United States v. United States Shoe Corporation

523 U.S. 360

Case Year: 1998

Case Ruling: 9-0, Affirmed

Opinion Justice: Ginsburg

FACTS

As part of the Water Resources Development Act of 1986, Congress imposed the Harbor Maintenance Tax (HMT). This legislation assessed a uniform charge on shipments of commercial cargo through the nation's ports. The charge was set at 0.125 percent of the cargo's value. Exporters, importers, and domestic shippers were liable for the HMT, which was imposed at the time of loading for exports and unloading for other shipments. The HMT was collected by the Customs Service and deposited in the Harbor Maintenance Trust Fund. Congress could appropriate amounts from the fund to pay for harbor maintenance and development projects, including costs associated with the St. Lawrence Seaway, or related expenses.

United States Shoe Corporation paid the HMT for articles the company exported during the period April to June 1994 and then filed a protest with the Customs Service alleging that the toll was unconstitutional to the extent it applied to exports. The Customs Service responded with a form letter stating that the HMT was a statutorily mandated user fee, not an unconstitutional tax on exports. U.S. Shoe filed suit in the Court of International Trade challenging the constitutionality of the tax. The federal government defended the HMT, claiming that it was a legitimate user fee. The Court of International Trade held that the tax was not a user fee but a tax prohibited by the Export Clause. A divided court of appeals agreed, and the United States took its case to the Supreme Court.

JUSTICE GINSBURG DELIVERED THE OPINION OF THE COURT.

The Export Clause of the Constitution states: "No Tax or Duty shall be laid on Articles exported from any State." We held inUnited States v. International Business Machines Corp. (1996) (IBM), that the Export Clause categorically bars Congress from imposing any tax on exports. The Clause, however, does not rule out a "user fee," provided that the fee lacks the attributes of a generally applicable tax or duty and is, instead, a charge designed as compensation for government-supplied services, facilities, or benefits. This case presents the question whether the Harbor Maintenance Tax (HMT), as applied to goods loaded at United States ports for export, is an impermissible tax on exports or, instead, a legitimate user fee. We hold, in accord with the Federal Circuit, that the tax, which is imposed on an ad valorem basis, is not a fair approximation of services, facilities, or benefits furnished to the exporters, and therefore does not qualify as a permissible user fee.

Two Terms ago, in IBM, this Court considered the question whether a tax on insurance premiums paid to protect exports against loss violated the Export Clause. Distinguishing case law developed under the Commerce Clause and the Import-Export Clause, the Court held that the Export Clause allows no room for any federal tax, however generally applicable or nondiscriminatory, on goods in export transit. Before this Court's decision in IBM, the Government argued that the HMT, even if characterized as a "tax" rather than a "user fee," should survive constitutional review "because it applies without discrimination to exports, imports and domestic commerce alike." Recognizing that IBM "rejected an indistinguishable contention," the Government now asserts only that HMT is " 'a permissible user fee,' " a toll within the tolerance of Export Clause precedent. Adhering to the Court's reasoning in IBM, we reject the Government's current position.

The HMT bears the indicia of a tax. Congress expressly described it as "a tax on any port use," and codified the HMT as part of the Internal Revenue Code. In like vein, Congress provided that, for administrative, enforcement, and jurisdictional purposes, the HMT should be treated "as if [it] were a customs duty." However, "we must regard things rather than names," in determining whether an imposition on exports ranks as a tax. The crucial question is whether the HMT is a tax on exports in operation as well as nomenclature or whether, despite the label Congress has put on it, the exaction is instead a bona fide user fee.

In arguing that the HMT constitutes a user fee, the Government relies on our decisions in United States v. Sperry Corp.(1989), Massachusetts v. United States (1978), and Evansville-Vanderburgh Airport Authority Dist. v. Delta Airlines, Inc.(1972). In those cases, this Court upheld flat and ad valorem charges as valid user fees.... Those decisions involved constitutional provisions other than the Export Clause, however, and thus do not govern here. IBM plainly stated that the Export Clause's simple, direct, unqualified prohibition on any taxes or duties distinguishes it from other constitutional limitations on governmental taxing authority. The Court there emphasized that the "text of the Export Clause ...expressly prohibits Congress from laying any tax or duty on exports." Accordingly, the Court reasoned in IBM "[o]ur decades-long struggle over the meaning of the nontextual negative command of the dormant Commerce Clause does not lead to the conclusion that our interpretation of the textual command of the Export Clause is equally fluid.". . .

The guiding precedent for determining what constitutes a bona fide user fee in the Export Clause context remains our time-tested decision in Pace [v. Burgess, 1876]. Pace involved a federal excise tax on tobacco. Congress provided that the tax would not apply to tobacco intended for export. To prevent fraud, however, Congress required that tobacco the manufacturer planned to export carry a stamp indicating that intention. Each stamp cost 25 cents (later 10 cents) per package of tobacco. Congress did not limit the quantity or value of the tobacco packaged for export or the size of the stamped package; "[t]hese were unlimited, except by the description of the exporter or the convenience of handling."

The Court upheld the charge, concluding that it was "in no sense a duty on exportation," but rather "compensation given for services [in fact] rendered." In so ruling, the Court emphasized two characteristics of the charge: It "bore no proportion whatever to the quantity or value of the package on which [the stamp] was affixed"; and the fee was not excessive, taking into account the cost of arrangements needed both "to give to the exporter the benefit of exemption from taxation, and ...to secure ...against the perpetration of fraud." Pace establishes that, under the Export Clause, the connection between a service the Government renders and the compensation it receives for that service must be closer than is present here. Unlike the stamp charge in Pace, the HMT is determined entirely on an ad valorem basis. The value of export cargo, however, does not correlate reliably with the federal harbor services used or usable by the exporter. As the Federal Circuit noted, the extent and manner of port use depend on factors such as the size and tonnage of a vessel, the length of time it spends in port, and the services it requires, for instance, harbor dredging.

In sum, if we are "to guard against ...the imposition of a [tax] under the pretext of fixing a fee," Pace v. Burgess, and resist erosion of the Court's decision in IBM, we must hold that the HMT violates the Export Clause as applied to exports. This does not mean that exporters are exempt from any and all user fees designed to defray the cost of harbor development and maintenance. It does mean, however, that such a fee must fairly match the exporters' use of port services and facilities.

For the foregoing reasons, the judgment of the Court of Appeals for the Federal Circuit is

Affirmed.