Appellant, a New Jersey corporation with its principal office
and only manufacturing facilities located in North Carolina, blends
tobacco imported from foreign countries with domestic tobacco in
producing finished tobacco products virtually all of which are
consumed in the United States. Upon importation, the foreign
tobacco is placed under customs bond given by appellant, and is
stored in one or more of the customs-bonded warehouses owned and
maintained by appellant in appellee Forsyth and Durham Counties, N.
C., usually for a 2-year period to permit aging. Appellant pays the
required customs duties upon withdrawal of the tobacco from the
warehouses. Under North Carolina statutes, tobacco present in the
State on January 1 of each year is subject to a nondiscriminatory
ad valorem property tax levied and collected by counties
and municipalities. In listing its taxable personal property for
1983 in appellee counties, appellant claimed that, under the ruling
in
Xerox Corp. v. County of Harris, 459 U.
S. 145, its imported tobacco in customs-bonded
warehouses was immune from state taxation on federal constitutional
grounds. The counties' tax supervisors denied the claim, and the
denials were upheld on administrative appeals. The North Carolina
Court of Appeals affirmed, rejecting appellant's contentions that
the tax violated the Import-Export and Due Process Clauses, and
distinguished
Xerox, reasoning that it prohibited state
taxation only of imported goods stored under bond and awaiting
export, not of those destined for domestic manufacture and
consumption. Appellant filed with the North Carolina Supreme Court
both a notice of appeal and a petition for discretionary review.
The court granted a motion to dismiss for lack of a substantial
constitutional question and denied appellant's petition. Appellant
then filed with this Court an appeal from the North Carolina
Supreme Court and another appeal from the North Carolina Court of
Appeals.
Page 479 U. S. 131
Held:
1. This Court has appellate jurisdiction as to the North
Carolina Supreme Court's judgment, under 28 U.S.C. § 1257(2), which
extends such jurisdiction to review a "final" judgment
"rendered by the highest court of a State in which a decision
could be had . . . where is drawn in question the validity of a
statute of any state on the ground of its being repugnant to the
Constitution, treaties or laws of the United States, and the
decision is in favor of its validity. Pp.
479 U. S.
136-139."
(a) Appellant properly challenged on federal constitutional
grounds the validity of North Carolina's
ad valorem
property tax, and there was a final judgment in favor of validity.
Cf. Japan Line, Ltd. v. County of Los Angeles,
441 U. S. 434. Pp.
479 U. S.
136-138.
(b) The appeal from the North Carolina Supreme Court, not the
North Carolina Court of Appeals, is the proper one under § 1257(2).
A North Carolina statute gives a litigant an appeal of right to the
State Supreme Court from any Court of Appeals decision that
"directly involves a substantial question arising under the
Constitution of the United States." In the absence of positive
assurance to the contrary by the North Carolina Supreme Court, its
grant of appellees' motion to dismiss the appeal for lack of a
substantial federal constitutional question constitutes a decision
on the merits affirming the Court of Appeals' judgment, not a
determination that the State Supreme Court lacked jurisdiction over
the appeal. Pp.
479 U. S.
138-139.
2. Consistent with the Supremacy Clause, a State may impose a
nondiscriminatory
ad valorem property tax on imported
goods stored in a customs-bonded warehouse and destined for
domestic manufacture and sale. The holding in
Xerox Corp. v.
County of Harris, supra, is limited to its factual situation,
that is, where taxed imported goods in customs-bonded warehouses
are intended for transshipment in foreign commerce. North
Carolina's taxation of appellant's goods does not contradict the
purposes of the federal statutory scheme governing customs-bonded
warehouses to promote foreign commerce and to aid certain sectors
of American economic life. To invalidate the North Carolina tax
would place domestic tobacco, which is subject to the
ad
valorem property tax while aging, at a distinct disadvantage
to the imported tobacco; domestic producers and local taxpayers
would "subsidize" the growers of imported tobacco. Nor does the
taxation here conflict with the central purpose behind
customs-bonded warehouses: to ensure that federal customs duties
are collected. The federal statutes and regulations that guide
monitoring the movement of imported goods and the warehouse
proprietor's conduct with respect to such goods both guarantee the
collection of federal revenues and are not so comprehensive as to
leave no room for North Carolina's assessment of
ad
valorem taxes. Pp.
479 U. S.
139-152.
Page 479 U. S. 132
3. Application of the North Carolina tax to appellant's imported
tobacco does not violate the Import-Export Clause. The focus of
Import-Export Clause cases is on the nature of the tax at issue,
not the nature of the goods as imports. North Carolina's tax does
not offend the policies behind the Clause: concern that a state tax
might interfere with federal regulation of foreign commerce; fear
that on account of such state taxation the Federal Government will
lose an important source of revenue; and a desire to maintain
harmony among the States, which would be disturbed if seaboard
States could tax goods merely flowing through their ports to other
States not so favorably situated.
Cf. Michelin Tire Corp. v.
Wages, 423 U. S. 276. Pp.
479 U. S.
152-155.
4. North Carolina's tax does not violate the Due Process Clause.
A state tax comports with the Clause if the taxing power exerted by
the State bears a "fiscal relation" to protection, opportunities,
and benefits given by the State. In light of the police, fire, and
other services provided to appellant's imported tobacco by North
Carolina counties and cities, such a "fiscal relation" clearly
exists in this case. P.
479 U. S.
156.
No. 86-1021, 314 N.C. 540, 336 S.E.2d 21, affirmed. No. 85-1022,
appeal dismissed; reported below: 73 N.C.App. 476,
326
S.E.2d 911.
BLACKMUN, J., delivered the opinion for a unanimous Court.
JUSTICE BLACKMUN delivered the opinion of the Court.
This case [
Footnote 1]
presents the narrow but important question whether a State may
impose a nondiscriminatory
ad valorem property tax on
imported goods stored under bond in a customs
Page 479 U. S. 133
warehouse and destined for domestic manufacture and sale.
I
Appellant R. J. Reynolds Tobacco Company is a New Jersey
corporation with its principal office in Winston-Salem, N.C.
Reynolds manufactures finished tobacco products for sale to
distributors and other authorized purchasers. App. to Juris.
Statement 26a. Virtually all its products are consumed in the
United States.
Id. at 31a. Its only manufacturing
facilities are in Winston-Salem, where it blends imported tobacco
with domestic tobacco in its manufacturing process. [
Footnote 2]
The foreign tobacco is shipped to a port of entry in the United
States and is placed under customs bond given by Reynolds to secure
the payment of federal import duties.
See 19 U.S.C. § 1555
(1982 ed., Supp. III). The tobacco is then transported by truck or
rail to one or more of the 88 customs-bonded warehouses owned and
maintained by Reynolds in Forsyth and Durham Counties, N.C.
[
Footnote 3] Because
Page 479 U. S. 134
nearly all imported tobacco requires aging, it is usually in the
warehouses for two years. Reynolds pays the required customs duties
upon withdrawal of tobacco from the warehouses. Reynolds stores its
domestic tobacco in nonbonded warehouses in the same two counties.
It receives identical city and county police, fire, and other
public services at its customs-bonded and nonbonded warehouses.
