importer? If so, the tax is invalid. If not, if the goods have
become part of the general property of the State, the tax is not
barred by the Import Clause. The answer to this question involves
essentially a determination of the physical status of the foreign
goods. But, however variant the facts in different situations, the
determinative principles have remained constant. And, in the cases
now before us, just as in every case this Court has decided under
the Import Clause, the rules of decision must flow from the careful
and authoritative exposition of Chief Justice Marshall in the
governing case of
Brown v. Maryland. The Chief Justice
recognized that, at some point in the importing process, foreign
goods lose their immunity and become subject to the taxing power of
the State. Yet the goods must remain immune from state levies long
enough to give the constitutional prohibition its intended effect.
Every case decided under the Import Clause, from that day to this,
has been concerned with applying to the particular facts before the
Court the considerations and standards formulated in
Brown v.
Maryland for determining
Page 358 U. S. 559
when the exclusive national power ends and state power begins.
[
Footnote 2/6] In words grown
familiar with judicial statement, yet deserving of repetition here,
the great Chief Justice stated both the problem and the guide for
decision. "[T]here must be a point of time," Marshall
postulated,
"when the prohibition ceases, and the power of the State to tax
commences; . . . It is sufficient for the present to say generally
that, when the importer has so acted upon the thing imported that
it has become incorporated and mixed up with the mass of property
in the country, it has, perhaps, lost its distinctive character as
an import, and has become subject to the taxing power of the State,
but, while remaining the property of the importer in his warehouse,
in the original form or package in which it was imported, a tax
upon it is too plainly a duty on imports to escape the prohibition
in the constitution."
12 Wheat. at
25 U. S.
441-442.
Since, in
Brown v. Maryland, the object of importation
had been sale, reasoned the Chief Justice, certainly the importer
was entitled to realize that aim without being subject to state
taxation. Although more subtle, more befogging cases might be
imagined, it was "plain" that, at least while in the hands of the
importer in its original form or package, the foreign good remained
an import and thus free from state levies.
The counsel for the State of Maryland in
Brown v.
Maryland was its Attorney General, Roger B. Taney.
Page 358 U. S. 560
Twenty years later, sitting as Chief Justice, Taney acknowledged
that "further and more mature reflection" had made clear to him the
wisdom of the principles laid down by his predecessor. "Indeed,"
said Mr. Chief Justice Taney,
"goods imported, while they remain in the hands of the importer,
in the form and shape in which they were brought into the country,
can in no just sense be regarded as a part of that mass of property
in the State usually taxed for the support of the State government.
[
Footnote 2/7]"
It is needless to review the consistency with which this Court
has repeated and applied the formulas of Marshall and Taney. A few
of the more important examples will serve as concrete
illustrations. In
Low v. Austin,
13 Wall. 29, the Supreme Court of the State of California had
sustained the application of a general
ad valorem property
tax to cases of imported French champagne which were being held in
the warehouse of the importer, a commission merchant, for purposes
of sale. The California court was unable to discern any
"reason why imported goods, exposed in the store of a merchant
for sale, do not constitute a portion of the wealth of the State as
much as do domestic goods similarly situated. [
Footnote 2/8]"
This Court rejected the reasoning of the state court as in
conflict with the principles of
Brown v. Maryland, and
invalidated the application of the tax to the imported wine.
"[G]oods imported," said this Court,
"do not lose their character as imports, and become incorporated
into the mass of property of the State, until they have passed from
the control of the importer or been broken up by him from their
original cases. Whilst retaining their character as imports, a tax
upon them, in any shape, is within the constitutional prohibition.
[
Footnote 2/9]"
Similarly, in
Anglo-Chilean Nitrate Sales
Corp. v. Alabama,
Page 358 U. S. 561
288 U. S. 218,
bags of Chilean nitrate stored in the importer's warehouse,
awaiting sale, were held to be immune from assessment under the
general franchise tax of the State of Alabama. The consistency with
which these principles have been applied is demonstrated even more
lucidly in those instances in which the Court has upheld a tax on
goods held by the importer. In each such case, the tax has been
allowed only after an indubitable demonstration that the goods
involved had been so altered from the physical form in which they
had arrived upon importation that they had lost their character as
foreign imports and had become, through the importer's action, a
new ingredient of the general mass of property of the State.
