# Record and brief — Xerox Corp. v. County of Harris > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385008_1986%3A0 ## Record - **Collection:** Supreme Court brief - **Document type:** Record and brief - **Published:** January 1, 1982 - **Citation:** 459 U.S. 145 ## Text quawayes jeuogopsune & 1 ™ ] 4 3 g ice - Supreme Court, U.S. FILED FEB 9 1982 L. STEVAS, IN THE Supreme Court of the United States OCTOBER TERM, 1981 > XEROX CORPORATION, Appellant, —Y,.— COUNTY OF HARRIS, TEXAS, and CITY OF HOUSTON, TEXAS, Appellees. ON APPEAL FROM THE TEXAS COURT OF CIVIL APPEALS JURISDICTIONAL STATEMENT ALFRED H. HODDINOTT, JR. 800 Long Ridge Road Stamford, Connecticut 06904 (203) 329-8700 Counsel for Appellant February 9, 1982 QUESTION PRESENTED Appellant Xerox Corporation (“Xerox”),* through subsidi- aries, assembled copying machines abroad, shipped them to a customs bonded warehouse in Texas, stored them temporarily and then reshipped them abroad, at all times under customs bond. May a state assess an ad valorem tax on goods that a) were continuously in the flow of foreign commerce; b) never entered domestic commerce or became part of the common mass of property within the state; c) paused only temporarily within the state; and d) were continuously under the supervision, custody and control of the United States Customs Service. * The parties to this proceeding are as listed in the caption, except that pursuant to Supreme Court Rule 28.4(c), a copy of the notices of appeal and this statement were served upon the Attorney General of the State of Texas, since 28 U.S.C. § 2403(b) may be applicable. Pursuant to Supreme Court Rule 28.1, Xerox, a New York corporation, states that it has no parent or affiliates. Xerox has one United States subsidiary which is not wholly owned—Rank Xerox Business Equipment, Inc., a Delaware corporation. Xerox also has other subsidiaries, as defined by the Securities and Exchange Commission, in a number of foreign countries: Xerox do Brasil, S.A.; Xerox de Mexico, S.A. de C.V.; Xerox del Peru, S.A.; Xerox de Venezuela, C.A.; Xerox de Colombia, S.A.; Rank Xerox Limited; Rank Xerox Holding B.V.; Rank Xerox Manufacturing (Nederland) B.V.; Rank Xerox Fabrikations G.m.b.H.; Societe Industrielle Rank Xerox S.A.; Fuji Xerox Co., Ltd.; Office de Transformation Papetiere S.A.; Rank Xerox Espanola S.A.; Rank Xerox (N.Z.) Ltd.; and Rank Xerox (Australia) Pty. Ltd. iii TABLE OF CONTENTS PAGE QUESTION PRESENTED ......ccccccccccccccccees i PED RMP cocccccsccesecccsscseseusesece 1 PETE coc csiccescscccncecsvccesesesesse 2 CONSTITUTIONAL PROVISIONS AND STATUTES. 3 SE GE WE GE ig. cccceccaecteocsocece 5 THE QUESTION PRESENTED REQUIRES PLE- Pe GNI s ccc cccwccedcdcsccceces ) SN REED rr BE ean Ty Comet ee oly eee 10 ia i ods ccc cngocbekaedcese 10 ced eeaneeeee 13 i ee ea ae i ee gig ain 15 OF EL, cvccncocccsdccecencescue 18 iv TABLE OF AUTHORITIES Cases PAGE American Smelting and Refining Co. v. County of Contra Costa, 271 Cal. App. 2d 437, 77 Cal. Rptr. 570, appeal dismissed, 396 U.S. 273 (1969) ......... 13, 17 Bacon v. Illinois, 227 U.S. 504 (1913). ............... 16 Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827)... 14 Calvert v. Zanes-Ewalt Warehouse, Inc., 502 S.W.2d 689 i, Ch i ciecd beled tis et daeehe 6d demace 16 Department of Revenue of the State of Washington v. Association of Washington re Companies, er PED ok bbe cicceddsedecssucdeves 9, 15, 17 Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945). . 14 Independent Warehouses, Inc. v. Scheele, 331 U.S. 70 Di ci stecedaues tussautansunestaadiaesuabakin 16 Japan Line, Ltd. v. County of Los Angeles, 441 U.S. PET SET OLE ToT Tre tre TrtTere 2,17 Kosydar v. National Cash Register Co., 417 U.S. 62 DE 6 cthesudéaunteusdecadwedeubbeesunesenees 16, 18 Low v. Austin, 80 U.S. (13 Wall.) 29 (1872) .......... 14 McGoldrick v. Gulf Oil Corp., 309 U.S. 414 (1940) . 9, 10-13 Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976) . 9, 13-15, 16 National Distillers Products Corp. v. City and County of San Francisco, 141 Cal. App. 2d 651, 297 P.2d 61, cart. Ganted, 352 U.S. GAB (IDSG).... vecccccccccccces 12 Susquehanna Coal Co. v. City of South Amboy, 228 Dds bccdhagesuaedeeetaks bescneueie 16 Youngstown Sheet & Tube Co. v. Bowers, 358 U.S. 534 ST 15 «uddertedudees.bebensdheddeneuns oeekeus 14 PAGE Constitutions UNITED STATES Article I, Section 8, Clause 3 .............ce000. 3, 8, 10 Article I, Section 10, Clause 2 .................. 3, 8, 13 TEXAS ES EE cddoccctcdsccebascecesoosese 4 Statutes and Rules UNITED STATES CODE EE a i aaa kine niedenteedeuns 3, 10 a he de ene cndeenbeee 3, 11, 12 tt. 1 i cctonneéwedbeeseuenee 3, 9, 11, 12, 17 i ee es be ae a ae 2 EERE a en i VERNON’S TEXAS CIVIL STATUTES Pat Ucdewdieuncan seks isekeedieadeo ace 4 CODE OF FEDERAL REGULATION Oe rer 11 ENE I a Re eR 16 i ee ccc baie Geebaneeeb bee Chews 11 Other Materials Securities anc Exchange Commission, 1977 Form 10K Annual Report, Xerox Corporation, Notes to Consol- idated Financial Statements, pp. 6, 19 ............. 7 IN THE Supreme Court of the United States OCTOBER TERM, 1981 a > XEROX CORPORATION, Appellant, —V.— COUNTY OF HARRIS, TEXAS, and CITY OF HOUSTON, TEXAS, Appellees. ON APPEAL FROM THE TEXAS COURT OF CIVIL APPEALS > JURISDICTIONAL STATEMENT OPINIONS BELOW The Supreme Court of Texas did not issue an opinion; its refusal of an Application for a Writ of Error appears in the appendix (“App.”) hereto, p. 20a infra. The opinion of the Texas Court of Civil Appeals, dated April 30, 1981, is reported at 619 S.W.2d 402. It is reprinted in the appendix, p. la infra. The opinion and the amended findings of fact and conclu- sions of law of the trial court, the District Court for the 165th District, Houston, Texas, dated July 14 and October 24, 1980, are not reported. They are reprinted in the appendix, pp. lla-19a infra. JURISDICTION This is an appeal drawing in question the validity of state statutes which were challenged as being repugnant to the Constitution and were held to be valid. It is an appeal from the decision of the Texas Court of Civil Appeals that the ad valorem taxes of appellees as applied to Xerox are valid and not prohibited by the Constitution of the United States. An Application for a Writ of Error to the Supreme Court of Texas was refused, on a finding of “no reversible error”; its judg- ment was entered on October 14, 1981. It overruled a motion for rehearing on November 25, 1981. See App. p. 21a infra. Notices of appeal to this Court were filed on January 29 and February 1, 1982 in the Supreme Court of Texas and the Texas Court of Civil Appeals respectively, App. pp. 22a-27a infra. This appeal is being docketed within 90 days from the denial of rehearing below. The jurisdiction of this Court is invoked under 28 U.S.C. § 1257(2). The Court has clearly established its jurisdiction over the issues raised here. In Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 440-41 (1979), it held In this case, appellants drew in question the validity of California’s ad valorem property tax, contending that the tax, as applied to their containers, was repugnant to the Commerce Clause and various treaties, and the California Supreme Court sustained the validity of the tax. Under these circumstances, this Court’s appellate jur‘sdiction would seem manifest. * * * Appellants squarely challenged the constitu- tionality of the tax statute, as applied, and the California Supreme Court just as squarely sustained its validity, as applied. We have held consistently 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. [citations] We conclude that we have appellate jurisdiction of this case. CONSTITUTIONAL PROVISIONS AND STATUTES United States Constitution, Article I, Section 8, Clause 3 The Congress shall have power . . . To regulate Com- merce with foreign Nations, and among the several States, and with the Indian Tribes. . . . United States Constitution, Article I, Section 10, Clause 2 No state shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspec- tion Laws... . Title 19, United States Code § 1555. Buildings or parts of buildings and other inclo- sures may be designated by the Secretary of the Treasury as bonded warehouses for the storage of imported mer- chandise entered for warehousing.... Except as otherwise provided in this chapter, bonded warehouses shall be used solely for the storage of imported merchan- dise and shall be placed in charge of a proper officer of the customs, who, together with the proprietor thereof, shall have joint custody of all merchandise stored in the warehouse. .. . § 1556. The Secretary of the Treasury shall from time to time establish such rules and regulations as may be neces- sary for the establishment of bonded warehouses and to protect the ‘nterests of the Government in the conduct, management, and operation of such warehouses and in the withdrawal of and accounting for merchandise depos- ited therein. § 1557.' (a) Any merchandise subject to duty. . . may be entered for warehousing and be deposited in a bonded As effective prior to October 3, 1978, the relevant time period. 