App. to Juris. Statement 32a.
Tobacco present in North Carolina on January 1 of each year is
subject to an
ad valorem property tax in the amount of 60%
of the rate generally applicable to other property. [
Footnote 4]
See N.C.Gen.Stat. § §
105-277(a) and 105-285 (1985). Counties and municipalities are
authorized to levy and collect property taxes, but they must do so
in a manner uniform throughout the State.
See § 105-272.
In listing its taxable personal property for 1983 in Durham and
Forsyth Counties, Reynolds claimed that, under this Court's ruling
in
Xerox Corp. v. County of Harris, 459 U.
S. 145 (1982), its imported tobacco in customs-bonded
warehouses was immune from taxation on federal constitutional
grounds. App. 4-13. The tax supervisors for the respective counties
denied this claim, and the County Boards of Equalization and Review
upheld the denials.
Id. at 15-23.
Reynolds then filed appeals (consolidated for hearing) with the
North Carolina Property Tax Commission, sitting as the State Board
of Equalization and Review. Reynolds again
Page 479 U. S. 135
contended that the taxation of the imported tobacco was at odds
with
Xerox. The Commission, however, found
Xerox
distinguishable because the warehoused goods under consideration in
that case were destined for foreign markets and were lodged only
temporarily in customs-bonded warehouses in this country, whereas
Reynolds' tobacco was not so destined and had "nothing temporary
about its existence in this country." App. to Juris. Statement
35a-36a. The Commission,
id. at 36a, likened the Reynolds
facts, instead, to those of
American Smelting & Refining
Co. v. County of Contra Costa, 271 Cal.
App. 2d 437, 77 Cal. Rptr. 570 (1969),
appeal dism'd,
396 U. S. 273
(1970), where a nondiscriminatory tax on imported goods stored in
customs-bonded warehouses and destined for domestic consumption was
upheld.
The North Carolina Court of Appeals affirmed the Commission's
decision.
In re R. J. Reynolds Tobacco Co., 73 N.C.App.
475,
326
S.E.2d 911 (1985). The court first rejected Reynolds'
contention that the tax violated the Import-Export Clause, because
the tax was clearly not an impost or duty.
Id. at 478-480,
326 S.E.2d at 914-915. The court then distinguished
Xerox,
reasoning that it prohibited state taxation only of goods stored
under bond and awaiting export, not of those destined for domestic
manufacture and consumption. 73 N.C.App., at 482-483, 326 S.E.2d at
916-917. Following the California Court of Appeal's conclusion in
American Smelting that customs-bonded warehouses were not
meant to create a "warehouse enclave" for foreign goods destined to
be sold and consumed in domestic commerce, the North Carolina court
observed that it would be unfair to
"exempt imported tobacco aging in customs bonded warehouses from
property taxation while imposing these taxes on domestically-grown
tobacco aging in ordinary warehouses."
73 N.C.App. at 483-484, 326 S.E.2d at 917. Finally, the court
dismissed Reynolds' due process claim, finding that the appropriate
test was "
whether the taxing power exerted by the state bears
fiscal relation to protection,
Page 479 U. S.
136
opportunities and benefits given by the state.'"
Id. at 485, 326 S.E.2d at 918, quoting Wisconsin v. J.
C. Penney Co., 311 U. S. 435,
311 U. S. 444
(1940). Because there was no dispute that the imported tobacco
received the benefit of local services, the imposition of the
ad valorem tax did not constitute a due process violation.
73 N.C.App. at 485-486, 326 S.E.2d at 918.
Reynolds then filed with the North Carolina Supreme Court a
notice of appeal and a petition for discretionary review. The
Supreme Court granted the counties' subsequent motion to dismiss
for lack of a substantial constitutional question and denied
Reynolds' petition.
In re R. J. Reynolds Tobacco Co., 314
N.C. 540,
335 S.E.2d
21 (1985).
Reynolds appealed to this Court. [
Footnote 5] We postponed consideration of our jurisdiction
to the hearing on the merits. 475 U.S. 1009 (1986).
II
Under 28 U.S.C. § 1257, appellate jurisdiction lies in this
Court to review a "final" judgment
"rendered by the highest court of a State in which a decision
could be had . . . (2) . . . where is drawn in question the
validity of a statute of any state on the ground of its being
repugnant to the Constitution, treaties or laws of the United
States, and the decision is in favor of its validity."
A
The initial jurisdictional question presented here is whether
Reynolds properly challenged the validity of North Carolina's
ad valorem property tax and whether there was a final
judgment in favor of validity. Because the North Carolina Court of
Appeals sustained the tax against Reynolds' claim that, as applied
to its imported tobacco, the tax was repugnant to the
Import-Export, Supremacy, and Due Process
Page 479 U. S. 137
Clauses, and the North Carolina Supreme Court concluded that no
substantial constitutional question was raised by the appeal, our
appellate jurisdiction would seem to be assured. Appellees contend,
however, that jurisdiction under § 1257(2) has not been
established, because Reynolds failed to make "
an explicit and
timely insistence'" in the North Carolina courts that the State's
tax statute, as applied to it, violated the Federal Constitution.
Brief for Appellees 12, quoting Charleston Federal Savings
& Loan Assn. v. Alderson, 324 U.
S. 182, 324 U. S. 185
(1945). Appellees argue that Reynolds challenged merely the
assessment or levy of the tax by North Carolina authorities, a
situation where appellate jurisdiction does not lie. We find the
argument unpersuasive.
In
Japan Line, Ltd. v. County of Los Angeles,
441 U. S. 434
(1979), this Court was faced with a similar challenge to appellate
jurisdiction. Appellees in that case asserted that Japanese
shipping companies had been denied only a constitutional immunity
from taxation for their shipping containers, and that the
California courts had not sustained the tax statute against federal
constitutional attack.
See id. at
441 U. S. 440.
Contrary to that suggestion, this Court found that the appellants
had challenged the constitutionality of the tax statute, as
applied, and that the California courts had sustained the statute's
validity.
Id. at
441 U. S. 441.
We further observed that
"a state statute is sustained within the meaning of § 1257(2)
when a state court holds it applicable to a particular set of facts
as against the contention that such application is invalid on
federal grounds."
Ibid.
The situation presented by the present case is like that in
Japan Lines: Reynolds explicitly drew the
ad
valorem property tax, as applied to its imported tobacco, into
constitutional question, and the North Carolina courts upheld the
validity of the tax.
See also Xerox Corp. v. County of
Harris, 459 U.S. at
459 U. S. 149;
McCarty v. McCarty, 453 U. S. 210,
453 U. S. 219,
n. 12 (1981). Thus, under § 1257(2), there was a final state
Page 479 U. S. 138
court judgment in favor of the validity of the tax, and Reynolds
properly challenged it.
B
Reynolds draws our attention to a jurisdictional detail that is
unresolved. It has not been made clear which North Carolina court,
in circumstances like those present here, is the "highest court"
from which an appeal lies under § 1257. North Carolina, with
exceptions not pertinent here, gives a litigant an appeal of right
to its Supreme Court from any decision of its Court of Appeals that
"directly involves a substantial question arising under the
Constitution of the United States or of this State." N.C.Gen.Stat.