[
Footnote 2/10]
The historic standards governing the application of the Import
Clause received recent reaffirmation in
Hooven & Allison
Co. v. Evatt, 324 U. S. 652.
That case is of compelling significance here. For the situation
there involved so precisely parallels the circumstances now before
us as to control these cases, unless
Hooven & Allison
is to be overruled and the dissenting views expressed in that case
adopted as the Court's views.
The Hooven & Allison Company imported bales of foreign hemp
for use in the manufacture of cordage and similar products. The
State of Ohio sought to tax this hemp while it was stored in the
manufacturer's warehouse subsequent to importation and prior to
use. During hearings before the Ohio Board of Tax Appeals, it was
established that the company was accustomed to keep on hand merely
a "minimum working inventory" of imported hemp, an amount
sufficient to compensate for the three-to six-month delay involved
in shipping the hemp from foreign countries. On appeal, the Ohio
Supreme Court
Page 358 U. S. 562
sustained the tax on the grounds that the hemp, having been
stored for the purposes of manufacture, had lost its constitutional
immunity. In support of its conclusion, the Ohio court quoted the
portion of the proceedings below in which the company had admitted
the presence of only a "minimum working inventory." This fact was
urged before this Court in support of the State's request for
affirmance. [
Footnote 2/11]
This Court invalidated the tax and reversed the judgment of the
Ohio Supreme Court. Mr. Chief Justice Stone thus spoke for the
Court:
"Although one Justice dissented in
Brown v. Maryland,
supra, from that day to this, this Court has held, without a
dissenting voice, that things imported are imports entitled to the
immunity conferred by the Constitution; that that immunity survives
their arrival in this country and continues until they are sold,
removed from the original package, or put to the use for which they
are imported."
324 U.S. at
324 U. S.
657.
"
* * * *"
". . . [N]o opinion of this Court has ever said or intimated
that imports held by the importer in the original package and
before they were subjected to the manufacture for which they were
imported, are liable to state taxation. On the contrary, Chief
Justice Taney, in affirming the doctrine of
Brown v.
Maryland, in which he appeared as counsel for the State,
declared, as we now affirm:"
"Indeed, goods imported, while they remain in the hands of the
importer, in the form and shape in which they were brought into the
country, can in no just
Page 358 U. S. 563
sense be regarded as a part of that mass of property in the
state usually taxed for the support of state government. . . ."
". . . We do not perceive upon what grounds it can be thought
that imports for manufacture lose their character as imports any
sooner or more readily than imports for sale. T he constitutional
necessity that the immunity, if it is to be preserved at all,
survive the landing of the merchandise in the United States and
continue until a point is reached, capable of practical
determination, when it can fairly be said that it has become a part
of the mass of taxable property within a state, is the same in both
cases."
324 U.S. at
324 U. S.
666-667.
Indeed, there is no process of logic, however dextrous, which
would strike down a tax on imported goods being held prior to sale
and allow a tax on goods stored prior to the processing which is
preliminary to sale. In fact, the latter tax is less essential to
state revenue, since, in the case of goods held for manufacture,
the State still retains the opportunity to impose a tax on the
first sale. If the merchant who imported goods for the purpose of
sale was entitled to realize that purpose before being subject to
state taxes, certainly the manufacturer who had imported goods in
order to process them was entitled to no lesser privilege. Goods
lying in a manufacturer's warehouse in their original form or
container are no more a part of the general mass of property of a
State than are goods which are displayed by a commission merchant,
in their original crates, for purposes of sale; nor is a tax on
goods stored for manufacture any less of an "interception" of those
goods while they are still imports than is a tax on goods
immediately prior to their first sale. Clearly
Hooven &
Allison did not represent an extension of the principles of
Brown v. Maryland, but was an application of that
decision
Page 358 U. S. 564
in a context where to distinguish the principle would have been
to reject it. [
Footnote 2/12]
The lucid standards developed by this Court for the
interpretation of the Import Clause give clear guidance
Page 358 U. S. 565
for the disposition of the present cases. We accept the finding
of the Wisconsin courts that the imported lumber was stored for the
dominant purpose of air drying. Having entered the process of
manufacture, the goods had become subject to the taxing power of
the State. However, neither the imported ores in No. 9 nor the
foreign veneers in No. 44 had been subject to manufacturing. On tax
day, they lay in the manufacturer's storage area, in their original
"form and shape," awaiting their initial processing. Thus, the
taxes sought to be levied on these materials are clearly barred by
the historic series of adjudications of this Court, which have
established that goods so situated, whether awaiting sale or
manufacture, are constitutionally immune from state taxation under
the proscription of Art. I, § 10, cl. 2, of the Constitution.