4 warehouse at the expense and risk of the owner, importer, or consignee. Such merchandise may be withdrawn, at any time within 3 years from the date of importation, for consumption upon payment of the duties and charges accruing thereon at the rate of duty imposed by law upon such merchandise at the date of withdrawal; or may be withdrawn for exportation or for transportation and ex- portation to a foreign country, or for shipment or for transportation and shipment to the Virgin Islands, Ameri- can Samoa, Wake Island, Midway Islands, Kingman Reef, Johnston Island, or the island of Guam, without the payment of duties thereon, or for transportation and rewarehousing at another port or elsewhere, or for trans- fer to another bonded warehouse at the same port. . . . Texas Constitution, Article VIII, Section 1 Taxation shall be equal and uniform. All real property and tangible personal property in this State, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value, which shall be ascertained as may be provided by law. . . . Vernon’s Texas Civil Statutes, Article 7145 All property, real, personal or mixed, except such as may be hereinafter expressly exempted, is subject to taxation, and the same shall be rendered and listed as herein prescribed. STATEMENT OF THE CASE The facts surrounding this case are simple and, as noted by the court below, basically undisputed. This statement is based essentially on the facts as set forth in the amended findings of fact and the lower court opinion. See App. pp. 15a-19a; la-10a infra. Xerox manufactures copying machines domestically and, through subsidiary corporations, also assembles them abroad. For reasons of good will and to more effectively compete in the sale of copiers in Latin America, Xerox set up an assembly plant in Mexico City, Mexico. The governments of Mexico, Brazil and other members of the Latin America Free Trade Association (“LAFTA”) give import and tariff concessions to companies that have a plant facility in a member country and, indeed, some countries deny import rights to manufacturers of copiers who do not have such a plant. Xerox had previously used the Panama Free Trade Zone to store copiers pending shipment to Latin America, but abandoned it due to anti- American feeling over the Panama Canal. Houston was chosen as the alternative location due, in part, to its excellent trans- portation facilities. Most of the component parts of the copiers assembled at the Xerox plant in Mexico City were manufactured in the United States and shipped to Mexico for assembling. The parts were shipped from Rochester, New York, to Nuevo Laredo, Mexico, placed in Mexican customs bond and shipped to Xerox’ plant. After being assembled for use in Latin America, the copiers were packaged individually and trucked to Nuevo Laredo, where they cleared Mexican customs. The copiers entered the United States at Laredo, Texas, and were placed in the custody and control of the United States Customs Service (“U.S. Customs”). They were shipped via a customs bonded trucking company to the Houston Terminal Warehouse in Houston, Harris County, Texas, a Class 3 customs bonded warehouse. The copiers were placed in the warehouse, under U.S. Customs 6 control and supervision, pending orders from affiliated Xerox corporations in Latin America. In the warehouse they were kept segregated from domestic goods. When an order was received, the goods were removed and transported by customs bonded trucks to either the Port of Houston or the Port of Miami, continuously under U.S. Customs control and supervi- sion, where they were exported after first having cleared United States customs. The goods in question were in the warehouse for varying periods of time, ranging from several days to twenty-five months. All were in the warehouse for less than the period provided for by the customs statute then in force. No United States customs duty was ever paid on any of the machines. It is conceded by the appellees that the goods never left the supervi- sion, custody and control of U.S. Customs. None of the copiers assembled in Mexico, including those in question, has ever entered the United States for domestic consumption, and in reality, they could not. That is because 1. All printing and instructions were in Spanish and Portuguese; 2. Many of the machines required 50 cycle electricity, which is not readily available in the United States; 3. Some of the machines did not have Underwriters Laboratory or Canadian Standards Association (UL/ SSA) approval; 4. The copiers and their component parts were such that they could not participate in the Xerox “Retrofit” program in the United States, a program Xerox uses to continuously update copiers in service with improve- ments as they are developed; and 5. Import would require paying customs duties of 5% of the value of the copiers and 5% of the value of technical assistance given to the Mexican operation, which assistance was worth in excess of $7 million. 7 Accordingly, Xerox contends the machines were constantly in the flow of foreign commerce, and never entered the domestic commerce of the United States or became a part of the common mass of goods within the State of Texas. Contrary to inferences made by the Texas Court of Civil Appeals, Xerox pays its own way with respect to the services it receives from state and local governments.’ Indeed, in the City of Houston and County of Harris, Texas, Xerox paid ad valorem taxes of approximately $881,000 and $936,000 in 1976 and 1977, respectively, or a total of $1,817,000, on copiers (other than those in question) which were located there for domestic use. In addition, Xerox has, of course, paid for the services of the common carriers who transported the goods and for the use of the warehouse. All of those payments obviously included a portion used by those entities to pay state and local taxes. Xerox also paid fees for the use of the Port of Houston. Appellees did not assess ad valorem taxes on the machines stored under customs bond for the years 1974 or 1975. In 1977, the City of Houston (on behalf of itself and the Houston Independent School District) and Harris County (on behalf of itself, the State of Texas and several other local taxing authori- ties) assessed ad valorem taxes for that year. Harris County also back assessed for the year 1976. Harris County assessed taxes of $104,395.45 for the two years, while the City of Houston assessed $156,728.90 for 1977.’ Xerox commenced this action for declaratory judgment on September 30, 1977. !n the earliest pleading filed, the original 2 In the years in question (1976 and 1977), Xerox paid $215,651,000 and 4196,233,000 or a total of $411,884,000 in state and local income, payroll and personal property taxes. See Securities and Exchange Commission, 1977 Form 10K Annual Report, Xerox Corporation, Notes to Consolidated Financial Statements, pp. 6, 19. 3 Xerox’ contention that Harris County was estopped from assessing taxes for 1976 because it had been given a letter of exemption by a Deputy County Tax Assessor-Collector was rejected by the court below. Without conceding that the decision below was correct, Xerox abandons that claim here because it does not raise a federal question. petition (App. p. 28a infra), Xerox sought declaratory judg- ment that the State and local ad valorem taxes in question were “unconstitutional, illegal and void” because they were in con- travention of the Import-Export Clause and the Commerce Clause of the United States Constitution, Article 1, Section 10, Clause 2 and Article I, Section 8, Clause 3. The trial court, the 165th District Court for Harris County, Texas, upheld that claim and ruled that these taxes were unconstitutional, as applied to the foreign commerce in question (App. p. Ila infra). On appeal to the Texas Court of Civil Appeals, the same constitutional issues were raised when the appellees contended that the taxes were valid despite Xerox’ constitutional chal- lenge. That court reversed the trial court, holding that the taxes were valid and not prohibited by the Import-Export Clause (619 S.W.2d at 405-6, App. p. 6a infra) and that they were not “repugnant to nor violative of the Commerce Clause of the United States Constitution” (619 S.W.2d at 407, App. p. 8a infra). In its Application for Writ of Error to the Supreme Court of Texas, appellant raised as points of error, inter alia, that the Court of Civil Appeals had erred in holding that Xerox’ copiers, while stored under customs bond, were subject to State and local ad valorem taxes and that those taxes were valid under the Import-Export and Commerce Clauses of the United States Constitution. The Texas Supreme Court consid- ered that claim and the constitutional ruling of the Court of Appeals in denying the Writ, finding “no reversible error” (App. p.20a infra). THE QUESTION PRESENTED REQUIRES PLENARY CONSIDERATION The question presented is so substantial as to require plenary consideration with briefs on the merits and oral argument because 1. The only holding of this Court with respect to the applicability of state taxes to goods in customs bonded warehouses is McGoldrick v. Gulf Oil Corp., 309 U.S. 414 (1940) (“McGoldrick”), where state sales taxes were held unconstitutional as an impingement on the federal regulation of commerce. The court below re- jected the applicability of McGoldrick. 1f McGoldrick is no longer the law, it should be overruled only after plenary consideration, and not inferentially by a sum- mary affirmance here. 2. Xerox contends that these taxes also are invalid under the Import-Export Clause because its copiers were in transit, never entered domestic commerce and never became part of the common mass of goods within the State. This Court has stated in Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976) (“Michelin”), that goods in transit are immune from state taxation, but has since indicated that the question of the approach to be taken on goods in transit is one it would prefer to decide with full argument in a case with pertinent facts presented. Department of Revenue of the State of Washington v. Association of Washington Stevedoring Companies, 435 U.S. 734, 757, n.23 (1978). This case presents those facts. 3. Having stated in Michelin, supra at 290, that the Import-Export Clause prohibits the assessment of property taxes on goods in transit, the Court should decide whether goods held in a customs bonded ware- house for the period of time mandated by Congress, 15 U.S.C. § 1557(a), are “in transit” for these purposes. 10 4. In light of the enormous value of goods stored and passing through customs bonded warehouses through- out the United States, affirmance would create a new class of taxes which would have a substantial impact on the foreign commerce of the United States, and would seriously impair or destroy the usefulness of the federally mandated system of customs bonded ware- houses. Discussion 1. The McGoldrick Case Although these copiers remained constanily under the rigid supervision of U.S. Customs, were clearly “in transit” and never entered the domestic commerce of the United States or the common mass of property within the State of Texas, the court below held local ad valorem taxes applicable to them. As might be expected, this is not the first time that a local taxing authority has attempted to tax a customs bonded import-ex- port operation such as that of Xerox. On the only other occasion this Court considered the question it held such a local tax unconstitutional. McGoldrick v. Gulf Oil Corp., supra. In reviewing McGoldrick, it is important to recall the role of a customs bonded warehouse in the foreign commerce of the United States. The Commerce Clause of the Constitution (art. I, § 8, cl. 3) gives Congress the “power ... To regulate commerce with foreign Nations. . . .” The regulation of for- eign commerce, therefore, was reserved exclusively for the federal government. In exercising that right, Congress has promulgated, inter alia, extensive tariff schedules, levied duties on imported goods, and issued various regulations which are administered by U.S. Customs. For example, Congress has authorized eight different classes of customs bonded ware- houses, 19 U.S.C. § 1555, and provided that merchandise can be imported to the borders of the United States and delivered to the supervision and control of U.S. Customs for storage in a customs bonded warehouse. The merchandise can then be imported into the United States or exported. If exported, it is not subject to customs duties. 