§ 7A-30 (Supp. 1985). As Reynolds explains, the grant of appellees'
motion to dismiss the appeal for lack of a substantial federal
constitutional question by the North Carolina Supreme Court could
be interpreted as a decision on the merits affirming the Court of
Appeals' judgment, or it could be viewed as a determination by that
court that it lacked jurisdiction over the appeal.
See
Brief for Appellant 11. Depending upon how the dismissal is to be
characterized, appeal here would properly lie from the Supreme
Court or, on the other hand, from the Court of Appeals. [
Footnote 6]
We have resolved that we should decide this jurisdictional
question so that practitioners may be certain of their ground. In
the absence of positive assurance to the contrary from the North
Carolina Supreme Court, we consider that court's dismissal of
Reynolds' appeal to be a decision on the merits.
Cf. Michigan
v. Long, 463 U. S. 1032,
463 U. S.
1037-1044 (1983). With no such contrary assurance in the
present record, we
Page 479 U. S. 139
conclude that it is the appeal from that court that is the
proper one under § 1257.
When confronted with a comparable situation arising from Ohio,
this Court ruled that the appeal lies from the Ohio Supreme Court,
and not from that State's Court of Appeals.
See Matthews v.
Huwe, 269 U. S. 262,
269 U. S. 265
(1925);
Hetrick v. Village of Lindsey, 265 U.
S. 384,
265 U. S. 386
(1924).
See also Tumey v. Ohio, 273 U.
S. 510,
273 U. S. 515
(1927). [
Footnote 7] In
Matthews, Chief Justice Taft, an Ohioan writing for the Court,
explained the appropriateness of the appeal from the Ohio Supreme
Court:
"It is one of those not infrequent cases in which decision of
the merits of the case also determines jurisdiction. The petition
was dismissed, not because the court was really without
jurisdiction, for it could have taken it, but because the question
was regarded as frivolous, which is a different thing from finding
that the petition was not in character one which the Court could
consider."
269 U.S. at
269 U. S. 265.
This reasoning is applicable to the present case: there is no
question that the North Carolina Supreme Court had jurisdiction to
hear Reynolds' appeal, but it determined not to do so in light of
its conclusion that the appeal raised no substantial constitutional
question.
We therefore regard the appeal in No. 85-1021 (from the Supreme
Court of North Carolina) as the proper one, and we dismiss the
appeal in No. 85-1022 (from the North Carolina Court of Appeals)
for want of jurisdiction.
Page 479 U. S. 140
III
On the merits, the crucial issue is whether Congress has
exercised its power under the Supremacy Clause to preempt
ad
valorem state taxation of imported goods that are stored in
customs-bonded warehouses and that are destined for domestic
markets. Under this Clause the "Constitution, and the Laws of the
United States which shall be made in Pursuance thereof . . . shall
be the supreme Law of the Land." U.S. Const., Art. VI, cl. 2. In
determining whether Congress has invoked this preemption power, we
give primary emphasis to the ascertainment of congressional intent.
Rice v. Santa Fe Elevator Corp., 331 U.
S. 218,
331 U. S. 230
(1947). This may be manifested in several ways.
Ibid.;
Louisiana Public Service Comm'n v. FCC, 476 U.
S. 355 (1986). Chief among the indications of an intent
to preempt is where Congress has legislated so comprehensively that
it has left no room for supplementary state legislation.
Rice
v. Santa Fe Elevator Corp., supra. Preemption may also be
found where state legislation would impede the purposes and
objectives of Congress.
Hines v. Davidowitz, 312 U. S.
52,
312 U. S. 67
(1941). In undertaking this analysis, however, we must be mindful
of the principle that
"federal regulation of a field of commerce should not be deemed
preemptive of state regulatory power in the absence of persuasive
reasons -- either that the nature of the regulated subject matter
permits no other conclusion, or that the Congress has unmistakably
so ordained."
Florida Lime & Avocado Growers, Inc. v. Paul,
373 U. S. 132,
373 U. S. 142
(1963);
Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Ware, 414 U. S. 117,
414 U. S. 127
(1973) ("So here, we may not overlook the body of law relating to
the sensitive interrelationship between statutes adopted by the
separate, yet coordinate, federal and state sovereignties").
See Brown v. Hotel Employees, 468 U.
S. 491,
468 U. S.
500-501 (1984).
In
Xerox Corp. v. County of Harris, 459 U.
S. 145 (1982), this Court recently dealt with the issue
of preemption of state
Page 479 U. S. 141
taxation on imported goods stored in customs-bonded warehouses.
It there examined the narrow question
"whether a state may impose nondiscriminatory
ad
valorem personal property taxes on imported goods stored under
bond in a customs warehouse and destined for foreign markets."
Id. at
459 U. S. 146.
[
Footnote 8] At the outset of
its preemption analysis, the Court in
Xerox examined the
legislative history of the Warehousing Act of 1846, 9 Stat. 53, the
forerunner of the present statutory scheme, in order to uncover the
objectives behind the customs-bonded warehouse. The Court
observed:
"The Act stimulated foreign commerce by allowing goods in
transit in foreign commerce to remain in secure storage, duty free,
until they resumed their journey in export."
459 U.S. at
459 U. S. 150.
The Court further noted that making this country a center of world
commerce was a desired and conceivable goal in light of our
favorable geographic location between the Atlantic and Pacific
Oceans that would facilitate the "transshipment of goods."
Id. at
459 U. S.
150-151. Moreover, for the drafters of the Act, the
promotion of foreign commerce went hand in hand with the growth of
American shipping and mercantile industries.
Id. at
459 U. S. 151.
The Court concluded:
"To these ends, Congress was willing to waive all duty on goods
that were reexported from the warehouse, and to defer, for a
Page 479 U. S. 142
prescribed period, the duty on goods destined for American
consumption."
Ibid.
The Court, therefore, had to determine whether state taxation of
the copiers destined for export would contradict the purpose of
promoting foreign commerce and the related goal of aiding certain
sectors of American economic life. It limited its preemption
analysis to whether taxation would impede the congressional
objectives. It particularly relied upon its earlier decision in
McGoldrick v. Gulf Oil Corp., 309 U.
S. 414 (1940), where it had found that the federal
warehouse scheme preempted a New York City sales tax on oil
imported under customs bond, refined in a customs-bonded warehouse,
[
Footnote 9] and sold as ships'
stores for vessels destined for abroad. As the Court in
Xerox noted, the tax at issue in
McGoldrick would
detract from the benefit American refiners received in their
freedom from customs duties on the oil, and thus undermined the
advantage they gained in the competition with their foreign
counterparts. 459 U.S. at
459 U. S. 152
(citing
McGoldrick, 309 U.S. at
309 U. S.
429). Applying this reasoning to the case before it, the
Xerox Court concluded that the waiver of customs duties
benefited those merchants who used American ports "as transshipment
centers," gave them a competitive advantage over importers using
storage facilities in other countries, and thus promoted foreign
commerce to the United States. 459 U.S. at
459 U. S. 153.
Because the waiver so clearly furthered the Act's purposes, any
attempt to remove its benefit, such as would occur through state
taxation, was incompatible with these goals. The Court thus ruled
that state property tax on the copiers was preempted. [
Footnote 10]
Page 479 U. S. 143
In a summary of its holding, however, this Court rather broadly
stated that
"state property taxes on goods stored under bond in a customs
warehouse are preempted by Congress' comprehensive regulation of
customs duties."
