*1 HARRIS, XEROX OF TEXAS, CORP. COUNTY v. et al. Argued November No. 81-1489. 1982 Decided December *2 Brennan, Court, in Burger, J., opinion of the which C. delivered Rehnquist, Blackmun, Stevens, O’Connor, Marshall, and White, J., Powell, dissenting opinion, post, p. 155. JJ., joined. filed a Hoddinott, the cause and filed briefs Jr., argued H. Alfred for appellant. the cause for argued appellees. Helena
Cheryl Chapman D. Jay her the brief for of Houston was appellee City With Howell, County Jr. J. Greene filed a brief for appellee John of Harris.* Burger delivered the opinion
Chief Justice Court.
We noted to decide whether a jurisdiction probable ad may valorem impose nondiscriminatory personal in taxes on a customs imported goods under bond and The Texas destined for markets. foreign Court of Civil held such taxes constitutional. Appeals
HH Xerox Appellant engaged is a New York Corp. corporation in ma- the business of business selling and manufacturing chines. Its it has established operations span globe, and As- F.
*James Gossett filed a for the International Association brief sessing Officers as amicus curiae. foreign
affiliates countries facilitate sales. It assembly production plants has facilities in Mexico. parts copying Xerox manufactured machines Colo- shipped City, rado and New York which were to Mexico assembly by copiers Mexico, for its affiliate there. The as- designed sembled Mexicowere for sale in the Latin Ameri- printing all market, can on the machines and instructions Spanish accompanying Portuguese. were in them Most of copiers operated cycles per on electric current of 50 sec- cycles per ond, rather than the 60 second standard Many copiers by appel- United States. assembled City approved by lant’s affiliate Mexico were not either *3 United Laboratories the Canadian Standards Association, required in for sale the United States. To convert the copiers approximately for domestic sale would have cost $100 per copier. assembly copiers transported by
After in Mexico, the were trucking company a customs bonded to the Houston Terminal in Warehouse Houston, Tex.,1 Class customs bonded they periods ranging warehouse. There were stored for days years awaiting ship- from a few to three while sale copiers ment to Xerox in affiliates Latin America. The segregated remained in the warehouse, from other merchan- shipment dise, until a order was received. Xerox re- When transport copiers ceived an order, it would under bond to they either the Port Houston or Miami, the Port of where shipment were loaded on board for vessels to Latin America. copiers remained under the continuous control and su- pervision of the United States Customs Service from the they they time entered the bonded warehouse until cleared 1974, Until Xerox shipped copiers its to the Free Mexican-assembled Panama, Trade Zone of rising where were stored tax free. anti-American in storage sentiment fa Panama led Xerox to seek another cility. It settled on port the Houston warehouse of the excellent because in facilities the Port of Houston. or the Port of Port of Houston at the Customs
United States export.2 Miami for and stored Mexico assembled of the copiers
None use; for domestic all to customers ever sold Houston were no Xerox Consequently, paid abroad. were sold ultimately them.3 duties import taxes on the copiers did not assess any
The local authorities In 1977, in 1974 and 1975. bond stored under valorem personal assessed ad of Houston4 city in the Houston ware- copiers on the $156,728 taxes suit, of Harris6 followed County 1977.5 The house during $48,426 assessing for 1977 and also $55,969 assessing $104,395. for a total of taxes for back in- the local Xerox learned authorities As soon as it all copiers, shipped to tax its Mexican-assembled tended in Buffalo, zone N. Y., to a trade the machines fill orders to Latin shipment which it continued to America. “joint in customs bonded warehouses are under the cus Goods stored
tody” proprietor of the warehouse and the United States Customs Service. charge” “in all The United States Customs Service is of the warehouse and § performed “supervision.” 1555. work there is under its 19 U. S. C. 1557(a) question, permitted At the time 19 U. S. C. imported goods up years with three in a customs bonded warehouse *4 duty. payment import importer post out of an to a bond required was duty. for the years, the value of At the end of the three the could upon payment duty owed, be withdrawn for domestic sale could 1978, reexport payment any duty. be withdrawn for In the without of period years time limit to five was extended three years. 1978, Simplification Pub. Customs Procedural Reform and Act of (1976 1557(a) 95-410, 108(b)(1), § 892, ed., Supp. § L. 92 Stat. 19 U. C.S. V). 4Houston and assesses collects taxes the Houston Inde for itself and pendent School District. 5 paid $1,817,000 1976 and Xerox in ad approximately a total of taxes appellees copiers valorem to use. located in Texas for domestic Texas, County itself, Harris assesses and of collects taxes for the State taxing and other local authorities. sought injunctive
Declaratory relief was state court and already appel- assessed and such taxes as both from the taxes might impose future. Xerox claimed that the in the lees question were unconstitutional because violated Import-Export of Clause and the Commerce Clause Appellees 2; I, §8, cl. Art. cl. 3. I., Constitution. Art. counterclaimed for the taxes assessed. by appellees
The trial court that the taxes assessed held Import-Export Clauses, violated both the and Commerce and granted judgment it to Xerox. The Texas of Civil holding Appeals, District, reversed, First the taxes Import-Export violated neither the Clause nor the Com- (1981). Alternatively, merce 619 S. Clause. W. 2d it held that the trial court had violated Pro- Texas Rule Civil granting injunctive Finally, granted cedure 683 relief. it judgment appellees to on their counterclaims in the amount plus penalties County of $131,311 and to interest Harris plus penalties city $156,728 to interest of Houston. Supreme application The Texas Court denied Xerox’s appeal probable writ error and this followed. We noted jurisdiction, (1982), 456 U. S. and we reverse.