19 U.S.C. § 1557(a). During the relevant time period, merchandise could remain in a customs bonded warehouse for three years (now five). 19 U.S.C. § 1557(a). In short, Congress has created a comprehensive system to regulate the flow of foreign commerce through customs bonded warehouses, and its restrictions are stringent.‘ Pursuant to 19 U.S.C. § 1556, regulations have been formula- ted by the Secretary of the Treasury, including one that adopted the McGoldrick decision, stating that “imported goods in bonded warehouses are exempt from taxation or judicial process of any state or subdivision thereof.” 19 C.F.R. § 19.6, n.11. This is substantially the same as language that has appeared in customs regulations since 1915. See McGoldrick, supra at 426. In McGoldrick, the City of New York was attempting to impose a sales tax on crude petroleum imported from Vene- zuela, processed into fuel oil in New York, and then sold for export, usually to ships bound for other countries. The opera- tion was in a customs bonded warehouse, and the bonds were conditioned, among other things, upon compliance with vari- ous customs laws and regulations. As here, the goods were always segregated from the common goods in the State, and never destined for domestic commerce. /d. at 429. The Su- preme Court reviewed the federal government’s refusal to permit taxation of products under customs bond and struck — down the attempted local taxation as repugnant to the Com- merce Clause of the Constitution. 4 _ For example, the warehouse must first be bonded; it must meet certain physical specifications; it cannot be physically altered or discontinued without the permission of U.S. Customs; the warehouse is obligated to give U.S. Customs a written list of all employees handling imported merchandise and to advise U.S. Customs of their termination; it is under the constant supervision of a U.S. Customs warehouse officer; and when any merchandise in bond is to be shipped, it shall be done only upon receipt of a permit signed by the U.S. Customs officer. 19 C.F.R. §§ 19.1-19.6. 12 The situation here is exactly that posited in McGoldrick. In 19 U.S.C. § 1557(a), Congress mandated that goods which are imported and held in customs bonded warehouses “may be withdrawn for exportation or for transportation and importa- tion to a foreign country. . . without the payment of duties thereon. . . .” That statute is but part of a comprehensive set of statutes and regulations, including those promulgated by the Secretary of the Treasury pursuant to 15 U.S.C. § 1556. The conclusion here, we submit, should be as in McGoldrick. The Congressional regulation, read in the light of its purpose, is tantamount to a declaration that in order to accomplish constitutionally permissible ends, the im- ported merchandise shaii not become a part of the com- mon mass of taxable property within the state . . . and shall not become subject to the state taxing power. Jd. 309 U.S. at 429. Appellees and the court below cite no valid reasons in law or fact to distinguish the instant case from McGoldrick, which has expressed this Court’s position on the applicability of state taxes to customs bonded merchandise. Many of the facts in this case which appellees claim distinguish it from McGoldrick were present in National Distillers Products Corp. v. City and County of San Francisco, 141 Cal. App. 2d 651, 297 P.2d 61, cert. denied, 352 U.S. 928 (1956). There, as here, the State sought to enforce ad valorem taxes on goods other than petroleum (liquor) stored in a customs bonded warehouse. The court held the taxes unconstitutional in light of McGoldrick, and in rejecting claims that the goods in question were subject to such taxation, succinctly stated that the goods . . .derive their immunity from local taxation under the commerce clause by reason of the fact that the federal government has regulated their manufacture, transporta- tion, storage, and exportation in furtherance of com- merce, and that such taxes would constitute an interference with that regulation. Jd. 297 P.2d at 61.° 5 The distinctions drawn by the appellees and the Texas Court of Civil Appeals do not create a difference. Clearly while this is an ad valorem 13 Finally, even in the case relied on by appellees, American Smelting & Refining Co. v. County of Contra Costa, 271 Cal. App. 2d 437, 77 Cal. Rptr. 570, appeal dismissed, 396 U.S. 273 (1969), State ad valorem taxes were rejected when, as here, the merchandise in question (ore) was destined for foreign com- merce. 77 Cal. Rptr. at 601. It is clear that whether the product involved is the oil in McGoldrick, Natural Distillers’ liquor, American Smelting’s ore or Xcrox’ copiers, Congress’ regula- tion of foreign commerce with respect to them is no less complete. The state taxes on these goods, while in customs bonded warehouses, are unconstitutional. Summary affirmance here would reject McGoldrick and create a clear conflict in the Court’s holdings as to the state taxation of customs bonded goods. Xerox submits that McGoldrick is alive, viable and controliing. If the Court decides McGoldrick is no longer the law, so be it; but if so, we submit that it should be overruled only after full plenary consideration. Otherwise its existence side by side with an affirmance of this case would create an anomaly in the Court’s holdings. 2. The Michelin Case Xerox contends that these taxes, as applied, are unconstitu- tional and in violation of the Import-Export Clause, because no state may “levy any Imposts or Duties on imports or Exports. . . .” U.S. Const. art. I, § 10, cl. 2. The court below sought to validate these taxes as not being repugnant to that clause of the Constitution through a reading of Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976). Michelin had imported tires and tubes from abroad, cleared United States customs tax rather than a sales tax, it still places an unconstitutional burden on federally regulated foreign commerce. And while McGoldrick focused on the regulation of petroleum imports and exports, and their use as ships stores, those regulations were part of the same overall regulation of foreign commerce at issue here. The language of customs regula- tions may have evolved over the years, but it is no less pervasive today than it was in 1940, and is designed to protect ai/ goods located in customs bonded warehouses, including Xerox’ copiers. 14 and paid duty. It then trucked them to its warehouse in Georgia, where they were unloaded, sorted and stored, await- ing orders from dealers. They were not in a customs bonded warehouse and were destined for domestic sale. This Court reviewed the history of the Import-Export Clause, starting with its reasons for being included in the Constitution and tracing its subsequent history. Before Michelin the cases almost uni- formiy followed the “original package” test, holding that as long as the imported product remained in its original package, it was still in foreign commerce and not subject to local taxation. The Court concluded that the “original package” test was not alone determinative, but held that imports were not subject to local taxation as long as they were in transit. It went on to suggest, in determining whether state taxes were prohibited “Imposts or Duties”, that an analysis be made to determine if they offended any of three policy considerations; namely, that 1) the federal government must speak with one voice in regulating foreign commercial relations; 2) import revenue of the federal government cannot be diverted to the states; and 3) harmony among the states might be disturbed unless states with ports of entry were prohibited from taxing goods merely fiowing through their ports. Jd. at 285-86. Whatever the result of an application of the Michelin criteria to these copiers (and Xerox believes that even under an analysis using the Michelin criteria, the taxes violated at least the first and third criteria and are invalid), the fact is that the Michelin test does not apply, for as the Court said at three separate places in the opinion, the Constitution prohibits “the assess- ment of even non-discriminatory property taxes on goods which are merely in transit through the State when the tax is assessed”. Jd. at 290. See also 423 U.S. at 286 and 302. As is demonstrated infra, Xerox’ goods were in transit, and there- 6 Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827); Low v. Austin, 80 U.S. (13 Wall.) 29 (1872); Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945); and Youngstown Sheet & Tube Co. v. Bowers, 358 U.S. 534 (1959). 15 fore never became part of the common mass of goods within the State which would be subject to taxation. We submit that since Xerox’ goods were in transit, the purported Michelin analysis is not valid and the goods are exempt from State taxation. However, the Court itself subse- quently has raised the issue of the applicability of that analysis to goods in transit, and invited a plenary hearing of that question. In Department of Revenue of the State cf Washing- ton v. Association of Washington Stevedoring Companies, 435 U.S. 734 (1978), the Court extended the Michelin test, and approved State taxation of interstate stevedoring activitics, noting, however, that the tax was on an activity and not the goods themselves. The Court concluded “that the Michelin policy analysis should not be discarded merely because the goods are in transit, at least where the taxation falls upon a service distinct from the goods and their value.” Jd. at 757. It said, however, that it was not deciding the issue raised here: We do not reach the question of the applicability of the Michelin approach when a State directly taxes imports or exports in transit. Our brother Powell, as his concurring opinion indi- cates, obviously would prefer to reach the issue today, even though the facts of the present case, as he agrees, do not present a case of a tax on goods in transit. As in Michelin, decided less than three years ago, we prefer to defer decision until a case with pertinent facts is pre- sented. At that time, with full argument, the issue with all its ramifications may be decided. Jd. at 757, n.23. Xerox submits that this case presents the pertinent facts upon which the Court may decide the question. 