Yet the Court does not choose to take this plainly marked path
of constitutional decision. Rather, it has
Page 358 U. S. 566
effectively departed from established doctrine and upholds the
challenged taxes. It does so on the basis of a theory which is as
elusive to logic as it is opposed to authority -- a theory which is
not only unsupported by economic fact or reason and without basis
in any of the invoked "realities," but which turns
Brown v.
Maryland and its progeny into
ad hoc results
unrelated to their rationale, and disregards the harmonious
reasoning on which these decisions were based and the process of
one hundred and thirty-two years of constitutional
adjudication.
The Court finds support for its decision in the language of
Hooven & Allison. "Unlike
Hooven," we are
told,
"these are not cases of the mere storage in a warehouse of
imported materials intended for eventual use in manufacturing but
not found to have been essential to current operational needs."
On the assumption that the cases before us present a situation
not governed by prior adjudication, it is maintained that, since
the goods in question had been "irrevocably committed . . . to
use in manufacturing' at the plant and point of final
destination," and were being used to supply the daily manufacturing
needs of the plant, petitioners must be deemed to have "so acted
upon the imported materials as to cause them to lose their
distinctive character as `imports.'" But is not this merely a way
of giving an asserted conclusion of law the appearance of a fact?
The vital question is how, if not when, do "imported materials . .
. lose their distinctive character as `imports.'" After all, the
vast bulk of imports are brought in for commercial purposes -- to
be exposed for sale in their original form or to be used as raw
materials in manufacture. They are, that is, "irrevocably
committed" to be sold or to be used in manufacturing. They are not
normally brought in to be dumped into the sea, as was the tea at
the Boston Tea Party. Of course, the goods here had been imported
and stored for
Page 358 U. S.
567
a manufacturing purpose. The manufacturer did not import
them to sit idly in his storage area.
The very ground now relied upon by the Court in its affirmance
of the challenged taxes was rejected in
Hooven &
Allison, as the record in that case overwhelmingly
demonstrates. [
Footnote 2/13] One
is bound to say that the passage
Page 358 U. S. 568
quoted by the Court from Mr. Chief Justice Stone's opinion in
support of the statement that the cases before us are "unlike
Hooven & Allison," does not support that proposition.
[
Footnote 2/14]
Page 358 U. S. 569
Putting thus to one side the unwarranted reliance on language in
Hooven & Allison, let us examine the basis on which
the state taxes are upheld. Both the imported veneers in City of
Algoma and the ore in Youngstown, the Court holds, must be said to
have been "put to the use for which they are imported," to have
"entered the manufacturing process," and therefore to have lost
their constitutional immunity, since they were "not only needed,
imported, and irrevocably committed to supply, but were actually
being used to supply, the daily requirements of the plant". Again,
one must ask whether these phrases mean any more than that the
goods were being held by the manufacturer for the purpose for which
he had imported them -- use in manufacture. They had not been
processed, changed from their original form or shape, acted upon,
physically altered in the slightest, mingled with domestic goods,
or "used," in the sense that anything
Page 358 U. S. 570
was done to them. They simply lay in storage areas awaiting use.
To say that the goods "were actually being used to supply, the
daily requirements of the plant," simply affirms the obvious fact
that the imports, unaffected in the form in which they were brought
in from abroad and deposited, awaited their intended, but not
begun, manufacturing process. In all prior considerations of the
Import-Export Clause, the immunity of imported goods has been
terminated only by physical handling or alteration, not by
reference to their assumed prospective role in the importer's use
of them. The imported hemp in
Hooven & Allison was
similarly "needed." It too was "irrevocably committed to supply,"
and clearly it was "actually being used to supply, the day-to-day
manufacturing requirements of the plant." To that end, the hemp was
imported. If the hemp was not to be so used, it would not have been
imported.
