# Amicus Brief — Sears, Roebuck & Co. v. County of Los Angeles

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Brief
- **Published:** January 1, 1979
- **Citation:** 442 U.S. 915

## Text

AUC
No. 78-1577

In the Supreme Court of the United States

OCTOBER TERM, 1978

SEARS, ROEBUCK AND CO., PETITIONER
Vv.

CouNTy OF Los ANGELES AND City Or COMPTON

ON PETITION FOR A WRIT OF CERTIORARI TO
THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA, SECOND APPELLATE DISTRICT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE

WADE H. McCreE, JR.
Solicitor General

M. CARR FERGUSON
Assistant Attorney General

STUART A. SMITH
Assistant to the
Solicitor General

ERNEST J. BROWN
Attorney
Department of Justice
Washington, D.C. 20530

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Constitutional provision and statutes involved ........... 2
I * snntiesacautiasneinticin gucteainaisssamsaveriuatauiageainbiaces 3
PII 5 sixctoiciviietnsidaciceibniisnsteaioadeniananienauaaiaaaes 5
SII cciaccindrinlaneciicacnanaonicdnaemmaieages naan 12

CITATIONS
Cases:
Allied Stores of Ohio v. Bowers,

Pe Rs TRIE + skccdisndahsatadenebagchuciuiqanacniaieecucramapanen 6
American Steel & Wire Co. v. Speed,

PE Rs I sein teh cannoticeanadaineidnbaleasnunanscessuakions 8
Asakura v. Seattle, 265 U.S. 332 .....ccccceeceeceee eee 6
Bacon Vv. Illinois, 227 U.S. S04 wn. cece ceseeeee eee y
Boston Stock Exchange v. State

Tax Commin, 429 U.S. 318 (1977) .........ce eee 6
Braniff Airways v. Nebraska State

GE: ee SI Be eens sshncetmcetccbvnsnnes 7
Brewing Co. v. Liquor Comm'n., 305

Faas I praseieeacitecachaciabdiiiau eitaniahsanndbedetiaciiennens 9
Brown v. Houston, 114 U.S. 622. ...... eee 8
Brown v. Maryland, 25 U.S. (12 Wheat).

de PSN ph AR sd BIS Pes ROME Me Res Ho 7

Page
Cases—(Continued):
Carson Petroleum Co. v. Vial, 279 U.S.

BN eaisheahdotcctiiensebnsside dank hniaudtnintssaidnleslapestinciascsnatinhetesaaties y
Chy Lung v. Freeman, 92 U.S. 275. ...cccccccceecceeees 6
Crew Levick Co. v. Pennsylvania, 245

SUSIE -IENY. woshiheonhsatesnsdbansinwecbtigledtiabearuncndsiminiccaiiad esdieslas 9 <
Dept. of Revenue v. James Beam Co..,

SOUP SENAY HUET. * hcpaisaniicdincestticcuneaiidunidinias dal-eukinutsanbaiebnas )
Empresa Siderurgica v. Merced Co..,

SE PE RIE cuteesnssassisahcdectinbussalathciscahooskisnaanasindbascuwis 8
Fairfax’s Devisee v. Hunter's Lessee,

BO: Ge FS ORNE OD cas diccwisctedodencceccsccassnvveanses 6
General Oil Co. v. Crain, 209 U.S.

Se ES EEE SORES SR AEE WS Ren bp Ne a y
Hauenstein v. Lynham, 100 U.S.