Id. at
459 U. S. 154.
Reynolds would conclude from that sentence that the holding in
Xerox precludes state taxation of
any goods in a
customs warehouse, regardless of their destination. [
Footnote 11] As is
Page 479 U. S. 144
clear from what has been said above, however, we accept
Xerox's holding and the quoted sentence as limited to the
factual situation presented in that case, that is, where the goods
are intended for transshipment.
It is difficult, moreover, to believe that the purposes in
forming the customs-bonded warehouse scheme identified by the Court
in
Xerox would be disserved by the imposition of
ad
valorem property taxes on Reynolds' imported tobacco. It makes
sense to conclude that state property taxation may discourage an
importer whose goods are destined for transshipment in foreign
commerce from using American ports and facilities, particularly
when the same importer is granted an exemption from customs duties
on all goods exported. Similar taxation would hardly deter an
importer who, like Reynolds, stores goods in customs-bonded
warehouses for up to two years for domestic manufacture and
consumption, the storage period arguably being part of the
manufacturing process because the tobacco requires aging. [
Footnote 12] Unlike Xerox,
Page 479 U. S. 145
moreover, Reynolds is not completely free of import duties on
its goods, but simply has them deferred. [
Footnote 13] Thus, rather than being a charge that
detracts from the absolute benefit of the waiver of duties, the
state tax here is in addition to the payment of duties and might
well be considered as nothing more than an expected cost of doing
business.
See Xerox Corp. v. County of Harris, 459 U.S. at
459 U. S. 156
(POWELL, J., dissenting). Furthermore, while the tax on goods
destined for foreign markets would have harmful effects on American
industry and workers by discouraging importers from using American
ships and ports, to invalidate the North Carolina tax would place
domestic tobacco, which is subject to the
ad valorem
property tax while aging, at a distinct disadvantage to the
imported tobacco. Domestic producers and local taxpayers would thus
"subsidize" the growers of imported tobacco. [
Footnote 14]
See In re R. J. Reynolds,
73 N.C.App. at 484,
Page 479 U. S. 146
326 S.E.2d at 917 ("Also, since this imported tobacco receives
the same local governmental services, such as police and fire
protection, as domestic tobacco, local taxpayers
Page 479 U. S. 147
would be forced to provide a subsidy in excess of a million
dollars to Reynolds"). Permitting imposition of a tax thus leads to
equal treatment for imported and domestic tobacco.
One of the Warehousing Act's major goals, manifested in its
scheme of deferral and waiver of duties, was to promote the
importer's flexibility with respect to his goods. Under the system
in place prior to the Warehousing Act, an importer was required to
pay the duties in cash when the goods were unloaded from the
vessel; if no duties were paid, interest on them would immediately
accrue and would have to be satisfied, or the customs officials
would sell the goods for the charges.
See Cong. Globe,
29th Cong., 1st Sess., App. 790 (1846) (remarks of Sen. Dix).
[
Footnote 15] What this
meant for the merchant who did not have a ready source of funds was
that he would be forced to part with a portion of his goods, often
in an unfavorable market, in order to raise money to pay the
duties.
Id. at 792;
see also H. R. Rep. No. 411,
29th Cong., 1st Sess., 1-3 (1846). Moreover, an importer who was
unsure about the ultimate destination of the goods would be
penalized by keeping them in warehouses in this country, for he
would lose the benefit of the use of the money that had been paid
for the customs duties.
See Cong. Globe, 29th Cong., 1st
Sess.,App. 792 (1846) (remarks of Sen. Dix). By permitting an
importer to defer duties for a set period of time and to have a
waiver of duties on reexported goods, the Warehousing Act enabled
the importer, without any threat of financial loss, to place his
goods in domestic markets or to return them to foreign commerce
and, by this flexibility, encouraged importers to use American
facilities. [
Footnote
16]
Page 479 U. S. 148
It is difficult to discern how imposition of an
ad
valorem tax will affect an importer's flexibility in a
situation where, as here, goods are destined for domestic markets.
Given that the tobacco is aging in the customs-bonded warehouses in
preparation for domestic manufacture and sale in this country,
Reynolds does not occupy the position of an importer looking for
the best market, domestic or foreign, in which to place the stored
goods. [
Footnote 17] In any
event, Reynolds clearly benefits from the flexibility created by
the Warehousing Act. By being allowed to defer customs duties on
the imported tobacco for up to five years, Reynolds is able to
decide how much imported tobacco to use in its manufacturing
process at any given time, depending upon the demand for its
products in the domestic market.
Nor is there any suggestion that taxation here would conflict
with the central purpose behind the customs-bonded warehouses: to
ensure that federal customs duties are collected.
See Xerox
Corp. v. County of Harris, 459 U.S. at
459 U. S. 155
(POWELL, J., dissenting). Not only is the present statutory and
regulatory framework sufficient to permit customs officials to
monitor the entrance and removal of goods from warehouses and thus
to guarantee collection of federal revenue, but Reynolds does not
explain how, on the facts of this case, imposition of the North
Carolina tax will prevent customs
Page 479 U. S. 149
officials from receiving the duties. [
Footnote 18]
See n 3,
supra. And the present statutes and
regulations that guide this monitoring and the warehouse
proprietor's own conduct with respect to the imported goods are not
so comprehensive as to leave no room for North Carolina's
assessment of
ad valorem taxes.
See Rice v. Santa Fe
Elevator Corp., 331 U.S. at
331 U. S. 230;
Louisiana Public Service Comm'n v. FCC, 476 U.S. at
476 U. S. 370.
Although the regulations are not themselves controlling on the
preemption issue,
see Xerox Corp. v. County of Harris, 459
U.S. at
459 U. S. 152,
n. 8, where, as in this case, Congress has entrusted an agency with
the task of promulgating regulations to carry out the purposes of a
statute,
see 19 U.S.C. § 1556, as part of the preemption
analysis we must consider whether the regulations evidence a desire
to occupy a field completely.
See Fidelity Federal Savings
& Loan Assn. v. De la Cuesta, 458 U.
S. 141,
458 U. S.
153-154 (1982). Preemption should not be inferred,
however, simply because the agency's regulations are comprehensive.