Furthermore, if we simply substitute "place of sale," for
"plant" in the Court's reasoning -- and we are not vouchsafed
reasons either in abstract reasoning or in practical logic to
disallow it -- the identical enumeration of factors here thought
sufficient to subject the imports to tax is found to be present in
virtually every case in which this Court has invalidated a state
tax on imports. The crates of champagne in
Low v. Austin
and the bags of nitrate in
Anglo-Chilean Nitrate Sales
Corp. were also "needed, imported, and irrevocably committed
to supply," and "were actually being used to supply, the day-to-day
manufacturing requirements" of the place of sale. In effect, the
result of today's decision means that, if imported goods are
needed, they are taxable. If useless, they retain their
constitutional immunity.
A close examination of the
Youngstown case makes
apparent this effective reversal of all previous judicial decision
on the Import Clause, and justifies concern over today's holding.
The stipulation of facts merely provides that the ore had been
imported for purposes of manufacture
Page 358 U. S. 571
and that "at least" three months' supply was generally kept on
hand. (R. 35.) There were no stipulations, nor were there any
findings, as to the rate of use of the ore, the immediacy of the
need for it, or its relation to the requirements of the plant,
which also used domestic ore in its manufacturing. We have simply
the fact that an inventory of ore was kept for eventual use. The
tax was sustained by the Ohio Supreme Court on the ground that the
bulk ore had become mingled with the general property of the State
because new ore had been added to the pile, and old ore removed.
[
Footnote 2/15] The Ohio court
did not discuss or rest on the fact that the goods were "so
essential to current manufacturing requirements that they must be
said to have entered the process of manufacture." There is no
possible way to make the Court's reasoning fit with the
circumstances which underlie and define
Brown v. Maryland
or
Hooven & Allison. Nothing has been done to the ore;
it is in its original form and shape prior to use. Even as a matter
of sound accounting, were that relevant, the goods could not be
said to have entered the process of manufacture. We cannot assume
or fictionalize facts. They must be found to exist. By assuming
them, the Court strips them of relevance and impliedly rejects the
unbroken meaning that the decisions have given the Import
Clause.
Nor is the Court's conclusion strengthened by the suggestion
that, since petitioner did not contest the taxability of that ore
which had been removed to stock bins or houses, we must allow the
rest of the ore to be taxed, as to distinguish between the two
would be incongruous.
Page 358 U. S. 572
The question of the taxability of the removed ore is not before
us. That question was not involved in any previous proceeding in
this case. We have not the basis for knowledge as to what, if any,
processing the ore underwent when removed to the stock bins. There
is certainly no basis for assigning a hypothetical constitutional
position to the removed ore and using such an argumentative figment
as the means for upholding the tax on the ore about which we do
have the precise facts and whose immunity is the question before
us.
In
United States Plywood v. City of Algoma, one-half of
the value of the imported wood was assessed for taxation. That
amount was found to be necessary in order to meet "current
operational needs," (R. 31) and was thus thought to be subject to
state taxation. Formulas for the determination of current
operational needs were discussed in detail by the Wisconsin courts,
but the Court's opinion in
Youngstown makes it unnecessary
to examine those formulas here. [
Footnote 2/16] For the reasoning of
Youngstown
makes it clear that not merely half, but all, of the imported
veneers can be properly taxed by Wisconsin, since they were all
"not only needed, imported, and irrevocably committed to supply,
but were actually
Page 358 U. S. 573
being used to supply, the daily [manufacturing] requirements of
the plant."
I can only reiterate that the fact that goods were "actually" to
be used for the purpose for which imported is not, and has never
been thought to be, relevant in determining their taxability under
the Import Clause. The abstract assignment of a status to goods
which are to be used in manufacture is certainly not germane to an
evaluation of that physical transformation of the goods which has
hitherto been required before an import could become vulnerable to
state taxes. To say that goods are necessary to meet requirements
merely asserts a truism which is equally applicable in every case
this Court has decided under the Import Clause.