I iesietininiainincsnlinsitlseiniaisaieaiiancadtaneisecl ie saemaasbkadelons 6
Henderson v. Mayor of New York,

Bk I. I ans lis ecdibiiceccbucap tinged a daianiecogmactrcies 6
Hines v. Davidowitz, 312 U.S. 52. wccccccccceceeeeeeeee 6
Hooven & Allison Co. v. Evatt, 324

Pa GIN pica edi ddncwn adie aan ucecisehdiihienbbancadovesenaxeecans 8
Hostetter v. Idlewild Liquor Corp..,

TE TEE, SIE” Wiko ntdiecnsDlanhsdaapolguterhenagsaccdepemeniclice 6, 9

Japan Line, Lid. v. County of Los
Angeles, No. 77-1378, (April
Bey SEE Nncunivinesdcianissnlbataedacaliaedanhas nants 7,8

Joy Oil Co. v. State Tax Comm'n., 337
U.S. 286

Page
Cases—(Continued):
- Kolovrat v. Oregon, 366 U.S. 187 w....cccceeeeeeeeeeee 6
Low v. Austin, 80 U.S. (13 Wall.)
BP Wiech ee dal alas ciielsentecibbsaccheiesabsuieiewiominnesiets 9, 10
Massachusetts v. United States, 435
RE Fe I Waseca claret bacalianrcutscanseennanesensesss 13
McGoldrick v. Gulf Oil Corp., 309 U.S.
NN iaictcsiit vices nae eledbenaniciialhs ialletdlidpndeiaiecnnyiniens 6
Michelin Tire Corp. v. Wages, 423
Sic: Se cckecspcemtbnnesuctelenesboindadeamduniaencieiabinda 7, 10
Minnesota v. Blasius, 290 U.S. 1 ccccccccessepeeseeseees )
Nielsen v. Johnson, 279 U.S. 47 coccccccecccceseeeeeeees 6
Ou v. Mississippi Barge Line, 336
Eee. EE snscciaiaaansedhaneherehaondnediOadbinnceanaterennts 7
People v. Compagnie Gen.
Transatlantique, 107 U.S. 59) ....ccccccccecceeeseeeeenees 6
Richfield Oil Corp. v. State Board,
ee es I aradire teeters clneldcuetedtheknceatantiapeneceniens 7
Sonneborn Bros. v. Cureton, 262 U.S.
UN cescah dlp hE cts codecbibilaa tia abakakdathtaadcovenevertindcaes 8
State Board v. Young's Market Co.,
EES EP wicdecbinaisbiaakbenccaepaditendsbhivntsibicewicesseese 9
Ware & Hylton, 3 U.S. (3 Dall.)
TIPU ccdicabtesnutiabuddntbahtadadaccisianeranithanvcitiackisteinintes 6
Washington Rev. Dept. v.
Stevedoring Assn., 435 U.S. 734 c.ccccccecceeeeees 9

Western Live Stock v. Bureau of
POOWRN, SD TE. BID tencsssdnseccicesnssessscnsicssosess 9

IV

Page
Cases -(Continued):
Wiloil Corp. v. Pennsylvania, 294
BM GRP ate OS aera eon Oe SO AR PO 8
Woodruff v. Parham, 75 U.S. (8 Wall.)
WO en nikccsichae ii bnti seth deh an haath sida dubilpawideatecdaxeuls 8
Zaschernig v. Miller, 389 U.S. 429 wo... 6
Constitution, statutes and regulations:
United States Constitution, Article 1,
SD Fai Te acces ceirsencasnnnsdshscsncse te
Internal Revenue Code of 1954 (26
U.S.C.):
I i aes nes 10
5 IE ERCRER! Sipe genet PPAR TRAE eR 10
RS I i es 10
Be I a ccacwsnconkincwins 10
1975 Cal. Stats., ch. 1126, §§1 and 2. ...........00... 2
OTE Wtite MUNL, U BS TO casi veneunsisdescicaicesnnccces 2
BPET SM GU BOT pan siecetaccniessiaiccnseesiavenes 2
Cal. Rev. & Tax. Code §225 (West
TINS | HIPUUIE ssl Sccusanantadoening tees tenianiaenethoiee 2, 4, 5
Cal. Rev. & Tax. Code §225.1 (West Supp.
eg, Be ETRE Tayo nD rc Pere Re ee ie 2.3.4