See Hillsborough County v. Automated Medical Laboratories,
Inc., 471 U. S. 707,
471 U. S.
716-718 (1985). In this case, the current regulations,
while detailed, appear to contemplate some concurrent state
regulation and, arguably, even state taxation. [
Footnote 19]
Page 479 U. S. 150
Finally, we agree with the North Carolina Court of Appeals that
this case presents a factual situation similar to that in
American Smelting, and that the California Court of
Appeal's reasoned decision is therefore pertinent. [
Footnote 20] The Court of Appeal considered
whether metal-bearing ores and concentrates to be treated in a
customs-bonded smelting and refining warehouse, [
Footnote 21] some to be reexported and
others to be used in domestic markets, were subject to a local
property tax. Relying upon
McGoldrick v. Gulf Oil Corp.,
309 U. S. 414
(1940), the Court of Appeal concluded that the refined materials
destined to reenter the exportation stream were exempt from local
taxation. 271 Cal. App. 2d at 481, 77 Cal. Rptr. at 601. With
respect to similar materials intended for domestic consumption,
however, the court concluded that
"neither the laws, nor the regulations, nor the precedents . . .
show a congressional intent to interfere with the right of the
state to tax goods which have been imported for, and
Page 479 U. S. 151
have been appropriated to, processing for domestic
consumption."
Ibid. The Court of Appeal could see no reason why state
taxation on such goods would interfere with the primary benefit to
be given the importer -- deferral of the duties, and the Federal
Government's concern with collecting its customs duties. It thus
concluded that there was no reason why this taxation should depend
upon when the goods were withdrawn from the warehouses.
Id. at 469-470, 77 Cal. Rptr. at 593-594. A customs-bonded
warehouse was not to become an "enclave of foreign commerce,"
id. at 470, 77 Cal. Rptr. at 594, nor was it to give the
operator of the smelter a "bounty" that would enable it to prevail
in its competition over "domestic smelters refining domestic ores."
Id. at 474, 77 Cal. Rptr. at 596-597. So also here,
regardless of the imposition of the North Carolina
ad
valorem tax, Reynolds will be able to defer payment of the
customs duties; the Federal Government will receive its customs
revenue; and domestic producers of tobacco will not suffer in their
competition with the imported tobacco. [
Footnote 22]
Page 479 U. S. 152
We therefore hold that, consistent with the Supremacy Clause, a
State may impose a nondiscriminatory
ad valorem property
tax on imported goods stored in a customs-bonded warehouse and
destined for domestic manufacture and sale.
IV
We turn to Reynolds' remaining constitutional arguments that the
North Carolina
ad valorem property tax violates the
Import-Export [
Footnote 23]
and Due Process Clauses. The Court has stated that its decision in
Michelin Tire Corp. v. Wages, 423 U.
S. 276 (1976), "adopted a fundamentally different
approach
Page 479 U. S. 153
to cases claiming the protection of the Import-Export Clause."
Limbach v. Hooven & Allison Co., 466 U.
S. 353,
466 U. S. 359
(1984);
see also Washington Revenue Dept. v. Association of
Wash. Stevedoring Cos., 435 U. S. 734,
435 U. S.
752-754 (1978). We explained this approach, and its
distinction from the earlier analysis, in
Limbach:
"To repeat: we think it clear that this Court in
Michelin specifically abandoned the concept that the
Import-Export Clause constituted a broad prohibition against all
forms of state taxation that fell on imports.
Michelin
changed the focus of Import-Export Clause cases from the nature of
the goods as imports to the nature of the tax at issue. The new
focus is not on whether the goods have lost their status as
imports, but is, instead, on whether the tax sought to be imposed
is an 'Impost or Duty.'"
466 U.S. at
466 U. S. 360.
In
Michelin, we concluded that a Georgia nondiscriminatory
ad valorem property tax, which had been assessed upon
imported tires and tubes stored in a warehouse, was not the kind of
tax prohibited by the Import-Export Clause, inasmuch as it did not
offend the policies behind the Clause: concern that an impost or
duty might interfere with the Federal Government's regulation of
commercial relations with foreign governments; fear that, on
account of such state taxation, the Federal Government would lose
an important source of revenue; and a desire to maintain harmony
among the States, which would be disturbed if seaboard States could
tax goods "merely flowing through their ports" to other States not
so favorably situated. 423 U.S. at
423 U. S.
285-286.
The nondiscriminatory
ad valorem property tax at issue
here seems indistinguishable from the tax in
Michelin in
terms of these policies. The North Carolina tax does not interfere
with the Federal Government's regulation of foreign commerce, for,
as we have seen, it falls on imported and domestic goods alike, and
does not single out imported goods for unfavorable treatment.
See id. at
423 U. S. 286.
Having concluded
Page 479 U. S. 154
that the tax does not impede the collection of customs duties,
it follows that it neither impairs an important source of revenue
for the Federal Government nor replaces the federal duty with one
of its own.
Ibid. Rather, the property tax is nothing more
than a means
"by which a State apportions the cost of such services as police
and fire protection among the beneficiaries according to their
respective wealth."
Id. at
423 U. S. 287.
If imposition of the tax happens to have the "incidental effect,"
ibid., of discouraging some importation of foreign goods,
prohibiting this result is not a function of the Import-Export
Clause. Finally, in light of the services provided in exchange for
this tax, it hardly constitutes the kind of exaction by the
seaboard States on goods destined for inland States that the
Framers sought to prevent by the Clause.
Id. at
423 U. S. 288.
A failure to assess the tax would shift the tax burden from
Reynolds and the ultimate consumers of its tobacco products to the
local taxpayers of North Carolina -- a result completely at odds
with
Michelin. See id. at
423 U. S. 289.
Accordingly, we conclude that the application of the tax to
Reynolds' imported tobacco does not violate the Import-Export
Clause.
This Court has observed that, in
Michelin, it limited
its holding to the imported goods "
no longer in transit.'"
Washington Revenue Dept., 435 U.S. at 435 U. S. 755
(quoting Michelin, 423 U.S. at 423 U. S.
302). Reynolds contends that, because goods stored in
customs-bonded warehouses are by definition "in transit," this case
does not fall within the scope of Michelin's holding.
[Footnote 24] This
reasoning, however, is unpersuasive.
Page 479 U. S. 155
The imported tobacco here, we repeat, has nothing transitory
about it: it has reached its State -- indeed, its county -- of
destination, and only the payment of the customs duty, after the
appropriate aging, separates it from entrance into the domestic
market. More importantly, an automatic "in transit" status for
goods stored in customs-bonded warehouses can be inferred only if
Congress intended to confer it upon
all goods stored in
customs-bonded warehouses.
See Xerox Corp. v. County of
Harris, 459 U.S. at
459 U. S. 157
(POWELL, J., dissenting). As we have seen, state taxation of such
goods destined for domestic markets is contrary to none of the
purposes for which Congress established the customs-bonded
warehouse scheme. It strains reason to think that, although
Congress could have directly preempted state taxation in this
situation by declaring it to be in conflict with the purposes of
customs-bonded warehouses or by directing the United States Customs
Service to issue regulations governing taxation of stored goods,
Congress decided to achieve the same effect in a more roundabout
fashion by giving the goods the talismanic "in transit" status.
Page 479 U. S. 156
We also find no merit in Reynolds' due process claim. As noted
by the North Carolina Court of Appeals, it is well settled that a
state tax comports with the Due Process Clause if "the taxing power
exerted by the state bears fiscal relation to protection,
opportunities and benefits given by the state."
Wisconsin v. J.