The Court summarizes its conclusion by stating that the imported
goods
"stood in the same relation to the State as like piles of
domestic materials at the same place that were kept for use and
used in the same way. . . . [
Footnote
2/17]"
The Court then continues:
"In those circumstances, the tax was not on 'imports,' nor was
it a tax on the materials because they had been imported, but
because, at the time of the assessment, they were being used, in
every practical sense, for the purposes for which they had been
imported. They were therefore subject to taxation just like
domestic property that was kept at the same place in the same way
for the same use. We cannot impute to the Framers of the
Constitution a purpose to make such a discrimination in favor of
materials imported from other countries as would result if we
approved the views pressed upon us by the manufacturers. "
Page 358 U. S. 574
This is exactly the argument offered by the Supreme Court of
California in support of the tax involved in
Low v.
Austin. That argument was then rejected unanimously by this
Court, and has never thereafter won acceptance. Whether the
imposition of a tax resulted in "a discrimination in favor of
materials imported from other countries" has never been thought
relevant to the determination of its constitutional validity. The
taxes which the Court struck down in
Low v. Austin, in
Anglo-Chilean Nitrate Sales Corp., and in
Hooven &
Allison were nondiscriminatory taxes which fell equally on
imported and domestic goods similarly situated. The Framers of the
Constitution provided an absolute immunity for imports. The
decisions of this Court have given to the brief phrases of Art. I,
§ 10, cl. 2, the content of a command: "a state shall not tax
imports," not, "a state shall not tax imports discriminatorily." It
is one hundred and thirty-two years too late to refuse to attribute
to the Framers the purpose of freeing imports from state taxation
which this Court has consistently assumed. [
Footnote 2/18]
Moreover, it cannot properly be said that the application here
of the settled principles of the Import Clause results in
"discrimination" in favor of foreign goods. Whether foreign goods
are receiving a tax advantage over similar domestic goods can only
be determined by an evaluation of the full range of imposts and
duties which the importer has been required to pay to the National
Government. Only then can we know, as a matter of economic reality,
whether, in fact, there is discrimination. And if we find
discrimination, it is the result of the decision of the Congress
and the President that the goods involved should, as a matter of
national policy, receive
Page 358 U. S. 575
preferential treatment. Certainly this Court should be reluctant
to make inroads on a rule of law so well and lucidly settled that
it may legitimately be regarded as an ingredient in the formulation
which is made by the National Government when it determines, as a
considered national policy, the extent to which import duties
should be imposed.
Reluctant as one is to say so, it must be said that the Court
proposes no reason for its decision which has not heretofore been
rejected by this Court. Nor are we pointed to new compelling
policies which must be invoked in order to upset a firmly
established principle of our constitutional law -- a principle
which, perhaps more clearly than any other constitutional standard,
has arrived at a lucid, coherent, and eminently workable
distribution of power between the Nation and the States.
In the
Youngstown case, appellant also claims that the
tax on a portion of its domestic ores was imposed in violation of
the Equal Protection Clause of the Fourteenth Amendment. I concur
in the Court's rejection of that claim.
[
Footnote 2/1]
Although the principles of
Brown v. Maryland are often
termed the "original package doctrine," Marshall was concerned with
a "package" only because the statute in that case taxed the selling
of goods in their original packages. 12 Wheat. at
25 U. S. 436
&
25 U. S. 443.
Marshall himself is careful to use the phrase, "form or package,"
12 Wheat. at
25 U. S. 442,
and Mr. Chief Justice Taney, in his reformulation of
Brown v.
Maryland, used the characterization "form and shape."
See p.
358 U. S. 560,
infra.
"It is a matter of hornbook knowledge that the original package
statement of Justice Marshall was an illustration, rather than a
formula, and that its application is evidentiary, and not
substantive. . . ."
City of Galveston v. Mexican Petroleum
Corp., 15 F.2d
208.
[
Footnote 2/2]
See Letter of James Madison to Professor Davis, 3
Farrand, Records of the Federal Convention (1911), 520-521;
Federalist No. 12 (Lodge ed. 1908) 67 (Hamilton); ibid., No. 44 at
280 (Madison).
[
Footnote 2/3]
See Federalist No. 12 (Lodge ed. 1908) 67
(Hamilton).
[
Footnote 2/4]
See 2 Farrand, Records of the Federal Convention
(1911), 441-442.