Cal. Rev. & Tax. Code §253.10 (West
SA TB TED ccccccccssecccspes Lidrcar suns ebudiaaichivicctainaidsons 2

Page
Constitution, statutes and regulations—(Continued):

Treasury Temporary Regulations in
Connection with the Airport and
Airway Revenue Act of 1970:

26 C.F.R. 154.2-1(C)1) .......cccreeeeeeeeererssseeeees 10
26 C.F.R. 194.2-1(C)(2) ........ccccceeeseseseseeeeeeeee 10
26 C.F.R. 194.2-1(A)( 1) .......cccccsccccccressseceees II
26 C.F.R. 154.2-1(d (3) .......ccccccrrsssssesceeeenees |

In the Supreme Court of the Hnited States

OCTOBER TERM, 1978

No. 78-1577
SEARS, ROEBUCK AND CoO., PETITIONER
Vv.

COUNTY OF Los ANGELES AND CiTy OF COMPTON

ON PETITION FOR A WRIT OF CERTIORARI TO
THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA, SECOND APPELLATE DISTRICT

BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE

This brief is submitted in response to the Court's
invitation of June 4, 1979.

OPINIONS BELOW

The order of the trial court is not officially reported.
The opinion of the Court of Appeal (Pet. App. 1-29) is
reported at 85 Cal. App. 3d 763. The denial by the
Supreme Court of California of a petition for hearing
(Pet. 2) is reported at 149 Cal. Rptr. 764.

JURISDICTION

The decision of the Court of Appeal was entered on
October 25, 1978 (Pet. 2; Pet. App. 1). The Supreme
Court of California denied petition for hearing on

(1)

to

January 17, 1979 (Pet. 2). The petition tor a writ of
certiorari was filed on April 16, 1979. The jurisdiction of

this Court is invoked under 28 U.S.C. 1257(3).
QUESTION PRESENTED

The United States will discuss the following question:
Whether the California property tax exemption for
personalty manufactured or produced (1) outside Califor-

J

nia and brought into the State for transshipment out of

the United States: or (2) outside of the United States, and
brought into California for transshipment out of the
State, for sale in the ordinary course of trade or business,
is invalid under the Commerce Clause of the United
States Constitution.

CONSTITUTIONAL PROVISION AND STATUTES INVOLVED

Article I, Section 8, Clause 3 of the United States
Constitution provides: “The Congress shall have Power
*** To regulate Commerce with foreign Nations, and
among the several States, and with the Indian Tribes”.

Sections 225 and 225.1 of the Cal. Rev. & Tax. Code
(West), enacted by 1975 Cal. Stats., ch. 1126, at 2746, §§ |
and 2, during the period here involved,' provided as
follows:

§225. Personalty brought into state for transship-
ment outside state or United States; exemption

Personal property manufactured or produced, (1)
outside this state and brought into this state for
transshipment out of the United States, or (2) outside
of the United States and brought into this state for

‘Although Section 225.1 of the Cal. Rev. & Tax. Code (West) was
repealed by 1977 Cal. Stats.. ch. 246, §4. its provisions were
simultaneously reenacted as Section 253.10 of the Rev. & Tax. Code.
by 1977 Cal. Stats., ch. 246, §7.

transshipment out of this state, for sale in the
ordinary course of trade or business shall be exempt
from taxation. The exemption under this section
shall not apply to personal property in manutac-
turing process or production. Such process or
production shall not include the breaking in bulk,
labeling, packaging, relabeling, or repackaging ot
such property.

§225.1. Method of claiming transshipment exemp-
tion

A person claiming the transshipment exemption
under Section 225 may either claim this exemption
by (1) a percentage method of determining property
held for transshipment on hand at a particular
location by allocating a portion of the total in-
ventory, using the percentage determined by
dividing the total out-of-state shipments by the
taxpayer from that location during the preceding
year by the total of such shipments from that
location during such year, or (2) an actual method as
evidenced by contracts #f sale on the tax lien date,
and a full, true and correct inventory of all property
held for transshipment together with the date of
receipt of the same, the date of withdrawal of the
same, the point of origin thereof, and the point of
ultimate destination thereof.