I—H h-1 A preliminary question jurisdic- is whether this Court has appeal. Appellees argue tion over the Court lacks that this jurisdiction reversing since the decision of the Texas court grant injunction independent of an rested on an and ade- quate ground. indispensable predicate an However, judgment an appellees award to the on their counterclaims was a permissible determination that the taxes at issue were under the United States Constitution; Texas Court Appeals Civil any independ- so held. It is not claimed that adequate ground ent and holding. supports state-law jurisdiction We therefore judgment. have review that *5 1257(2). § U. C.S.
150
B Con- powers Clause, the Commerce under to its Pursuant system comprehensive which gress a established Government-supervised bonded ware- provisions for includes duty prescribed may for imports free be where houses may during period any be periods. time At duty. Only payment reexported without withdrawn or stored be- domestic sale for are withdrawn if the any duty period due. 19 yond prescribed become does V). (1976 1557(a) Supp. § are While ed., U. C.S. custody they joint in the in warehouses propri- and the warehouse Customs Service United States supervision of the the continuous control and etor under regula- C. 1555. Detailed officers. U. S. local customs every aspect in which the ware- of manner tions control (1982). §§ operated. 19.1-19.6 be 19 CFR houses are to Government-regulated, a link bonded warehouses have been early foreign very period in commerce since “a the chain of (1877). history.” Murphy, Fabbri v. S. our U. Warehousing present A forerunner of the statute was the major objective Act of Stat. 58. of the ware- housing system importers payment of was to allow to defer duty until the entered the market or were domestic legislative exported. history explains sought to reinstate though long neglected Smith,
“the sound Adam maxim of every ought ‘That tax to be levied the time and ’ pay manner it; most convenient for the contributor [by providing] only paid that the when the tax shall be imports consumption Rep. are entered . H. R. . . .” (1846). Cong., No. 411, 29th 1st Sess., foreign by allowing goods The Act stimulated commerce duty storage, transit in commerce to remain secure journey geo- export. free, until resumed their graphic country place location of the it convenient made
151 Hemisphere transshipment within the Western and of consequence of and the Pacific. the Atlantic across both making center of world commerce was States a the United that vastly ship- carrying increased; be that trade would
“our many foreign building that stimulated; would be markets wholly part, by supplied, inor us with mer- be would Europe; from the now furnished warehouses of chandise industry seaports put greater our the of would be activity; [and] that the commercial transactions country Cong. . . Globe, would be facilitated . 29th (1846)(remarks Dix). Cong., App. 1st Sess., 792 Sen. willing Congress duty To ends, these was to waive all on reexported that were from the warehouse, and to de- prescribed duty period, fer, for a on destined for consumption. American no This was small sacrifice at a time up greater part when customs duties made of federal rev- objective but its enues,7 was to stimulate business for Ameri- industry can and work for Americans. Congress duty-free
In short, created secure and enclaves encourage under federal control in order to merchants here ports. question and abroad to make use American compatible comprehensive it whether would be with the goals scheme enacted to if effect these the states free lodged were to tax such while tem- were porarily Government-regulated bonded this country. In Corp., (1940), McGoldrick v. Oil U. S. Gulf
City sought impose imported of New York sales tax petroleum that was refined into oil in fuel New York and sold ships’ stores to vessels bound abroad. The crude oil was 1846, approximately 90% of all federal revenues were derived from customs duties. U. Census, S. Bureau of Historical Statistics of the States, United (Bicentennial Colonial Times to p. Part ed. 1975) (customs $26,713,000 accounted for out of total federal revenues $29,700,000). manu- in a customs refined imported bond under We from all duties. free facturing was pre-empted finding con- it tax, the state struck down gressional 429. Id., at scheme. exemption purpose of the