3. “In transit” Grounding the error below is the lower court’s decision concerning the status of the goods when taxed. It extended constitutional criteria beyond their intended limits. In one 16 place, the criteria cited as to whether the goods were “in transit” were: a) was there stoppage; b) was the final destina- tion determinable; and c) was it for the business purpose of the shipper; citing Independent Warehouses, Inc. v. Scheele, 331 U.S. 70 (1947); Michelin Tire Corp. v. Wages, supra; and Calvert v. Zanes-Ewalt Warehouse, Inc., 502 S.W.2d 689 (Tex. 1973). At another point in the decision, the court reasoned that under Kosydar v. National Cash Register Co., 417 U.S. 62 (1974), the goods were not immune from taxation because export had not started. Finally, the court claimed that State taxes could be applied where the goods were imported and warehoused at the owner’s convenience until a sale was ob- tained and the goods were exported, citing Bacon (Wabash Elevator) v. Illinois, 227 U.S. 504 (1913); Susquehanna Coal Co. v. City of South Amboy, 228 U.S. 665 (1913); and Michelin Tire Corp. v. Wages, supra. The significant feature absent in ai// of those cases is the customs bonded warehouse. Appellees have conceded that Xerox’ goods never left the supervision, custody and control of U.S. Customs. They were always kept in facilities where, pursuant to federal regulation, 19 C.F.R. § 19.2(c), they were carefully segregated from domestic commerce. And it is con- ceded that they never entered domestic commerce, but were shipped abroad. It is only if, as, and when Xerox paid the required customs duties that these goods would leave the federal enclave created by the customs bonded warehouse and enter the common mass of goods within the State. Until then, they were as surely in foreign commerce and beyond the reach of State taxation as if they had remained on the loading dock in Mexico City. In all of the cases cited by the court below, however, the import or interstate journey had ceased or the export journey had not yet begun. Thus, in each case, the goods had settled into the common mass of goods within the State, and therefore had some connection with the State for taxation purposes. Here, however, they were under federal 17 custody, and had not become part of the State’s common mass of property. In short, they had no nexus with the State of Texas. The length of time these goods may remain in the customs bonded warehouse has been mandated by Congress, which stated that they may remain for three years (now five) without the imposition of duty, and if transshipped within that time, as happened here, no duty applies. 19 U.S.C. § 1557(a). What- ever period of time it chose, Congress has stated the permissi- ble period that these goods may remain in foreign commerce, and, as this Court has consistently held, it is for Congress, and not local taxing authorities, to determine the indicia of foreign commerce. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434 (1979); Department of Revenue of the State of Washington v. Association of Washington Stevedoring Compa- nies, supra. However long they stayed, they were always in federal custody, bound for foreign destinations. The only case cited as being contrary to Xerox’ position is American Smelting & Refining Co. v. County of Contra Costa, supra, 271 Cal. App. 2d 437, 77 Cal. Rptr. 570, appeal dismissed, 396 U.S. 273 (1969). No federal court has addressed the issue. But there, while the California court permitted State taxation of goods that were held in bond and ultimately entered domestic commerce, it held that where, as here, the goods were for re-export, Congress had preempted the field, the goods did not have a nexus to the State and the State tax could not be applied. This Court, we submit, should not, by summary affirmance of the opinion below, put new limits on the definition of “in transit”, and permit decisions applicable to goods that either are, or are destined to be, part of the common mass of goods within the State to be extended to embrace goods in the custody of the federal government and which never leave foreign commerce. 4. Nationai Significance Summary affirmance would substantially alter the relation- ship between the states and the federal government, and would open the door to the imposition by state and local governments of substantial burdens on the foreign commerce of the United States. The $9 million worth of copiers that Xerox stored in a customs bonded warehouse is but a microcosm of what is undoubtedly hundreds of millions of dollars worth of goods similarly stored throughout the country. With the advent of modern air transportation, customs bonded warehouses may exist in every state. The merchandise stored in them could be subjected to a myriad of new state taxes as a result of affirmance. Moreover, affirmance here would, without more. substantially change the vaiue of customs bonded warehouses, limiting and perhaps destroying their usefulness in foreign commerce. This case merits plenary treatment, as it presents an important question touching on the accommodation of state and federal interests under the Constitution. Kosydar v. Na- tional Cash Register Co., 417 U.S. 62, 65 (1974). We submit that where, as here, summary affirmance would substantially conflict with existing law, change the existing federal-state relationship and impact the businesses of thousands of citizens of the United States, as well as our relationships with foreign governments and business entities, the case merits full plenary consideration, on a full record, with briefs and oral argument. 19 CONCLUSION For the reasons set forth above, it is submitted that this Court has jurisdiction, and that the question presented is one requiring plenary consideration. Respecifu!ly submitted, ALFRED H. HODDINOTT, JR. 800 Long Ridge Road . Stamford, Connecticut 06904 (203) 329-8700 Counsel for Appellant February 9, 1982 — xIpueddy ee ee Se ——— ee 1. Opinion of Texas Court of Civil Appeals, 619 S.W.2d 402 COUNTY OF HARRIS, Texas et al., Appellants, —VvV.— XEROX CORPORATION, Appellee. No. 17862 Court of Civil Appeals of Texas, Houston (Ist Dist.) April 30, 1981 Rehearing Denied May 21, 1981 Joe Resweber, Paul Bibler, Edward Cazares, Cheryl Heiena Chapman, Houston, for appellants. Larry D. Thompson, William K. Luyties, Houston, for appellee. Before COLEMAN, C.J., and SMITH and REDEN, JJ. SMITH, Justice. This is a declaratory judgment suit filed by Xerox Corpora- tion requesting the court to declare unconstitutional certain ad valorem taxes assessed against it by the City of Houston, the Houston Independent School District, Harris County, and the State of Texas, and seeking injunctive relief. The trial court entered judgment declaring the taxes unconstitutional and enjoined the collection of the taxes. 2a The question presented in this case is whether nondis- criminatory ad valorem taxes assessed by state and local taxing authorities are violative of the commerce clause and the im- port-export clause of the United States Constitution where assessed against imported property stored in local customs bonded warehouses awaiting sale and shipment to a foreign country. Xerox is incorporated under the laws of the State of New York and is authorized to transact business in the State of Texas. It is a manufacturer and seller of copier machines, engaging in both domestic and international commerce. It has affiliate companies in several foreign countries for the purpose of meeting certain governmental requirements of the respective countries as well as gaining certain benefits. In the instant case Xerox manufactured its parts in Colorado and New York and transported these parts to a warehousing facility in Rochester, New York. To meet the requirements of the ‘atin American Free Trade Association (LAFTA),' Xerox established an affiliate company in Mexico City to assemble copiers which would be functional in countries whose national language was either Spanish or Portugese. 7; get parts to its Mexican affiliate, Xerox shipped its unessembled parts from Rochester to Laredo, Texas, and thence, by truck, to Mexico City, where the machines were set up and adjusted by Mexican labor trained for this purpose. Mexican tax laws made the warehousing of the copiers in Mexico economically unfeasible; therefore, Xerox, up to the year of 1974, shipped its assembled copiers to the Free Trade Zone of Panama, where it had to pay no taxes on its ware- housed merchandise. In 1974, the Panamanian government and its people became hostile to American companies. Xerox made the decision not to jeopardize its merchandise in Panama and, after a search for another warehousing facility, decided to ship its products to Houston, [cxas, because of its excellent port facilities. 1 LAFTA is a group of Latin American countries who associated themselves for the purpose of regulating imports into their respective countries and adopting certain policies to implement the purpose of the association. 3a Xerox shipped the assembled copiers under bond from Mexico City by truck to Nuevo Laredo. The copiers were brought across the border under bond and placed in customs bonded warehouses. The machines were then transported by bonded trucking companies from Laredo to Houston, where they were placed in customs bonded warehouses. The uncrated machines remained in the warehouses, segregated from other merchandise, until Xerox obtained a sale. When a sale was obtained, the packaged machines were removed from the warehouse under bond and remained under bond until placed aboard a deep-water shipping vessel at Houston or Miami, to be transported to a Latin American company. No import taxes were ever assessed against these imported copiers by the United States. Xerox maintained other warehouses in Houston for copiers that were to enter domestic commerce, and ad valorem taxes were paid on these. None of the imported copiers from the customs bonded warehouses were ever sold to customers for domestic use. No taxes were assessed on the imported ma- chines by the local taxing authorities against Xerox in 1974 and 1975. In 1976, upon request from Xerox, Harris County, Texas, through an authorized deputy of the Tax Assessor-Col- lector, issued an exemption on the imported warehoused mer- chandise located in Houston. In 1977 the City of Houston’ assessed taxes on the imported warehoused copiers and Harris County’ followed by assessing taxes for 1977 and back assess- ing for the year of 1976. In this suit we are concerned about the taxes for years 1976 and 1977 only, for the reason that as soon as Xerox was apprized that it was being assessed taxes on its imported copiers, it shipped all such merchandise to Buffalo, New York, a free trade zone location. On assessment dates, January 1, 1976 and 1977, virtually none of the copiers in the warehouse had been sold or 2 The City of Houston assesses and collects taxes for itself and the Houston independent School District. 