[
Footnote 2/5]
In
Richfield Oil Corp. v. State Board of Equalization,
329 U. S. 69, at
329 U. S. 75-76,
we pointed out that
". . . the law under the Commerce Clause has been fashioned by
the Court in an effort"
"to reconcile competing constitutional demands, that commerce
between the states shall not be unduly impeded by state action, and
that the power to lay taxes for the support of state government
shall not be unduly curtailed."
"That accommodation has been made by upholding taxes designed to
make interstate commerce bear a fair share of the cost of the local
government from which it receives benefits . . . and by
invalidating those which discriminate against interstate commerce,
which impose a levy for the privilege of doing it, which place an
undue burden on it. . . ."
"It seems clear that we cannot write any such qualifications
into the Import-Export Clause. It prohibits every State from laying
'any' tax on imports or exports without the consent of Congress. .
. . It would entail a substantial revision of the Import-Export
Clause to substitute for the prohibition against 'any' tax a
prohibition against 'any discriminatory' tax. . . . [T]he two
clauses, though complementary, serve different ends. And the
limitations of one cannot be read into the other."
See also Woodruff v.
Parham, 8 Wall. 123;
Sonneborn Bros. v.
Cureton, 262 U. S. 506;
Federalist No. 32 (Lodge ed. 1908) 186-188 (Hamilton).
[
Footnote 2/6]
Hooven & Allison Co. v. Evatt, 324 U.
S. 652;
Anglo-Chilean Nitrate Sales Corp. v.
Alabama, 288 U. S. 218;
Gulf Fisheries Co. v. MacInerney, 276 U.
S. 124;
New York ex rel. Burke v. Wells,
208 U. S. 14;
May & Co. v. New Orleans, 178 U.
S. 496;
Low v. Austin,
13 Wall. 29;
Waring v. The
Mayor, 8 Wall. 110;
see also McGoldrick v. Gulf
Oil Corp., 309 U. S. 414;
Cook v. Pennsylvania, 97 U. S. 566. For
additional statements of the authority and importance of the
doctrine of
Brown v. Maryland, see American Steel & Wire
Co. v. Speed, 192 U. S. 500,
192 U. S.
519-520;
Norfolk & Western R. Co. v. Sims,
191 U. S. 441,
191 U. S. 449;
License Cases,
5 How. 504,
46 U. S.
575.
[
Footnote 2/7]
The License
Cases, 5 How. 504,
46 U. S.
575.
[
Footnote 2/8]
1 Cal.Unrep.Cas. 638, 643. The passage is also quoted at 13
Wall.
80 U. S.
30-31.
[
Footnote 2/9]
13 Wall. at
80 U. S. 34.
[
Footnote 2/10]
New York ex rel. Burke v. Wells, 208 U. S.
14;
Gulf Fisheries Co. v. MacInerney,
276 U. S. 124;
May & Co. v. New Orleans, 178 U.
S. 496.
Cf. 75 U. S. The
Mayor, 8 Wall. 110.
[
Footnote 2/11]
The record and proceedings below in
Hooven &
Allison are discussed in detail at notes
358
U.S. 534fn2/13|>13 and
358
U.S. 534fn2/14|>14,
infra.
[
Footnote 2/12]
The opinion of the Court asserts that the decision in
Hooven
& Allison is inconsistent with the reasoning of Marshall
in
Brown v. Maryland. We are told that
Brown v.
Maryland
"holds that goods brought into the country by an importer 'for
his own use' are not exempted from state taxation . . . , and
Hooven & Allison Co. v. Evatt . . . holds that they
are. . . ."
Surely this expresses a misapprehension of what Marshall said.