C. Penney Co., 311 U.S. at
311 U. S. 444;
see 1 R. Rotunda, J. Nowak, & J. Young, Treatise on
Constitutional Law § 13.2, p. 669 (1986). In light of the police,
fire, and other services provided to Reynolds' imported tobacco by
the North Carolina counties and cities, such a "fiscal relation"
clearly exists in this case. Although Reynolds contends that goods
located in customs-bonded warehouses are outside the taxing
jurisdiction of the State because of their "in transit" status, for
the reasons given, above this argument no more succeeds in the due
process context than it does when addressed to the Import-Export
Clause analysis.
In No. 85-1021, the judgment of the Supreme Court of North
Carolina is affirmed. The appeal in No. 85-1022 is dismissed for
want of jurisdiction.
It is so ordered.
* Together with No. 85-1022,
R. J. Reynolds Tobacco Co. v.
Durham County, North Carolina, et al., on appeal from the
Court of Appeals of North Carolina.
[
Footnote 1]
Although there are two appeals (by the same appellant), there is
but one case.
See Part II,
infra.
[
Footnote 2]
The imported tobacco comes from Bulgaria, Syria, Lebanon,
Brazil, and a few other places. App. to Juris. Statement 29a.
[
Footnote 3]
Pursuant to federal regulation, a private party may have a
building or part of a building designated as a customs-bonded
warehouse for the purpose of storing imported goods.
See
19 U.S.C. §§1666-1666 (1982 ed. and Supp. III); 19 CFR §§
19.1-19.12 (1986). A customs officer supervises the operation of
the warehouse, although labor on the stored merchandise is
performed by the proprietor. The regulations prescribe, among other
things, the manner in which goods enter and leave the warehouse, §
19.6, the records the proprietor must keep, § 19.12, and the
supervision the customs officer is to perform, § 19.4.
Customs warehouses are divided into eight classes. § 19.1(a).
Reynolds has two types, Class 2 and Class 8. Its Class 8 warehouses
are storage sheds for the cleaning, sorting, and repacking of
tobacco.
See § 19.1(a)(8). Its Class 2 warehouses are used
exclusively for the storage of tobacco.
See § 19.1(a)(2).
It is customary for Reynolds in the course of its manufacturing
process to move imported tobacco from storage in its Class 8
warehouses to its Class 2 warehouses located in Reynolds'
manufacturing areas. App. to Juris. Statement 30a. Reynolds owns
these warehouses and the land thereunder, is their sole user, and
pays all maintenance expenses and property taxes on them.
Id. at 30a, 32a.
Goods may remain in a customs-bonded warehouse for up to five
years from the date of importation without payment of customs
duties. 19 U.S.C. § 1557(a). Once goods are withdrawn, however,
duties are due unless the goods are to be exported.
Ibid.
When Reynolds is ready to use imported tobacco, its practice is to
pay the duty and to move the tobacco out of the Class 2 areas in
order to process it with domestic tobacco. App. 90. When this move
has been made, the imported tobacco is incorporated in the finished
tobacco products within two weeks.
Id. at 91.
[
Footnote 4]
There is no equal protection issue in this case.
[
Footnote 5]
Reynolds took care to file one appeal (No. 85-1021) from the
North Carolina Supreme Court and another (No. 85-1022) from the
North Carolina Court of Appeals.
See App. to Juris.
Statement 39a, 41a.
[
Footnote 6]
Although Reynolds has informed this Court that the Clerk of the
North Carolina Supreme Court advised it that a dismissal "for lack
of a substantial constitutional question is not regarded by that
Court as a decision on the merits," Reynolds observes that there is
no reported decision of the Supreme Court of North Carolina that
discusses the effect of such a dismissal. Brief for Appellant 11,
n. 8.
[
Footnote 7]
We acknowledge that this Court, in
Doyle v. Ohio,
426 U. S. 610
(1976), allowed certiorari to issue to an Ohio Court of Appeals
after the Ohio Supreme Court had dismissed an appeal for lack of a
substantial constitutional question.
See id. at
426 U. S. 616.
The "highest court" requirement, however, was not addressed in that
case.
We note that treating the North Carolina Supreme Court's summary
dismissal as a decision on the merits accords with this Court's
view of its own summary dispositions.
See Hicks v.
Miranda, 422 U. S. 332,
422 U. S. 344
(1975).
[
Footnote 8]
The facts in
Xerox reinforce the narrowness of the
question examined: the imported goods,
Xerox copiers, were
plainly designed for sale in Latin America, inasmuch as the
operating instructions were in Spanish or Portuguese, the machines,
as constructed, would not function on the type of electric current
that is standard in the United States, it would have cost $100 to
convert each machine for domestic sale, and none of the copiers was
ever sold in the United States. 459 U.S. at
459 U. S.
147-148. In fact, when Texas authorities began to assess
ad valorem personal property taxes on the copiers,
Xerox immediately shipped them to a foreign trade zone,
from which it continued to send the machines to Latin America, and
exhibited no intention to convert them for domestic use.
Id. at
459 U. S. 148.
Accordingly, in
Xerox, the bonded goods were destined to
be shipped abroad, unlike Reynolds' tobacco, which is destined for
domestic markets.
[
Footnote 9]
The warehouses with which
McGoldrick was concerned were
of Class 6,
see 309 U.S. at
309 U. S. 422,
defined in the present regulations as those
"for the manufacture in bond, solely for exportation, of
articles made in whole or in part of imported materials or of
materials subject to internal-revenue tax."
19 CFR § 19.1(a)(6) (1986);
see also 19 U.S.C. §
1311.
[
Footnote 10]
The Court remarked that the factual distinctions between
McGoldrick and the case before it -- namely, that in
McGoldrick the oil could be sold only as ships' stores and
the tax assessed was a sales tax, whereas
Xerox could have
paid the duty and withdrawn the copiers for domestic sale and was
subject to a property tax -- were "distinctions without a legal
difference."
Xerox, 459 U.S. at
459 U. S. 153.
According to Reynolds, this remark reveals that the Court was
unconcerned in its analysis with whether the goods stored in
customs-bonded warehouses were destined for domestic markets or for
export. Taken in context, however, the Court's comment suggests the
opposite to us: that
Xerox had the option to sell the
copiers domestically was not significant, given its clear intention
to ship them to Latin America; thus, the copiers were as much
destined for transshipment in foreign commerce as was the oil in
McGoldrick. The difference in the types of taxes in the
two cases was of no importance, for imposition of either tax would
detract from the benefit accruing to the importer from the waiver
of the duty.
That the Court in
Xerox was concerned solely with goods
destined for transshipment in foreign commerce is further
demonstrated by the other case upon which it principally relied,
District of Columbia v. International Distributing Corp.,
118 U.S. App.D.C. 71, 331 F.2d 817 (1964), where the Court of
Appeals proscribed a District of Columbia excise tax on the sale of
beverages to foreign embassies while the beverages were still in a
customs-bonded warehouse. Although this Court, 459 U.S. at 154,
cited language from
International Distributing Corp., 118
U.S.App.D.C. at 73-74, 331 F.2d at 819-820, to the effect that
customs-bonded warehouses were "federal enclaves free of state
taxation" and goods housed therein were outside the taxing
jurisdiction of the District until removed, the case appeared to
turn on the fact that international law, recognized by Congress,
granted diplomatic personnel the right to import goods duty free
and tax free for their own use.