3 Harris County assesses and collects taxes for itself, the State of Texas and several other loca! axing authorities. 4a otherwise committed and none had been consigned to a com- mon carrier. The length of time in storage varied from a few days to three years. The two model lines most numerously stored averaged seven and one-half months for one and twenty-five months for the other. The parties agree that the ad valorem taxes levied were uniform non-discriminatory taxes on property, not based on origin or destination of goods. There is no claim by Xerox that the taxes were, in any manner, not properly assessed, except that they were unconstitutional as applied to the copiers in question. The appellants assert as their first point of error that the trial court erred in finding that the copiers were not subject to state and local ad valorem taxation under the import-export clause of the United States. We agree. Article I, Section 10, clause 2 of the United States Constitu- tion, commonly referred to as the “import-export” clause, states as follows: No state shall, without the consent of congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection law... Section 8 of Article i of the United States Constitution com- mences by stating: “The Congress shall have the power to lay and collect taxes, duties, imposts and excises ... .” It is manifest that the framers of the United States Constitution were addressing specific problems in limiting Section 10, clause 2 of Article I to “imposts and duties.” The words “taxes” and “excises” are conspicuous by their absence from this section. The position of Xerox in this suit was the law of the land, prior to 1976. Brown v. Maryland, 12 Wheat. 419, 6 L.Ed. 678 and Low v. Austin, 13 Wall. 29, 20 L.Ed. 517. However, in that year the United States Supreme Court in Michelin Tire Corporation v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495, overruled Low v. Austin and held that a nondiscrimina- tory ad valorem tax did not infringe upon the import-export clause where the imported goods were no longer in transit. Sa Immediately thereafter, the Texas Supreme Court, relying on Michelin, reversed its holdings in City of Farmers Branch, et al. v. Matsushita Electric Corporation of America, 537 S.W.2d 452, 454 (1976) and in City of Farmers Branch, et al. v. American Honda Motor Company, Inc., 537 S.W.2d 454 (1976) and held that “The ad valorem tax imposed by Farmers Branch is clearly nondiscriminatory and applicable to all such stored goods whether imported or not.” The question then arises, were the copiers involved in our suit still in transit? We think they were not. The courts have established criteria to determine whether goods are in transit, i.e. (1) was there a stoppage in transporta- tion, and, if so, what was the purpose of the stoppage? (2) at the time of taxation was the final destination of the goods determinable? and (3) was the stoppage a necessary delay or accommodation to the means of transportation, or for busi- ness purposes and profits of the company? See Independent Warehouses v. Scheele, 331 U.S. 76, 67 S.Ct. 1062, 91 L.Ed. 1346 (i947); Michelin Tire Corperation v. Wages, supra; Calvert v. Zanes-Ewait Warehouse, Inc., 502 S.W.2d 689 (Tex. 1973). Applying these criteria, we find that there was a transporta- tion stoppage of the warehoused copiers and that such stop- page was occasioned for business purposes of Xerox; that on taxation day the final destination of the goods was not deter- minable, as the property had not been sold or committed to further transportation; and that the business purpose in stop- page was profits for Xerox. We hold the warehoused Xerox copiers were no longer in transit. The appellee also urges that the copiers were in the custody of customs officials stored in customs bonded warehouses, and that under such circumstances the federal government has preempted local taxing authorities by taking sole control. We cannot concur in this view. The California courts in American Smelting and Refining Company v. The County of Contra Costa, 271 Cal.App.2d 437, 77 Cal.Rptr. 570 (1969) held contrary to Xerox’s position and the Federal courts have not set aside or overruled that opinion. We are of the opinion and so hold that the storing of imported goods in a customs 6a bonded warehouse in and of itself does not preclude local authorities from assessing and levying a nondiscriminatory ad valorem tax under the import-export clause of the United States Constitution absent Federal legislation or regulation to the contrary. Appellee further asserts that its inventory of copiers is exempt because they are exports. This contention was rejected in Kosydar v. National Cash Register Company, 417 U.S. 62, 94 S.Ct. 2108, 40 L.Ed.2d 660 (1974), wherein the Supreme Court set forth the test that the mevement to foreign shores must be started or committed to be moved for an export to be exempt from taxation. There being no sale or commitment to sell and no movement or commitment to move, the export exemption does not apply in this case. Appellants’ first point of error is sustained. The appellants’ second point of error asserts that the trial court erred in concluding that the property was not subject to nondiscriminatory ad valorem taxes under the Commerce Clause of the United States Constitution. Article I, Section 8, clause 3 of The United States Constitu- tion, commonly referred to as the Commerce Clause, states as follows: Congress shall have the power “To regulate Commerce with Foreign Nations, and among the several states, and with Indian Tribes.” The commerce clause confers specific authority upon the United States Congress, however it should be noted that the conferral of authority and the exercising of that authority are distinct and separate matters. Xerox asserts that McGoldrick v. Gulf Oil Corporation, 309 U.S. 414, 60 S.Ct. 664, 84 L.Ed. 840 (1940), is dispositive of the appellants’ second point of error. We believe the cases are distinguishable. In McGoldrick the Supreme Court concluded that a New York sales ‘+x upon oil imported to be refined and sold to foreign bound vessels was preempted by congressional legislation and invalid. Congress has not exercised its preroga- tive in such a manner as to preclude ad valorem taxes on goods 7a such as the copiers involved in this case, -ven though it has authority to do so. It should be noted, however, that as a result of Low v. Austin, 13 Wall. 29, 80 U.S. 29, 20 L.Ed. 517 (1871), there is a footnote in the Code of Federal Regulations, 19 C.F.R. § 19.6(c), which states that “Imported goods in bonded warehouses are exempt from taxation or judicial process of any state or subdivision thereof.” This footnote is not a regulation and as pointed out in American Smeltering, supra, Michelin overruled Low and the footnote has no more weight than the precedent upon which it rests. Suffice it to say, the McGoldrick decision was based on specific congressional legislation and, as noted above, no comparable legislation has been enacted that would prohibit taxation in this case. Xerox takes the position that the most important purpose of the Commerce Clause and the Import-Export Clause is to prohibit state taxation from having any impact on the federal government’s regulation of foreign commerce. We have no quarrel with this statement, in fact we agree that the federal government should speak with one voice in its reguiation of foreign commerce. We are aware that local taxation will increase the cost of the product in the market place, be it a domestic or foreign market. The ability to compete in price is essential in the market place. Xerox has dropped from 95% of the Latin American copier market in 1976 to 74% in 1979, and in some countries its share has dropped to 40%. The bulk of the lost business has gone to Japanese competitors. We are not unaware that this same problem has occurred in automotive, television, radio, steel and many other industries. But the fact remains that the United States Congress has chosen not to enact legislation to protect the copier industry as it did for the oil industry in the McGoldrick case. The courts cannot enlarge legislation, nor can they legislate. In this case the taxing authorities have furnished Xerox with port facilities, police and fire protection, streets for ingress and egress, and may other services, and the taxes represent the quid pro quo. Such taxes do not hamper, impede, nor deprive the federal government of its exclusive regulation of fore'gn com- merce. Michelin Tire Corporation v. Wages, supra. Too, we find no fact findings that the taxes would impair Xerox’s 8a bility to compete in the foreign market, and the question of multiple taxation is not raised. See Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 99 S.Ct. 1813, 60 L.Ed.2d 336 (1979). Absent Federal Legislation or regulation to the contrary, we hold that a nondiscriminatory ad valorem property tax is not repugnant to nor violative of the commerce clause of the United States Constitution, where the domestic owner of property imports such property and warehouses it for the owner’s convenience until such time as a sale may be obtained and the property exported. Wabash Elevator v. People Of The State of Illinois, 227 U.S. 504, 33 S.Ct. 299, 57 L.Ed. 615 (1913), Susquehanna Coai Co. v. City of South Amboy, 228 U.S. 665, 33 S.Ct. 712, 57 L.Ed. 1015 (1913), Michelin v. Wages, supra. Xerox in its only cross-point alleges Harris County is es- topped, as a matter of law, from making claim for taxes on the imported copiers stored in bonded warehouses in Harris County on January 1, 1976. The basis for such assertion is that Xerox requested and received from Harris County a letter* of 4. August 9, 1976 Xerox Corporation Xerox Square Rochester, N.Y. 14644 Attention: Mr. Ricardo S. Perez International Traffic Manager Building 822 Dear Mr. Perez: Thank you for your affidavit dated July 27, 1976. Please be advised that this inventory will be carried as Exempt, in as much as it was stored in Bond on January 1, 1976. Sincerely, Carl S. Smith Tax Assessor-Collector By:H. F. Bruce Deputy