The Court determined petro- upon importation normally of crude laid from the tax *7 importation encourage oil for of the crude “to leum was stores] ships’ enable American and thus to [refinement into foreign competition trade and to recover meet refiners to imposition by Id., of the tax.” at the lost had been which that, on to note in The Court went at 428. 427; id., see also purpose, of this furtherance imported segregation
“Congress provided the of the for state, the the mass of within from merchandise procedure prescribed to its for the in- insure use the by adopted purpose, and reference confirmed and tended regulations prescribing merchandise, the that customs warehouse, in should be free from state while Id., taxation.” at 428-429. concluded that Congressional purpose regulation of the com-
“the the any stage merce fail if the would state were free impose transaction to the com- tax which would lessen petitive advantage by importer Con- conferred on the gress, might equal and which or remitted im- exceed the port duty.” Id., at 429. deciding, rely expressly
In so the Court declined to on the regulation “prescribing exemption customs the from holding regulation merely taxation,” is the stated “what implicit Congressional pres- regulation in the of commerce ently involved.” Ibid.8 8Here, a regulations footnote in the governing bonded ware specifically provided
houses “[i]mported in bonded warehouses exempt judicial process any taxation or subdivision State (1982). thereof.” 19.6(c), CFR n. to the recent amendment regulations deleted this footnote on effective Decern- November in McGoldrick applies with full force here.
The analysis in scheme reviewed statutory in the First, Congress sought, McGoldrick, du- by remitting American industry to benefit oil was tax on crude remitted import ties due. otherwise labor at refineries within the oil refiners employing benefit not sold domestic whose would be States, products United remission of duties benefited those Here, commerce. as ports transshipment American centers. shippers using Second, the of customs system regulation pervasive was McGoldrick case as it present In cases, the refined both petroleum. imported were warehouses under continual federal segregated custody Finally, the state tax was supervision. large enough each case offset substantially very benefits intended to confer remitting duty.9 short, freedom from state taxation is as necessary to the con- inwas McGoldrick. gressional scheme here as it there are factual Although distinctions between this case *8 and McGoldrick, are distinctions without they differ- legal ence. canWe discern no to relevance the issue of congres- McGoldrick sional intent in the fact that fuel oil in the could be sold as only stores ships’ whereas Xerox had the to option pay duty the and withdraw the for domestic copiers sale, that McGoldrick the tax city sought to a sales impose here appellees assessed a property tax. A similar conclusion was reached District Columbia v. Distributing Corp.,
International
C.
U. S.
D.
App.
(1964).
“ by the and their use of bonded warehouses ‘The idea negatives proposi- the custom authorities United States beverages the alcoholic were at time of sale tion that corporation]. petitioner [the possession in the private physi- warehouse was it is that the bonded True liquors cally were Columbia; in the District of they Dis- in the therein; and that sense were ju- they law, were still without that however, trict. subject until and did not become thereto risdiction, private had from the been withdrawn and removed from the control of the customs official.’” Id., 73-74, 381 F. at 819-820. 2d, Distributing Corp. merely International this confirms what Murphy, Court said in in Fabbri at 197-198: S., v. 95 U. “Congress regard complete importation did not while custody proper remained in officers of customs.”
Accordingly, we hold that state *9 pre-empted by stored under bond in a customs are Congress’ comprehensive regulation of customs duties. HHHHH—I unnecessary is
It for us to absent con- whether, consider gressional regulation, pass muster taxes here would Import-Export under the Clause or the Commerce Clause. Appeals re- judgment of is Civil of the Texas Court The proceedings incon- not case is remanded versed, opinion. this sistent with and remanded.