Such a contention was made here, by the dissent in
Hooven &
Allison Co. v. Evatt, 324 U. S. 652, at
324 U. S.
686-688 (dissenting opinion), and silently rejected. For
its refutation,
see Professor Thomas Reed Powell's State
Taxation of Imports -- When Does an Import Cease to be an Import,
58 Harv.L.Rev. 858, 859-864.
The statement of Marshall which is the basis of what is
attributed to him was made by the Chief Justice in response to a
contention by the State of Maryland that to grant immunity in this
case would mean that an importer "may bring in goods, as plate, for
his own use, and thus retain much valuable property exempt from
taxation." 12 Wheat. at
25 U. S.
442-443. Marshall thus dealt with this and similar
contentions:
"This indictment is against the importer for selling a package
of dry goods in the form in which it was imported without a
license. This state of things is changed if he sells them, or
otherwise mixes them with the general property of the State, by
breaking up his packages, and traveling with them as an itinerant
peddler. In the first case, the tax intercepts the import, as an
import, in its way to become incorporated with the general mass of
property, and denies it the privilege of becoming so incorporated
until it shall have contributed to the revenue of the State. It
denies to the importer the right of using the privilege which he
has purchased from the United States until he shall have also
purchased it from the State. In the last cases, the tax finds the
article already incorporated with the mass of property by the act
of the importer. He has used the privilege he had purchased, and
has himself mixed them up with the common mass, and the law may
treat them as it finds them. The same observations apply to plate,
or other furniture used by the importer."
12 Wheat. at
25 U. S.
443.
It is clear that Marshall is referring to personal household
goods brought in by the importer and used by him. He is rejecting
the idea that immunity can continue indefinitely after use if there
has been no sale. He does not say, as the Court would have him say,
that goods brought in by an importer "for his own use," or goods
"held for use," are subject to state taxation. The phrase "for his
own use," which the Court places in quotation marks and attributes
to Marshall, was the Chief Justice's statement of counsel's
contention, and is not to be found in his own conclusion. The
phrase "held for use," which the Court also attributes to Marshall
in its paraphrase of his views, is an interpolation nowhere to be
found in the Chief Justice's discussion. Goods which are imported
for purposes of sale are brought in for "use" as much as are goods
which have been brought in for manufacture. A tax imposed prior to
processing "intercepts" goods on their way to incorporation in the
general mass of property as effectively as does a tax prior to
sale. Marshall was not distinguishing between goods brought in for
manufacture and those brought in for sale. There is no rational
distinction. He was merely denying immunity to goods which had been
brought in and thereafter actively used by the importer. There is
nothing in
Brown v. Maryland that is not in complete
accord with what was decided in
Hooven & Allison.
[
Footnote 2/13]
At the hearing before the Ohio Board of Tax Appeals, the general
manager of the Hooven & Allison Company was asked if the
imported hemp was kept in the warehouse for any definite length of
time. He answered:
"No; it might be we would need the stuff as soon as it got
there, and, again, we might not; it comes from long distances, and
we do not carry any more inventory than we need to; it takes three
to six months for it to get to us; we attempt to keep a backlog for
that; we attempt to run our business with a minimum working
inventory, of course."
Transcript of Record, p. 42;
Hooven & Allison Co. v.
Evatt, 324 U. S. 652.
Relying in large part on this testimony, the Supreme Court of
Ohio concluded that the goods "had so come to rest as to be mingled
with the mass of property in this country. . . ."
Hooven &
Allison Co. v. Evatt, 142 Ohio St. 235, 242, 51 N.E.2d 723,
726. In its brief before this Court, Ohio supported the validity of
the tax on the basis of the above industrial circumstances:
"The evidence in the instant case shows that the petitioner
purchased fibers solely for its own use, never for sale. It was
impracticable to buy fibers a bale at a time to meet the immediate
needs of its mill. It took from three to six months to get delivery
after an order was placed. The undisputed testimony shows that the
petitioner did not carry any more inventory than was actually
needed, but, due to the uncertainty of deliveries, it attempted 'to
keep a backlog for that.' It attempted to operate 'with a minimum
working inventory' (R. 16). In other words, when the imported goods
reached the plant. they were immediately used, in that they were
essential to the continuous daily operation of petitioner's
plant."
Brief for Respondent, p. 20,
Hooven & Allison Co. v.
Evatt, 324 U. S. 652.
This Court's decision did not accept the arguments made by the
State throughout the course of litigation. The theory thus rejected
now serves as the basis for this decision.