HFB:bwe 9a exemption for that year. H.F. Bruce was an appointed deputy for the duly elected Tax Assessor-Collector for Harris Courty, Texas and was the deputy who ordinarily handled matters of exemption in that office. Carl S. Smith, the Tax Assessor-Col- lector, stated that Mr. Bruce handled these matters, but in questionable matters such as this Mr. Bruce ordinarily con- ferred with him. Mr. Smith further stated that he had no recollection of Mr. Bruce’s discussing the matter with him and that the letter was sent out erroneously. The general rule has been in this state that when a unit of government is exercising its governmental powers, it is not subject to estoppel. City of Hutchins v. Prasifka, Tex., 450 S.W.2d 829 (1970). Chief Justice Greenhill in his opinion in Prasifka noted, “. . . That a municipality may be estopped in those cases where justice requires its application and there is no interference with the exercise of this governmental function. But such doctrine is applied with caution and only in excep- tional cases where the circumstances clearly demand its appli- cation to prevent manifest injustice.” in this case the taxing date was January 1, 1976. Xerox filed its inventory and evaluations as of that date. Xerox filed its request for exemption July 27, 1976 and the date of Mr. Bruce’s exemption letter was August 9, 1976. We are of the opinion that no manifest injustice has occurred in this case. Xerox did not move its copiers into Harris County in reliance on such letter and there is no allegation of fraud or deceit by Xerox against Harris County officials. Appellees cross-point is overruled. Appellants by their third, fourth and fifth points of error complain that the injunctive relief granted by the trial court fails to comply with Ru'e 683, Tex.R.Civ.Proc., in that it (1) does not identify the parties enjoined (2) does not state the reason for the issuance of the injunction (3) does not identify the property involved, and (4) could be construed as operating for future taxes. Our disposition of previous points of error makes these objections irrelevant; but, we agree with these contentions, and, in the event we are held on appeal to have erred in our holdings, we suggest that the Judgment be re- 10a manded to the trial court to reform the injunctive portions of the judgment to comply with the requirements of Rule 683, T.R.C.P. The judgment of the trial court is reversed and rendered that Xerox take nothing, that Harris County have judgment against Xerox in the sum of $131,311.97 plus nenalties and interest for the tax years of 1976 and 1977, that the City of Houston have judgment for itself and the Houston Independent School District in the sum of $156,728.90 plus penalties and interest for the tax year of 1977, and that the injunction issued by the trial court is dissolved and set aside. Costs of appeal are charged to the appellee, Xerox. COLEMAN, C.J., and PEDEN, J., sitting. 2. Opinion of the District Court for the 165th District, Houston, Texas [SEAL] LYNN N. HUGHES Judge, 165th District Court Houston Texas, 77002 July 14, 1980 Mr. Larry D. Thompson Thompson, Lorance & Wittig 303 Jackson Hill, Suite 300 Houston, Texas 77007 RE: Xerox Corp. v. Harris County, et al. Cause No. 1,146,343 Dear Mr. Thompson: I have determined that the plaintiff is entitled to judgment in this case. The copiers began as components manufactured by Xerox and others in this country and by others in Mexico. The American-made components were exported to Mexico where they were assembled into copiers, also incorporating Mexican- made parts. The assembled copiers were exported from Mexico and held in Houston awaiting importation for consumption in an importing Latin America country by a marketing operation of Xerox. On the tax dates, the copiers were present in Houston in a bonded warehouse in the joint possession of the warehouseman and the U.S. Customs Service under federal law. At the time, they were destined for Latin America; they were being neither imported to the U.S. nor exported from the U.S. Although it apparently was legally and practically possi- 12a ble to import the copiers, domestic consumption was not indicated by Xerox’s corporate intent as verifiable by all the objective indications nor by the eventual disposition of these copiers. The copiers occupied a place both in the federal regulatory scheme and in foreign commerce similar to the ore-cum-metal that was “committed to reexport” in American Smelting & Refining Co. v. County of Contra Costa, 271 Cal. App.2d 437, 77 Cal. Rptr. 570 (1969), appeal dismissed, 396 U.S. 273 (1970), and to the fuel oil that was cotumitted to consumption as ship’s stores in McGoldrich v. Gulf Oil Corp., 309 U.S. 414 (1940). Good stored under a Customs bond may be subject to state taxation if in the process of importation they become func- tionally indistinguishable from the common property in the state, with the operative fact not being the warehouse bond but the termination of the process of foreign commerce and the entry of the good into domestic commerce. State v. Harper, 188 S.W.2d 400, (Tex.Civ.App.—San Antonio 1945, no writ), cert. denied, 327 U.S. 805 (1945); City of Farmers Branch v. Matsushita Electric Corporation of America, 537 S.W.2d 452 (Tex. 1976). Given the peculiar status of the copiers in the factual context of foreign commerce, they are not taxable because they do not have a substantial nexus with Houston and have not left the palpable flow of foreign trade. This case may also raise this question: If under the federal law governing the copiers’ presence in Houston they are immune from the possessory process of the Texas courts, are they not also outside the power of Texas to subject them to possessory taxes since their legal situs (as opposed to their physical presence) determines they incidence of the ad valorem tax? 19 U.S.C., § 1484 j; 19 C.F.R., § 19.6 fns. 10, 11; Guaranty Life Insurance Co. of Houston v. City of Austin, 108 Tex. 209, 190 S.W. 189 (1916); Greyhound Lines, Inc. v. Board of Equalization, 419 S.W.2d 345 (Tex. Civ. App.— Amarillo 1965, writ ref’d n.r.e.). [The effectiveness of the 13a federal exemption of goods in bond from state court process was litigated in J. Henry Schroder Banking Corp. v. Schultz, 373 F.Supp. 1283 (S.D. Tex. 1974), remanded as moot, 560 F.2d 1192 (Sth Cir. 1977), with the issue not being addressed in the appellate decision and being unclearly presented in the trial court.] The copiers may have a status that prevents them from having any situs; “they may acquire no tax situs in any of the states at which they touch port, and are taxable by the domicle or not at all.” Northwest Airlines, Inc. v. Minnesota, 322 U.S. 292, 314 (1944) J. Jackson dissenting in an instrumentalities case. The copiers’ presence in Houston was solely and deliberately the result of a federal foreign trade legal fiction. Even if the regulatory provisions of the national government was not clearly directed to the precise present-but-not-imported situa- tion in this case there is an effect on the Commerce Clause’s interest in foreign trade; the tax is not “valid so long as it interfers with no Act of Congress or treaty of the United States” because “it may properly be called ‘international.’ ” Henderson v. Mayor of New York, 92 U.S. 259, 274 (1875). In any event, the Congress and the Treasury have spoken with sufficie =t pertinence (no matter how opaquely) to place these copievs iato the stream of federal preemptive foreign com- merce reguiation to eliminate the power of domestic local governments to tax them. See the alternative holding in Japan Line Ltd. v. County of Los Angeles, 441 U.S. 434 (1979) and, of course, Gibbons v. Ogden, 22 U.S. 1 (1824). l4a Please prepare a proposed judgment, circulate it for en- dorsement by counsel, and send it to me for signing. If counsel do not agree, each shall file a proposed judgment immediately. Yours very truly, Lynn N. Hughes District Judge LNH/sb Copies: Mr. Paul Bibler, Jr. Assistant County Attorney Office of the County Attorney 1001 Preston, Suite 634 Houston, Texas 77002 Ms. Cheryl Helena Chapman Assistant City Attorney Office of the City Attorney Post Office Box 1562 Houston, Texas 77001 lSa 3. Amended Findings of Fact and Conclusions of Law of the District Court for the 165th District, Houston, Texas IN THE DISTRICT COURT OF HARRIS COUNTY, TEXAS 165th Judicial District NO. 1,146,343 _>— XEROX CORPORATION —Vi.— COUNTY OF HARRIS, TEXAS, ef al., > AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW Pursuant to the requests by the CITY OF HOUSTON and HARRIS COUNTY, the Court hereby states its amended findings of fact and conclusions of law in the above referenced matter. I. FINDINGS OF FACT 1. XEROX CORPORATION (hereinafter referred to as XEROX) is incorporated under the laws of New York, is doing business in Houston, Harris County, Texas and is a manufac- turer, seller and lessor of copier machines in both domestic and international commerce. 2. The CITY OF HOUSTON is a duly authorized tax authority in the State of Texas and is authorized by statute to collect taxes in its own behalf and on behalf of the Houston Indepen- dent School District. 16a 3. HARRIS COUNTY is a duly authorized taxis» authority in the State of Texas and is authorized by statute to collect taxes in its own behalf and on behalf of the State of Texas, the Harris Courty Flood Control District, the Port of Houston Authority, the Harris County Board of School Trustees, and the Harris County Hospital District. 4. At all relevant times, XEROX had copier machines in Houston, Harris County, Texas for its domestic business. The ad valorem taxes on these copiers are not in dispute. 5. Pursuant to its international business and in particular to its trade and commerce with Latin America and the Caribbean, XEROX, on tax day, January 1, of the years 1976 and 1977, leased Customs bonded storage space in the Houston Terminal Warehouse in Houston, Texas, for temporary warehousing of its copiers which were destined for eventual use in Latin America and the Caribbean. 6. The copiers in question were all stored under customs bond in the Houston Terminal Warehouse, a privately owned public warehouse, which at all material times was a Class III Customs bonded warehouse. 7. The fair market value of said copiers located in the Houston Terminal Warehouse on January 1, 1977 was $9,015,685.00, and on January 1, 1976 was $9,051,586.00. 8. On January 1, 1977 XEROX had 4,248 copiers stored in Customs bond at Houston Terminal Warehouse; the number is fairly representative of the average number of copiers in the Houston Terminal Warehouse during 1976 and 1977. 