Reversed Powell, dissenting. Justice importers permitted has 1799 the United States
Since payment post in lieu of immediate customs bond a Today imported goods. on holds that these duties goods exempt warehouses also are customs-bonded holding unre- taxation. This would be any congressional in- markable were it based evidence support lacking. is The tent, but such Court instead finds incompatible purposes that state taxation is with the of the warehousing system. customs-bonded federal importers paying Customs-bonded enables to defer goods ready customs duties until the are for domestic sale or paying altogether reexported. to avoid if duties are correctly Congress’ pur- The Court observes that ultimate pose encourage imports position has been to and enhance the of the United I States as center of international am trade. persuaded, nondiscriminatory not however, that state tax- incompatible ation of customs-bonded is with this purpose. significance “pervasive” sys-
The Court attributes to the regulation goods, tem of customs of stored but ante, explain power fails to how this The affects a State’s to tax. purpose regulation guarantee security of the is to fed- eral revenues. The owner of customs-bonded eventu- ally pay reexport goods. must the customs duties or warehousing system enables the Federal Government to export monitor the removal of bonded for sale or paid ensure that imposition duties when due. State’s an impair “per- ad valorem tax does not this function. regulation vasive” manner which customs-bonded goods are simply stored and withdrawn, imma- therefore, validity terial to the goods. of state taxation of those *10 of customs- argues taxation that state also purpose congressional of frustrate would bonded It as- States. encouraging the United trade with large enough “to offset sub- appellees’ are serts that Congress very intended to confer stantially benefits duty.” remitting to me that the word It seems Ibid. impose If a State were to misused. context is “offset” this property special customs-bonded ware- on a tax “offsetting” perhaps be viewed as a tax could such houses, deciding storage. importer An whether to the benefits through weigh the amount saved would use the warehouses pay against expended the amount duties remission county city, property case, however, tax. this impose acting pursuant to the same ad valorem law, state property importer stored. An taxes no matter where the deciding bring imported goods Texas there- whether to into storage while the he will have to fore knows that pay property tax whether or not he uses a customs- using The value to him customs- bonded warehouse. savings is the full amount from deferral precisely Congress ex- avoidance the benefit duties — pressly provided encourage has order to merchants to bring business to the United States. accepts exemp- appellant’s argument
The Court that a tax import- tion for in customs-bonded warehouses reduces thereby ers’ costs and furthers in encour- the federal interest aging acknowledges trade. But the Court itself that state legislation only “necessary” pre-empted should be where congressional purpose. showing achieve a has Ibid. No Duty-free been made that this standard is met here. stor- age exemption inde- taxation are pendent policies promoting foreign trade.
quite reasonably may policy, choose done, one as it has with- choosing out the other. primarily The Court relies v. Oil McGoldrick Gulf
Corp.,
(1940),
Nor do
merit in
constitutional
Appellees’
they
taxes do not violate the Commerce Clause, as
“applied
activity
are
to an
with a substantial nexus with the
taxing
fairly apportioned,
[are]
[do]
State,
not discriminate
against
fairly
[are]
commerce,
interstate
and
r lated to the
provided by
Complete
services
Transit,
the State.”
Auto
(1977).
Brady,
Inc. v.
U. S.
Nor do these non-
discriminatory
Import-Export
ad valorem taxes violate the
Corp.
Clause, Art. I,
2.
§10, cl.
See
Tire
Michelin
v.
(1976).
Wages,
Appellant open possibility *12 judgment of Texas Civil I Court of would affirm Appeals. notes that Michelin Tire left nondiscriminatory property may that even im- not be posed goods copi- appellant’s that still transit. But up years, ers were stored for to three current law and under up years. could have been 19 U. C. stored for to five S. (1976 1557(a) V). Supp. only ed., conceivable basis the view that these Con- remain “in is that transit” gress provided. agree so has I en- cannot has immunity dowed from customs-bonded with indefinite nondiscriminatory state-authorized taxation. local storage, period appellant’s During prolonged their protection police fire and various and benefited city. county “[T]he provided State other services way, imported goods pay simply making their own merely privilege moving opposed exacting 'the a fee Washington Dept. through Revenue v. Associa- a State.’” Stevedoring Washington S. Cos., U. tion of (1978) concurring concurring part J., (Powell, result) Corp. Wages, supra, (quoting Tire v. Michelin 290). Import-Export Clause never was intended ex- empt imported in these circumstances.