[
Footnote 2/14]
In support of its argument that the cases before us are "unlike"
Hooven & Allison, the Court quotes from the following
passage from that case:
"It cannot be said that the fibers were subjected to manufacture
when they were placed in petitioner's
warehouse in their
original packages. And it is unnecessary to decide whether, for
purposes of the constitutional immunity, the presence of some
fibers in the
factory was so essential to current
manufacturing requirements that they could be said to have entered
the process of manufacture, and hence were already put to the use
for which they were imported, before they were removed from the
original packages. Even though the inventory of raw material
required to be kept on hand to meet the current operational needs
of a manufacturing business could be thought to have then entered
the manufacturing process, the decision of the Ohio Supreme Court
did not rest on that ground, and the record affords no basis for
saying that any part of petitioner's fibers, stored in its
warehouse, were required to meet such immediate current needs.
Hence, we have no occasion to consider that question."
(Italics added.) 324 U.S. at
324 U. S.
667.
The record in the case, the opinions below, and the briefs in
this Court leave no doubt that this passage does not refer to the
bulk of the imported hemp stored in the warehouse of the Hooven
& Allison Company as a "minimum working inventory." Indeed,
such reference would be wholly inconsistent with the principles on
which the opinion rests. Due regard for the record and for the
opinions clarifies the Chief Justice's meaning. When the imported
hemp was ready for use, it was moved from the warehouse to the
factory. At the hearing, the general manager testified as to this
hemp:
". . . it is removed from the raw material account and charged
into processing in the mill; each bale of fiber as it is removed
from the raw material warehouse becomes, according to our records,
in process. Of course, we have to batch and treat this stuff; it
may not be used for a couple of days; but as soon as it leaves the
warehouse it is charged in process. . . ."
Transcript of Record, p. 43,
Hooven & Allison Co. v.
Evatt, 324 U. S. 652.
The Ohio Supreme Court took special note of this hemp which was
in transit from the warehouse to the processing line. It remarked
that:
"While the bales remain in the raw material warehouse, they are
carried in a raw material account on appellant's books; but, upon
their removal from such warehouse, the bales are immediately
charged to goods-in-process account, whether the bales have been
broken or not."
Hooven & Allison Co. v. Evatt, 142 Ohio St. 235,
237, 51 N.E.2d 723, 724.
As far as appears, these bales of hemp which had been removed to
the factory as immediately necessary for current needs, but which
remained in their original packages, were not separately assessed
for taxation, nor were they at any stage of the proceedings,
treated as a separate item. It is obvious, though his language is
somewhat cloudy, that what Chief Justice Stone meant was that he
was not considering whether the removed hemp had a special status.
Therefore, although it could not "be said that the fibers were
subjected to manufacture when they were placed in petitioner's
warehouse . . . ," it was
"unnecessary to decide whether, for purposes of the
constitutional immunity, the presence of some fibers in the
factory was so essential to current manufacturing
requirements that they could be said to have entered the process of
manufacture."
(Italics added.)
[
Footnote 2/15]
Since the Court does not rely on the reasoning of the Ohio
court, I will not stop to examine closely its ground of decision.
It is sufficient to note that it is difficult to understand by what
mutation an import loses its status as an import merely by mingling
it with identical imported goods which are similarly being stored
prior to use.
[
Footnote 2/16]
The Wisconsin court found that one-half of the imported goods
was necessary to meet "current operational needs." On the basis of
this finding of "fact," this Court finds its new interpretation of
the Import Clause satisfied. Since that interpretation is far
broader than the narrow concept of "current operational needs," as
applied by the Wisconsin court, it is unnecessary to discuss the
constitutional validity of a rule based on "current operational
needs." It is sufficient to note here that such a formula possesses
no basis in economics; it is merely an arbitrary figure assigned to
a portion of inventory. An appropriate analysis of the formulas
tentatively offered by the Wisconsin Circuit Court to support its
finding would reveal the unreal and arbitrary nature of the
finding. However such discussion would be superfluous here.
[
Footnote 2/17]
This merely states a legal conclusion. The physical status of
the imports did not differ in the slightest from that of any other
import this Court has held to be immune from state taxation. Their
"relation" to the State is the question for decision.
[
Footnote 2/18]
See the passage quoted at
358
U.S. 534fn2/5|>note 5,
supra, from
Richfield
Oil Corp. v. State Board of Equalization, 329 U. S.
69,
329 U. S. 75-76.
See also Federalist No. 32 (Lodge ed. 1908) 186-188
(Hamilton).