9. The Houston Terminal Warehouse was, at all material times, a Class III Customs bonded warehouse, pursuant to 19 USCA 1555 and 19 USCA 1557(a) as well as the rules and regulations promulgated by the Secretary of the Treasury, Title 19 C.F.R. 19.01, et seq. The copiers were in the Houston Terminal Warehouse pursuant to these laws and regulations. 10. The copiers were assembled in Mexico of component parts largely manufactured in the United States and which 17a were shipped from the United States to the Mexican corporate affiliates of XEROX in Mexico City. 11. Each individual copier was individually packaged and remained in its original Mexican export packaging while in Houston. 12. The copiers were shipped from Mexico City to the United States border where, after the appropriate documents were executed, the copiers were surrendered to the supervision and control of the United States Customs Service and were transferred by a customs bonded trucking company to the Houston Terminal Warehouse. 13. At all times while in the United States, including while in the Houston Terminal Warehouse, the copiers remained in Customs bond and continuously under the control, supervi- sion, and custody of the United States Customs Service. 14. The copiers were held in Houston pending orders from XEROX affiliates in Latin America and the Caribbean to meet sales demands in these areas. 15. The copiers were then transferred, under customs bond and customs supervision and control, to transportation facili- ties such as Port of Houston or Miami where they were, in every case, shipped to Latin America or the Caribbean. 16. The copiers were free from United States custom duties and tariffs during their presence in Houston, pursuant to 19 USCA 1555 and 19 USCA 1557(a), and no customs duty has ever been paid by XEROX on said copiers. 17. None of the copiers stored at the Houston Terminal Warehouse by XEROX have ever been consumed domestically and had never entered the United States market. All copiers have been used exclusively in Latin America and the Carib- bean, and none of the copiers have ever returned to the United States. 18. If the copiers were used in the United States, XEROX would have to pay United States customs duties amounting to five percent of the value of the copiers. 18a 19. The copiers could have been modifed for domestic consumption but other aspects of marketing, including servic- ing, would have made domestic sales economically impractical. 20. XEROX, at all material times, was facing aggressive competition in the Latin American and Caribbean market. 21. XEROX used the Houston Terminal Warehouse facility and the laws of the United States which allowed for duty free importation and re-exportation pursuant to 19 USCA 1555 and 19 USCA 1557(a) to take advantage of the competitive advan- tage allowed by such laws so that it could more effectively compete in the Latin American and Caribbean market. 22. XEROX, during the year 1976, filed a request with the county for exemption from ad valorem taxes on the copiers stored in the Houston Terminal Warehouse on January 1, 1976. 23. HARRIS COUNTY, in a letter dated August 9, 1976 and written by H. F. Bruce, Deputy Tax Assessor-Collector of Harris County, who had the authority to write the letter, advised XEROX that the copiers would be exempt for the tax year 1976. 24. The taxes assessed and levied on the copiers by the CITY OF HOUSTON, for its own use and for the use and benefit of the Houston Independent School District, for the year 1977 was $156,728.90. 25. The taxes assessed and levied on the copiers by HARRIS COUNTY, for its own use and for the use and benefit of the State of Texas, the Harris County Flood Control District, the Port of Houston Authority, the Harris County Board of School Trustees, and the Harris County Hospital District, were as follows: (a) $55,969.39 for the year 1977; (b) $48,426.06 for the year 1976. 26. The ad valorem tax on personal property levied by the CTY OF HOUSTON and HARRIS COUNTY is a uniform tax on 19a property that does not discriminate on the origin or destination of goods. 27. On January 1, 1976 and 1977 the copiers stored at the Houston Terminal Warehouse had not been consigned to a common carrier. Il. CONCLUSIONS OF LAW 1. The copiers owned by XEROX and located at the Houston Terminal Warehouse on January 1, 1976 and on January 1, 1977 were not subject to state or local ad valorem taxation on personal property under the United States Constitution, Article I, Section 8, Clause 3, and Article I, Section 10, Clause 2. 2. With the exception of the negligible number of copiers previously committed to sale, XEROX was not bound by any laws, either State or Federal, to export the copiers to Latin America. SIGNED this 27th day of October, 1980. /s/ LYNN N. HUGHES Judge Presiding CERTIFICATE OF SERVICE I hereby certify that a true and correct copy was mailed, certified mail, return receipt requested, postage prepaid, on this 24th day of October, 1980, to Mr. Larry D. Thompson, Attorney for the Plaintiff, 303 Jackson Hill, Suite 200, Hous- ton, Texas 77007 and to Mr. Paul Bibler, Jr., Assistant County Attorney, 1001 Preston, Suite 637, Houston, Texas 77002. /s/ CHERYL HELENA CHAPMAN Cheryl Helena Chapman 20a 4. Order of the Supreme Court of Texas CLERK’S OFFICE—SUPREME COURT Austin, Texas Oct. 14, 1981 Dear Sir: You are hereby notified that the Application for Writ of Error in the case of C-481, XEROX CORPORATION vs. COUNTY OF HARRIS, TEXAS ET AL. was this day refused. No reversible error. (Motion to dismiss overruled) Very truly yours, GARSON R. JACKSON, Clerk 2la Denial of Rehearing by the Supreme Court of Texas CLERK’S OFFICE—SUPREME COURT Austin, Texas Nov. 25, 1981 Dear Sir: You are hereby notified that the Motion for Rehearing in the case of XEROX CORPN. v. COUNTY OF HARRIS No. C-481 was this day overruled. Very truly yours, GARSON R. JACKSON, Clerk 22a 6. Notice of Appeal and Acknowledgment of Filing IN THE SUPREME COURT OF THE STATE OF TEXAS No. C-481 > XEROX CORPORATION, Petitioner-Appellant, —V.— COUNTY OF HARRIS, TEXAS and CITY OF HOUSTON, TEXAS, Respondents-Appellees. > NOTICE OF APPEAL TO THE SUPREME COURT OF THE UNITED STATES Notice is hereby given that Xerox Corporation, Petitioner- Appellant above named, hereby appeals to the Supreme Court of the United States from the final judgment of the Supreme Court of the State of Texas finding no reversible error entered on October 14, 1981, and the denial of rehearing on November 25, 1981. This Appeal is taken pursuant to 28 U.S.C. § 1257(2). Notice is hereby given that 28 U.S.C. § 2403(b) may be applicable. /s/ ALFRED H. HODDINOTT, JR. Alfred H. Hoddinott, Jr., Esquire 800 Long Ridge Road Stamford, Connecticut 06904 (203) 329-8700 Counsel for Petitioner-Appellant. 23a CERTIFICATE OF SERVICE I do hereby certify that a true and correct copy of the above and foregoing Notice of Appeal to the Supreme Court of the United States was served on the counsel listed below by mail on this 22nd day of January, 1982 by depositing it in a United States post office wiih first class postage prepaid to each of those counsel at his post office address. /s/ ALFRED H. HODDINOTT, JR. Alfred H. Hoddinott, Jr. Copies to: Ms. Cheryl Helena Chapman Assistant City Attorney P.O. Box 1562 Houston, Texas 77001 Mr. Larry W. Hays Assistant County Attorney 1001 Preston, Suite 634 Houston, Texas 77002 Mr. Mark W. White Attorney General, State of Texas PO. Box 12548 Austin, Texas 78711 24a CLERK’S OFFICE—SUPREME COURT Austin, Texas Jan. 29, 1982 Dear Sir: In the case of Xerox Corp. v. County of Harris, C-481, your Notice of Appeal was filed today. Very truly yours, GARSON R. JACKSON, Clerk 25a 7. Amended Notice of Appeal and Acknowledgment of Filing IN THE COURT OF CIVIL APPEALS FIRST SUPREME JUDICIAL DISTRICT AT HOUSTON, TEXAS No. C-481 => COUNTY OF HARRIS, TEXAS and CITY OF HOUSTON, TEXAS, —vs.— XEROX CORPORATION > AMENDED NOTICE OF APPEAL TO THE SUPREME COURT OF THE UNITED STATES Notice is hereby given that Xerox Corporation, Petitioner- Appellant above named, hereby appeals to the Supreme Court of the United States from the final judgment of the Court of Civil Appeals for the First Supreme Judicial District at Hous- ton, Texas, and from the final judgment of the Supreme Court of the State of Texas finding no reversible error entered on October 14, 1981, and the denial of rehearing on November 25, This Appeal is taken pursuant to 28 U.S.C. § 1257(2). Notice is hereby given that 28 U.S.C. § 2403(b) may be applicable. /s/ ALFRED H. HODDINOTT, JR., Alfred H. Hoddinott, Jr., Esquire 800 Long Ridge Road Stamford, Connecticut 06904 (203) 329-8700 Counsel for Petitioner-Appellant. 26a CERTIFICATE OF SERVICE I do hereby certify that a true and correct copy of the above and foregoing Amended Notice of Appeal to the Supreme Court of the United States was served on the counsel listed below, by mail, on this the Ist day of February, 1982, by depositing it in a United States post office with first class postage, prepaid, to each of those counsel at his address. /s/ ALFRED H. HODDINOTT, JR. Alfred H. Hoddinott, Jr. Copies to: Ms. Cheryl Helena Chapman Assistant City Attorney Post Office Box 1562 Houston, Texas 77001 Mr. Larry W. Hays Assistant County Attorney 1001 Preston Suite 634 Houston, Texas 77002 Mr. Mark W. White Attorney General, STATE OF TEXAS Post Office Box 12548 Austin, Texas 78711 27a COURT OF APPEALS FIRST SUPREME JUDICIAL DISTRICT Harris County Civil Courts Building Houston, Texas 77002 February 1, 1982 Lorance & Thompson Hon. Larry Thompson 303 Jackson Hill at Memorial Houston, Texas 77007 Dear Sir: Re: 17862, County of Harris, Texas and City of Houston, Texas vs. Xerox Corporation, from Harris County Please be advised amended Notice of Appeal to the Supreme Court of the United States, on behalf of Xerox Corporation, was filed today in the above cause. Respectfully, MARIBELLE REICH, Clerk /s/ MARGIE THOMPSON, Deputy mt cc: Ms. Cheryl Helena Chapman P. O. Box 1562 Houston, Texas 77001 Mr. Larry W. Hays 1001 Preston, Suite 634 Houston, Texas 77002 Mr. Mark W. White, Attorney General P. O. Box 12548 Austin, Texas 78711 28a 8. Plaintiff’s Original Petition IN THE DISTRICT COURT OF HARRIS COUNTY, TEXAS —__— Judicial District No. > XEROX CORPORATION —vs.