STATEMENT

Petitioner brought this suit for refund of ad valorem
personal property taxes paid under protest to the County
of Los Angeles and the City of Compton.

The facts were stipulated (Pet. App. 1-2, 4) and may be
summarized as follows: Petitioner is engaged in the
business of selling goods at retail, both in California and

elsewhere. On March 1, 1976, the tax lien date for
purposes of the annual California ad valorem tax on
personal property, petitioner held tangible personal
property in warehouses in the County of Los Angeles and
City of Compton. The property in question had been
manufactured or produced outside the United States, and
had been imported by petitioner and placed in warehouses
for distribution both within and without California for
purposes of sale in the ordinary course of petitioner's
business. Petitioner’s distribution warehouses in the
County of Los Angeles were devoted almost entirely to
goods imported from foreign countries, particularly from
locations in the Pacific area. The rate of turnover at the
warehouses averaged approximately three times per year.
Petitioner intended to ship the goods as quickly as its
distribution operations permitted. Pursuant to Sections
225 and 225.1 of the California Revenue and Taxation
Code, petitioner applied to the total amount of goods
manufactured or produced outside the United States and
held in its warehouses in Los Angeles County on March
1, 1976, the fraction represented by the out-of-state
shipments from those locations during the preceding year
divided by the total shipments from those locations
during that year. Petitioner accordingly claimed a
transshipment property tax exemption for property
having a value of $19,373,089 (Pet. App. 1-3, 4-5).

Respondents denied the claimed exemption. They
asserted (1) that properly construed, Section 225 ex-
empted only goods in transit through the State, and (2)
that even if Section 225 were construed to exempt
imported goods held in the State by the owner for
disposal or use, it would violate the United. States
Constitution by regulating interstate and foreign com-
merce in interfering with foreign affairs, because it
extended no exemption to interstate goods. Petitioner

thereupon paid the tax under protest and instituted this
action for refund in the Superior Court of Los Angeles
County. The Superior Court upheld petitioner's claimed
exemption (Pet. App. 1-2, 5-6).

The Court of Appeal reversed (Pet. App. 29). Although
it rejected respondents’ statutory argument that Section
225 applied only to goods “in transit” (Pet. App. 7-10), it
held that the statutory exemption of foreign goods
cegulated interstate and foreign commerce and was
therefore invalid under the Commerce Clause of the
United States Constitution (Pet. App. 6, 10-18). It also
suggested that the exemption interfered with the power of
the Congress to impose tariffs (Pet. App. 15-16). In the
Court of Appeal’s view, the statutory exemption gave
goods of foreign origin a competitive advantage over
goods manufactured in other states and brought to
California for transshipment in interstate commerce. It
concluded that “state taxes which discriminate between
classes of interstate and foreign goods on the basis of their
Origin are not permitted” (Pet. App. 14). With three
Justices dissenting, the Supreme Court of California
denied a petition for hearing (Pet. 2).

ARGUMENT

In holding that the California property tax exemption
for foreign goods destined for interstate commerce or out-
of-state goods destined for export violates the Commerce
Clause of the Constitution and interferes with Congress’
power to impose tariffs, the Court of Appeal misinter-
preted the decisions of this Court.

1. Section 225 of the California Revenue and Taxation
Code exempts from taxation while held in California,
imported goods destined for other states and goods from
other states destined for export. It does not, however,

exempt domestic goods destined for interstate commerce.
On the authority of this Court's decision in Boston Stock
Exchange v. State Tax Comm'n, 429 U.S. 318 (1977), the
Court of Appeal held that the statute unconstitutionally
discriminated against interstate commerce and therefore
violated the Commerce Clause. But Boston Stock
Exchange has no bearing on the question presented in this
case. The prohibited discrimination in that case was one
that provided “a direct commercial advantage to local
business” by virtue of “laws that favor local enterprise at
the expense of out-of-state business” (429 U.S. at 329) by
taxation “in a manner that discriminates between two
types of interstate transactions in order to favor local
commercial interests over out-of-state business” (id. at
335).