Id. at 74, 331 F.2d at
820. Arguably, then, the beverages at issue in
International
Distributing Corp. were still in foreign commerce. The Court's
additional quotation from
Fabbri v. Murphy, 95 U. S.
191,
95 U. S.
197-198 (1877),
see 459 U.S. at
459 U. S. 154,
is not inconsistent with this reading of
McGoldrick and
International Distributing Corp. See n 24,
infra.
[
Footnote 11]
Reynolds also notes that counsel for both
Xerox and the
state taxing authorities expressed the opinion, in response to
questions at oral argument in the
Xerox case in this
Court, that the holding would apply either to goods destined for
foreign commerce
or to those earmarked for domestic use.
Reynolds therefore argues here that the Court did intend its broad
language to cover both types of goods. Brief for Appellant 17; Tr.
of Oral Arg. 11-12. Although the questioning at oral argument in
Xerox suggests that the Court may well have been inquiring
into a situation different from the facts before it -- not an
infrequent occurrence at oral argument -- the Court limited the
analysis
in its opinion to goods in transshipment.
[
Footnote 12]
Because Reynolds' only manufacturing facility is in Forsyth
County, there is no suggestion that Reynolds will discontinue its
importation of foreign tobacco if the tax is allowed to stand, and
that the tax thus will affect foreign commerce adversely. In fact,
Reynolds has been importing foreign tobacco into North Carolina for
approximately 25 years.
See App. 88-89. Reynolds has been
paying the North Carolina
ad valorem property tax on its
imported tobacco at least since this Court in
Michelin Tire
Corp. v. Wages, 423 U. S. 276
(1976), abandoned the "original package" doctrine that had barred
property taxes on imported inventory retained in its original
package in the hands of the importer. That doctrine had prevented
state taxation on Reynolds' imported tobacco.
See Reply
Brief for Appellant 7, n. 9. It may be noted, however, that
Reynolds has filed suit in state court seeking refunds of property
taxes it paid on imported tobacco for 1980, 1981, and 1982, has
paid under protest the taxes for 1984 and 1985, and has claimed --
and been denied -- an exemption for 1986.
See Brief for
Appellees 7, n. 8.
[
Footnote 13]
The cost of the imported tobacco for which Reynolds sought
exemption is $519,059,527. App. to Juris. Statement 28a-29a. The
customs duties on this tobacco amount to approximately $42-48
million.
Id. at 32a. The tax at issue is about $5 million
annually. Brief for Appellees 31, n. 34.
[
Footnote 14]
North Carolina does grant domestic tobacco (and other "farm
products") an exemption from taxation for the year following the
one in which the product is grown if it is in "an unmanufactured
state" and "owned by the original producer." 2D N.C.Gen.Stat. §
105-275(4) (1985). Although this tends to equalize competition
between imported and domestic tobacco, it is not clear from the
record that Reynolds' domestic tobacco is eligible for the benefit
of § 105-275(4). Even if all of Reynolds' tobacco received the
benefit of that provision, it would still not be on an equal
competitive footing with imported tobacco, which would be exempt
from property taxes for up to five years as long as it is stored in
customs-bonded warehouses.
See 19 U.S.C. § 1557(a).
There is no indication in the legislative history of the
Warehousing Act that one of the goals of the customs-bonded
warehouse system was to benefit imported goods in their competition
with domestic goods. In fact, when the bill was debated in the
Congress, legislators expressed concern that the deferral of duties
would benefit the foreign merchant at his domestic counterpart's
expense:
"The foreigner could warehouse his goods, safely and cheaply,
for three years, without being compelled to pay the duties. He can
sell the goods out as he finds customers; and by continuing the
practice of invoicing his goods at a cheaper rate than the American
merchant can, he will always place himself in a more advantageous
position, and the effect would be to drive the latter out of
business."
Cong. Globe, 29th Cong., 1st Sess., 1042 (1846) (remarks of Sen.
Huntington).
See also Cong. Globe, 29th Cong., 1st
Sess.,App. 1166 (1846) (remarks of Rep. Smith).
In response to these criticisms, Senator Dix, one of the
sponsors of the bill in the Senate, explained that deferral of
duties would not give foreign importers and goods such a
benefit:
"Whether goods are stored in the countries where they are
produced, or in our own cities, is of no consequence so far as the
question of competition with our domestic products is concerned,
unless it can be shown that in the latter case (storing in our own
cities) they will be brought into the domestic market at a cost
materially less. This, it is believed, cannot be readily shown.
Whether stored at home or abroad, the expense of bringing
merchandise into the domestic market must be nearly the same. In
either case, it has the same processes to perform. It must be
transported from the factories or workshops where it is produced,
to the sea; it must be shipped, carried across the ocean, brought
into our ports, and before it can enter into the domestic market to
be sold, the impost or duty must be paid. The charges and exactions
are the same in both cases. If it is placed in store here and
allowed to remain for a limited period without paying duty, it is
in no better condition, so far as cost is concerned, than it would
have been if it had been kept in store in the country where it was
produced, unless storage here is cheaper, and this is
questionable."
Id. at 795. Senator Dix noted that some benefit might
accrue to importers of foreign goods because of the deferral of
duties (
i.e., interest on the amount for the duties during
the deferral period), but he considered that to be immaterial and,
in any event, more than offset by the promotion of foreign
commerce.
Id. at 795-796. Thus, rather than believing that
the Act improved the competitive position of foreign goods and
their importers, Senator Dix disavowed this purpose and discounted
any such effect.
[
Footnote 15]
The pre-Warehousing Act System, which required payment of a cash
duty as high as 40% of the value of the goods,
see H. R.
Rep. No. 411, 29th Cong., 1st Sess., 1 (1846), was itself a
response to an earlier system that had allowed importers to defer
payment of customs duties for as long as nine months.s
See
Cong. Globe, 29th Cong., 1st Sess., App. 790 (1846) (remarks of
Sen. Dix).
[
Footnote 16]
Although there were efforts in both the House and the Senate to
require a merchant to designate at the outset which portion of his
goods was intended for reexport or for domestic use, such attempts
were rejected.
See Journal of the Senate, 29th Cong., 1st
Sess., 406-407 (1846); Cong.Globe, 29th Cong., 1st Sess., 1178
(1846). Rejection of such amendments suggests that Congress
intended to give maximum flexibility to the importer who was unsure
of the ultimate destination of the goods.
[
Footnote 17]
We make no determination with respect to warehoused goods that
are not, as are those here, destined for the domestic market. We
leave for another day such questions as what degree of probability
of shipment to foreign markets must be shown to invoke the tax
exemption, and whether, with regard to goods for which that showing
has been made, state taxes may nevertheless be annually assessed
but not collected until release into the domestic market
occurs.
[
Footnote 18]
Although Reynolds suggests that practical problems may arise for
an importer whose goods are subject to state taxation and who must
decide which goods to designate for domestic use, Brief for
Appellant 25, this case presents no such practical difficulties.
Here, all the goods are destined for domestic manufacture. As has
been noted, Reynolds has paid the tax in question for several years
without, apparently, experiencing any serious difficulty.