Here, in contrast, the statutory property tax exemption
did not favor local business at the expense of out-of-state
business. It favored imports and exports.? There 1s,
however, no constitutional prohibition against favoring
imports over domestic goods. The Import-Export Clause
of the Constitution itself makes such a differentiation.
The decisions of this Court have therefore consistently
held invalid state statutes that have had an adverse impact
upon foreign nationals or upon foreign commerce.’ Nor

2Cf. Allied Stores of Ohio v. Bowers, 358 U.S. 522 (1959). There,
the issue was addressed under the Equal Protection Clause of the
Fourteenth Amendment rather than under the Commerce Clause.

3See, e.g., Ware v. Hylton, 3 U.S. (3 Dall.) 199 (1796); Fairfax's
Devisee v. Hunter's Lessee, 11 U.S. (7 Cranch) 603 (1813); Brown v.

Maryland 25 U.S. (12 Wheat 419 (1827); Henderson v. Mavor of

New York, 92 U.S. 259 (1875); Chy Lung v. Freeman, 92 U.S. 275
(1875); Hauenstein v. Lynham, 100 U.S. 483 (1879); People v.
Compagnie Gen. Transatlantique, 107 U.S. 59 (1882); Asakura v.
Seattle, 265 U.S. 332 (1924); Nielsen v. Johnson, 279 U.S. 47 (1929);
McGoldrick vy. Gulf Oil Corp., 309 U.S. 414 (1940); Hines v.
Davidowitz, 312 U.S. 52 (1941); Kolovrat v. Oregon, 366 U.S. 187
(1961); Hostetter v. Idlewild Liquor Corp., 377 U.S. 324 (1964); Dept.
of Revenue v. James Beam Co., 377 U.S. 341 (1964); Zschernig v.
Miller, 389 U.S. 429 (1968).

does the Commerce Clause require a different result. As
this Court reaffirmed in Washington Rev. Dept. v.
Stevedoring Assn, 435 U.S. 734, 751 (1978), “[T]he
Import-Export Clause states an absolute ban, whereas the
Commerce Clause merely grants power to Congress.” See
also Richfield Oil Corp. v. State Board, 329 U.S. 69, 75
(1946).

When only the Commerce Clause is involved, this
Court only last Term in Japan Line, Lid. v. County of
Los Angeles, decided April 30, 1979 (No. 77-1378),
explicitly rejected the premise that “Commerce Clause
analysis is identical, regardless of whether interstate or
foreign commerce is involved. * * * When construing
Congress’ power to ‘regulate Commerce with foreign
Nations, a more extensive constitutional inquiry is
required.” (Slip op. 11-12). Japan Line held that shipping
containers employed in foreign commerce, based and
owned in Japan, were not subject to the apportioned
property taxation to which domestic shipping containers
engaged in interstate commerce would have been subject.4
Although this Court in Michelin Tire Corp. v. Wages, 423
U.S. 276 (1976), held that a state was not constitutionally
required to exempt imports held in the original package
from generally imposed property taxation, nothing in the
decision suggested that the exemption that had previously
been constitutionally required under decisions overruled
by Michelin Tire was thereafter constitutionally
prohibited.

As the Court in Michelin Tire pointed out (423 U.S. at
283-294), the considerations underlying the Import-
Export Clause were that the federal government speak
with one voice in regulating commercial regulations with

‘See Ou v. Mississippi Barge Line, 336 U.S. 169 (1949); Braniff
Airways v. Nebraska State Board, 347 U.S. 590 (1959).

foreign governments, that import revenues not be diverted
to the states, and that seaboard states with ports of entry
not be permitted to be toll-takers at the expense of states
not situated as favorably geographically, The California
statute serves all of these purposes. The fact that it serves
and advances constitutional policy somewhat more fully
than the minimum required of the state does not justify
the Court of Appeal’s ruling that it violates the
Commerce Clause.

During the more than 100 years prior to the Michelin
Tire decision, while the rule of Low v. Austin, 80 U.S. (13
Wall.) 29 (1871) and Hooven & Allison Co. v. Evatt, 324
U.S. 652 (1945), required exemption of imported goods in
original packages from generally imposed state property
taxes, the Court consistently held that goods that had
moved in interstate commerce in their original packages
enjoyed no comparable exemption. When the Court
overruled Low and Hooven, it was not on the basis of any
discrimination favoring imports over goods in interstate
commerce, but only because the considerations that gave
rise to the Import-Export Clause did not require

SEven before the Michelin Tire decision, the California exemption
was somewhat broader than the minimum then constitutionally
required. By its terms, the exemption for imports persisted beyond
the original package, for it permitted breaking bulk, repackaging, etc.
With regard to goods held for export, it granted exemption prior to
movement in the stream of exportation, as defined by this Court's
decisions in Empresa Siderurgica v. Merced Co., 337 U.S. 154 (1949)
and Joy Oil Co. v. State Tax Comm'n., 337 U.S. 286 (1949). It is not
questioned, however, that the goods exempted from tax were goods
that had been imported and goods that were subsequently exported.

*Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1868); Brown v.
Houston, 114 U.S. 622 (1885); American Sieel & Wire Co. v. Speed,
192 U.S. 500 (1904); Sonneborn Bros. v. Cureton, 262 U.S. 506, 509,
510-513 (1923); Wiloil Corp. v. Pennsylvania, 294 U.S. 169 (1935).

exemption. Nothing in Michelin Tire suggested that the
pre-existing exemption was now to be constitutionally
prohibited.’

In sum, the decisions of this Court involving imports,
exports, and foreign commerce uniformly emphasize that
one of the principal purposes of the Constitution was to
assure that the states did not impede or obstruct
importation, exportation, or foreign commerce. The
Court in Michelin Tire overruled Low v. Austin only
when it was demonstrated that application of a generally
imposed property tax to imports in the original package
did not substantially impede importation or foreign
commerce. Washington Rev. Dept. v. Stevedoring Assn.,
435 U.S. 734, 751-755 (1978). By favoring imports and
exports, Section 225 of the California Revenue and
Taxation Code facilitates importation and exportation
and assures that imports and exports passing through the
state will not be impeded even to the extent of the impact
of a generally applicable property tax. While such action

7Indeed, in contexts other than property taxes on goods in the
original package, the Court has treated imports or exports markedly
differently from goods shipped in interstate commerce. Compare
Dept. of Revenue v. James Beam Co.; 377 U.S. 341 (1964) and
Hostetter v. Idlewild Liquor Corp., 377 U.S. 324 (1964) with State
Board v. Young's Market Co., 299 U.S. 59 (1936) and Brewing Co. v.
Liquor Comm'n., 305 U.S. 391 (1939); Crew Levick Co. v.
Pennsylvania, 245 U.S. 292 (1917) with Western Live Stock v. Bureau
of Revenue, 303 U.S. 250 (1938); Carson Petroleum Co. v. Vial, 279
U.S. 95 (1925) with General Oil Co. v. Crain, 209 U.S. 211 (1908),
Bacon Vv. Illinois, 227 U.S. 504 (1913), and Minnesota v. Blasius, 290
U.S. 1 (1933).