See n. 12,
supra.
[
Footnote 19]
For example, an applicant for the proprietorship of a bonded
warehouse must estimate the "maximum duties and taxes" that will be
due on goods stored therein at any one time. 19 CFR § 19.2(a)
(1986). Under this regulation, state taxation is entirely
consistent with the supervisory control over stored goods exercised
by customs officers. Pursuant to § 19.7, moreover, warehoused goods
shall be "liable for the expenses of labor and storage . . . and
for all other expenses accruing upon the goods." Expenses might be
read here to include state
ad valorem property taxes.
Under § 19.12(b)(3), to maintain the security of the merchandise, a
warehouse proprietor is to comply with Treasury Regulations, but in
the event of a conflict between them and "any local, state or
Federal standard," the latter shall control. This suggests that
dual federal and state regulation of customs-bonded warehouses is
not only possible but contemplated under the regulations.
[
Footnote 20]
Reynolds contends that, in light of the decision in
Xerox, the summary dismissal in
American Smelting
is entitled to no precedential value. Reply Brief for Appellant 8.
Given the limited focus in
Xerox, we do not think that the
decision in that case is at odds with
American Smelting or
affects the precedential weight, albeit limited, of the summary
dismissal for want of a substantial federal question.
See
American Smelting & Refining Co. v. County of Contra
Costa, 396 U. S. 273
(1970);
Hicks v. Miranda, 422 U.S. at
422 U. S.
344.
[
Footnote 21]
It is irrelevant that the warehouses in
American
Smelting were Class 7 customs-bonded warehouses designed "for
smelting and refining imported metal-bearing materials for
exportation or domestic consumption," 19 CFR § 19.1(7) (1986);
see also 19 U.S.C. § 1312(a), and different from the Class
2 and Class 8 warehouses at issue here. We note that
McGoldrick, which the Court considered as precedent for
its decision in
Xerox, concerned Class 6 warehouses,
designed for the manufacture of articles destined solely for
exportation, and not of the type used by
Xerox.
See n 9,
supra.
[
Footnote 22]
Reynolds also argues that the legislative history of the Trade
and Tariff Act of 1984, Pub.L. 98-573, 98 Stat. 2948, which, among
other things, amended the Foreign Trade Zones Act, ch. 590, 48
Stat. 998, codified, as amended, at 19 U.S.C. § § 81a-81u (1982 ed.
and Supp. III), shows that Congress understood the
Xerox
holding to be broad,
i.e., as prohibiting local taxation
on all goods stored in customs warehouses. That legislation
provides a statutory exemption from state and local property taxes
for goods held in a foreign trade zone. While foreign trade zones
are more difficult to establish than customs-bonded warehouses,
they do permit a wider range of operations.
See 19 U.S.C.
§ 81c (1982 ed., Supp. III); 1 R. Sturm, Customs Law &
Administration § 18.1, pp. 45-52 (1986); Note, 17 Geo.Wash.J.Int'l
L. & Econ. 555, 564-565 (1983). Reynolds buttresses its
argument with statements in the legislative history to the effect
that, by passing this amendment, Congress was bringing the
prohibition of taxation of imported goods in foreign trade zones in
line with a similar prohibition in customs-bonded warehouses.
See, e.g., 129 Cong.Rec. 14501 (1983) (statement of Sen.
Tower); H.R. Rep. No. 98-267, p. 35 (1983); S.Rep. No. 98-308, p.
36 (1983). Just as in the case of imported goods in customs-bonded
warehouses, those stored in foreign trade zones are subject to
import duties only when they are withdrawn for domestic
consumption.
See 19 U.S.C. § 81c (1982 ed., Supp.
III).
Such statements given in the context of a different piece of
legislation dealing with a different part of the customs scheme are
not persuasive as to congressional purpose with respect to
customs-bonded warehouses.
See Consumer Product Safety Comm'n
v. GTE Sylvania, Inc., 447 U. S. 102,
447 U. S.
117-118, and n. 13 (1980) (congressional statements
explaining intent of previous legislation are entitled to less
weight than the statute's language and its legislative history
before enactment). Moreover, the Trade and Tariff Act of 1984 had a
narrow focus: the legislators from Texas sought to preempt state
taxation of goods in foreign trade zones because Texas, alone among
the States, permitted this taxation, and thus businesses were
discouraged from locating such zones in that State.
See
129 Cong.Rec. 14501 (1983) (remarks of Sen. Bentsen) ("The
Bentsen-Tower bill addresses a very narrow problem dealing with
foreign trade zones in the State of Texas"). Foreign trade zones
are valued because they actually promote domestic industry and
create jobs.
Ibid. Given that the taxation of goods in
foreign trade zones could arguably harm domestic industry, while
exemption from taxation of the imported goods in the present case
would serve to discriminate against domestic producers, there
appears to be a sufficient justification for the difference in
state taxation with respect to these customs entities. There is no
evidence that Reynolds also uses foreign trade zones for the
purpose of aging its imported tobacco.
Cf. Xerox Corp. v.
County of Harris, 459 U.S. at
459 U. S. 148
(when threatened with local taxes,
Xerox immediately
shipped its copiers to a foreign trade zone).
[
Footnote 23]
"No State shall, without the Consent of the Congress, lay any
Imposts or Duties on Imports or Exports, except. . . ." U.S.
Const., Art. I, § 10, cl. 2.
[
Footnote 24]
For this argument, Reynolds particularly relies upon the
Xerox Court's favorable citation of
International
Distributing Corp. to the effect that the goods in customs
warehouses were outside the District of Columbia's jurisdiction,
459 U.S. at
459 U. S. 164
(citing 118 U.S.App.D.C. at 73-74, 331 F.2d at 819-820), and the
Court's remark that "
Congress did not regard the importation as
complete while the goods remained in the custody of the proper
officers of customs,'" ibid. (quoting Fabbri v.
Murphy, 96 U.S. at 96 U. S.
197-198). In our view, such reliance is misplaced. The
Court in Xerox declined to reach the Import-Export Clause
issue and was concerned only with the possible preemption of state
taxes in the limited context of goods destined to reenter the
export stream. Thus, the citations are consistent with
Xerox's restricted conclusion that such goods should not
be subject to ad valorem property taxes.
By themselves, these cases do not give any significant weight to
Reynolds' present contention. Although there is language in
International Distributing Corp. concerning the locality's
jurisdiction over goods in customs-bonded warehouses, as we
observed above,
see n 10,
supra, the decision turned on reciprocity
in permitting diplomatic personnel to bring in goods duty and tax
free and did not deal with the Import-Export Clause issue.
Reynolds' reliance on
Fabbri is not helpful either,
because that case involved a dispute over whether an importer would
be required to pay interest on the customs duty, in addition to the
duty itself, when imported goods were withdrawn over a year after
they had been stored. 95 U.S. at
95 U. S. 193.
Once again, no Import-Export Clause issue was raised in the case,
and the remark from
Fabbri specifically addresses the
appropriateness of the interest charge: that interest was to be
paid so long as the goods were in customs officials' custody.
Id. at
95 U. S.
197-198.