Carson Petroleum Co. v. Vial, supra, may have been heavily
qualified by the decision in Joy Oil Co. v. State Tax Comm'n, 337
U.S. 286 (1949), as the dissent in the latter case asserted (337 U.S. at
291-292). But the result in Carson Petroleum was distinguished from
other contemporary decisions principally by the fact that the oil
involved was destined for export (see 279 U.S. at 106-109).

10

may not be constitutionally required, it is not, as the
decision below’ erroneously held, constitutionally
prohibited. Nothing in the Commerce Clause prevents a
state from favoring imports and exports beyond the
extent required by the Import-Export Clause.

2. a. In further support for its invalidation of the
statutory exemption for imported goods, the Court of
Appeal suggested (Pet. App. 15-16) that Section 225
impedes the power of the Congress to determine the
effective tariff applicable to imported goods. But this
reasoning is contrary to this Court's analysis in Michelin
Tire. In considering the effect of removing the exemption
for imported goods required by earlier decisions, the
Court pointed out (423 U.S. at 287): “It may be that such
taxation could diminish federal impost revenues to the
extent its economic burden may discourage purchase or
importation of foreign goods. The prevention § or
avoidance of this incidental effect was not. however, even
remotely an objective of the Framers in enacting the
prohibition.”

b. Furthermore, Sections 4271 and 4272 of the Internal
Revenue Code of 1954 show that the California
exemption for imports and exports is entirely consistent
with congressional policy. Section 4271 imposes a tax of 5
percent upon the amount paid for transportation of
property by air, but Section 4272(a) limits this to
“transportation by air which begins and ends in the
United States.” Section 4272(b) excludes trom tax, under
regulations prescribed by the Secretary, “transportation of
property in the course of exportation * * * by continuous
movement, and in due course so exported.”

Under Treasury Temporary Regulations in Connection
with the Airport and Airway Revenue Act of 1970 (26
C.F.R.), Section 154.2-1(c)(1) and (2), transportation will

be considered to begin and end at the points of origin and
destination as shown by a through airwaybill, or, if no
such airwaybill has been issued, then the export or import
character of the shipment may be shown by a contract or
other written evidence showing the beginning point and
ending point of air transportation. And Section 154.2-
l(c 1) of the Regulations is explicit in providing that
transportation from a point outside the United States to a
point inside the United States will not be considered
broken “even though there may be stopovers in the
United States (such as, for example, to consolidate cargo
at a ‘gateway’ city).”

With regard to exports, the tax is not applicable to the
segment of air transportation in the United States even
though the mode of tr’ nsportation in export is other than
by air. Section 154.2-i(d)(1) of the Regulations provides:

For example, the tax does not apply to air
transportation from Chicago to New York if the
property is in the course of exportation, by
continuous movement, by boat from New York to
Europe and in due course is so exported. Delays
caused by circumstances beyond the control of the
shipper (such as labor disputes or natural disasters)
will not interrupt continuous movement. Property
arriving at a gateway city by air may be repacked or
consolidated with other property without interrupt-
ing continuous movement.

Under Section 154.2-1(d)(3) of the Regulations, payment
of the tax may be deferred for six months to establish the
fact of export “in due course” within that period. Proot of
export received after six months will establish a ground
for refund of the tax paid.

12

The foregoing provisions show that even when the
facilities of the airways of the United States are
employed,* Congress has exempted trom the air transpor-
tation excise tax goods that are in fact imports and
exports, and has provided flexible rules permitting
stopovers, repackaging, and consolidation of cargo in the
course of movement without loss of exemption. Califor-
nia’s removal of property tax burdens upon imports and
exports is therefore entirely consistent with congressional
policy.

CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted.

WADE H. McCrekr, JR.
Solicitor General

M. CARR FERGUSON
Assistant Attorney General

STUART A. SMITH
Assistant to the Solicitor
General

ERNEST J. BROWN
Altorney

AuGust 1979

“Cf. Massachusetts v. United States, 435 U.S. 444 (1978).

DOJ-1979-08

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0117%3A02. Public record. Not legal advice.