— COUNTY OF HARRIS, TEXAS and CARL S. SMITH > PLAINTIFF’S ORIGINAL PETITION TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW XEROX CORPORATION (hereinafter “Xerox”) complaining of the County of Harris, Texas (hereinafter “Harris County”) and Carl S. Smith (hereinafter “Smith”), Defendants, and for cause of action would show: Xerox is incorporated under the laws of New York and is duly authorized to transact business in the State of Texas. Harris County is a duly authorized taxing authority in the State of Texas and may be served, pursuant to Article 2027 V.A.T.S., by serving its County Judge, Jon Lindsay, at his office at 1115 Congress, Houston, Texas, 77002. Smith is the Tax Assessor and Collector of Harris County, is a resident of Harris County, and may be served at his offices at 301 San Jacinto, Houston, Texas 77002. 29a Xerox is a manufacturer and seller of copier machines, engaging in both domestic and international commerce. Pur- suant to its internationai trade, Xerox stores copiers (Models 3100, 3103 and 660) under United States Customs Bond in the Houston Terminal Warehouse located at 701 North San Jacinto, Houston, Texas, awaiting shipment to Latin American countries. Xerox manufactures the parts for these copiers at its main manufacturing facility in New York. These parts are shipped to the Mexico affiliate of Xerox, in Mexico City, and are as- sembled into the final product. After manufacturirg, the copiers are separately packaged and shipped to Nuevo Laredo, Mexico, and, at this point, are placed in Customs Bond. The copiers are then shipped, by truck, in Customs Bond, to the Houston Terminal Warehouse where they remain in Customs Bond and under continuous Customs control and supervision until shipped to Latin America, pursuant to orders placed with Xerox by its various Latin American affiliates. From the time these copiers enter the United Siates until they leave the United States, either through the Houston International Trade facili- ties or via Miami, Florida, the copiers are under the strict, constant control and regulation of the United States Customs Service. In the three year period in which Xerox has used the Houston Terminal Warehouse facilities, over ten thousand copiers passed through said warehouse; none of them have entered the comme ve of the United States, and virtually all have entered Latin American countries. Houston Terminal Warehouse stores Xerox copiers that are destined exclusively for foreign trade. By statute, Harris County may impose and Smith may assess and collect ad valorem taxes on personal property which is within the boundaries of Harris County and which is subject to such taxes. Ad valorem taxes were imposed by Harris County 30a for the year 1977 at the rate of $1.25 per $100.00 of assessed valuation on certain personal property within the county, upon an assessed valuation of property equal to 32% of the actual valuation. Ad valorem taxes for the year 1977, are due on October 1, 1977, and as of February 1, 1978, taxes become delinquent if not paid. If taxes are not paid by February 1, 1978, Harris County and Smith may enforce collection thereof. IV. On January 1, 1977, Xerox was the owner of the aforemen- tioned copiers at the Houston Terminal Warehouse. Within the time and in the manner prescribed by law, Xerox filed an application requesting an exemption with respect to these copiers. At all times material hereto, Xerox had a warehouse in Houston for storage of copiers it owns, leases, and maintains for domestic use in the Harris County area; Xerox does not now, and never has, claimed an exemption for these domestic- use copiers. Subsequent to filing the request for an exemption, Xerox received notice from Smith advising Xerox that its request for an exemption with respect to the copiers at Houston Terminal warehouse was denied, and that the copiers at said warehouse on January 1, 1977, were placed on the tax rolls of Harris County at a value of Nine Million Fifteen Thousand Six Hundred Eighty-Five Dollars ($9,015,685.00), with taxes as- sessed at approximately Fifty-Six Thousand Dollars ($56,000.00). V. Article 1, Section 8, Clause 3, of the United States Constitu- tion provides: “The Congress shall have the power ... to regulate commerce with foreign nations, and among the several states and with the Indian Tribes.” Pursuant to the Commerce Clause, Congress has promul- gated statutes (19 USC § 1551 et seq.) and, pursuant to these 3la statutes, the Secretary of Transportation has promulgated regulations (19 C.F.R. § 19.1 et seq.) which frees goods stored in Customs bonded warehouses of any import duties, and if such goods are exported and not used for domestic consump- tion, no duty on the importation can be levied. The purpose and effect of the statutes and regulations is to free American enterprises from extra financial burdens so that these en- terprises can effectively compete in foreign commerce. The federal purpose, through its statutes and regulations, of grant- ing American businesses this competitive advantage in their international commerce and trade, pre-empts any attempt by local governments to place taxes on the merchandise of such businesses. To allow local taxes, e.g., ad valorem taxes on merchandise having a foreign destination, would effectively abrogate the federal pian and purpose of granting this com- petitive advantage. Thus, the local tax must yield, under the supremacy clause of the federal constitution, to the dictates of the federal statutes and regulations. VI. Article 1, Section 10, Clause 2, of the United States Consti- tution provides: “No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws; and the net produce of all duties and imposts, laid by any State on imports or exports, shall be for the use of the Treasury of the United States; and all such laws shall be subject to the revision and control of congress.” Congress has not consented to the imposition of ad valorem taxes on goods in a Customs Bonded warehouse, and the Harris County ad valorem taxes are not necessary for the execution of any inspection laws of Texas or any political sub-division thereof, including Harris County. The Xerox copiers are protected by the import-export clause as the only time the copiers are ever “at rest” and not 32a physically being transported, while in Texas, is when the copiers are under customs bond in the Houston Terminal Warehouse. As indicated, goods in a Customs bonded ware- house are exempt from local taxation. In addition, federal statutes allow goods in a Customs bonded warehouse to remain for a period of three years (with routine extensions of at least one year) before any Cuty can be imposed on such goods. Effectiveiy, this is a congressional determination that the goods have not entered the domestic marketplace and are still “in transit.” Thus, the Xerox copiers are continually in import-export transit and are constitutionally exempt from local taxation. Vil. Xerox has consistently claimed the exemptions for its copiers from the ad valorem taxes, based on the decisions, statutes and regulations pursuant to the Commerce Clause and based on the Import-Export Clause; and has at all times made same known to Harris County and Smith. VIII. Harris County, Smith and the Harris County Board of Equalization have each and all refused and denied Xerox’s claim of a tax exemption for the copiers located at the Houston Terminal Warehouse. Smith has assessed such tax and the Board of Equalization has affirmed Smith’s decision. Defendants are insistii.g that Xerox pay the tax and are threatening to assess and collect and to continue to assess and collect such illegal and unconstitutional taxes. IX. There exists an actuai, substantial, immediate and bone fide controversy between Xerox and Defendants as to the legality and constitutionality of the imposition of the Harris County ad valorem taxes on Xerox’s copiers located at the Houston Terminal Warehouse, and Xerox seeks herein and is entitled to have a declaration that said tax is improper, illegal and uncon- stitutional and may not be imposed or collected. 33a X. As of February 1, 1978, Xerox will have no adequate remedy at law and will be irreparably damaged, unless Defendants are enjoined from collecting said tax. Article 7266, V.A.T.S., allows the Tax Assessor-Collector to summarily seize and sell, without Court process, any and all personal property of Xerox located in Harris County and apply same to reduce the amount of the illegal tax assessed against Xerox. Accordingly, prior to February 1, 1978, upon hearing hereof, Defendants should be temporarily enjoined from the enforcement or collection of said illegal tax, and from seizure of, levy upon, or sale of any of Xerox’s property, and from any other means of enforcement or attempted enforcement by said Defendants of the illegal tax on Xerox’s copiers. Upon final hearing, said injunction should be made permanent. WHEREFORE, PREMISES CONSIDERED, Xerox prays that Defendants be cited to appear and answer herein, and that (1) Pursuant to Article 2524-1, V.A.T.S., this court declare and adjudge that the Harris County ad valorem tax on Xerox’s copiers located at the Houston Terminal Warehouse is uncon- stitutional, illegal and void; (2) Prior to February 1, 1978, Defendants be temporarily enjoined from any collection, enforcement or attempted en- forcement of the unlawful tax on Xerox’s copiers, in question pending a final determination hereof; (3) Defendants be permanently enjoined from assessing, collecting and enforcing said unconstitutional, illegal and void tax against Xerox or any of its property, whether real, per- sonal, mixed, intangible or tangibie; 34a (4) And for general relief, both legal and equitable, to which Xerox is justly entitled. Respectfully submitted, LORANCE, THOMPSON & WITTIG By /s/ LARRY D. THOMPSON Larry D. Thompson Attorney for Plaintiff 609 Fannin, Suite 2121 Houston, Texas 77002 222-1304 xinuaddy JuIOr Office -Supreme oo US FILFEDN No. 81-1489 APR 28 1982 STEVAS, CLERK IN THE x Supreme Court of the United States OCTOBER TERM, 1981 ~~ XEROX CORPORATION, Appellant, —VvV.— COUNTY OF HARRIS, TEXAS, and CITY OF HOUSTON, TEXAS, Appellees. APPEAL FROM THE TEXAS COURT OF CIVIL APPEALS —_——— —_ -— —— - ——__- —--- JOINT APPENDIX —- ——_—_ —- ——_— ——_—_—_-— | ALFRED H. HODDINOTT, JR. MICHAEL H. DRISCOLL 800 Long Ridge Road County Attorney (203) 329-8700 JOHN J. GREENE Counsel for Appellant Assistant County Attorneys 1001 Preston, Suite 634 Houston, Texas 77002 (713) 221-5101 Counsel for Appellee County of Harris, Texas (Attorneys names continued on inside cover) APPEAL DOCKETED FEBRUARY 9, 1982 PROBABLE JURISDICTION NOTED APRIL 5, 1982 F. J. COLEMAN, JR. City Attorney JAY D. HOWELL, Jr. Senior Assistant City Attorney CHERYL HELENA CHAPMAN Senior Assistant City Attorney Counsel of Record BELINDA TURNER SAULSBERRY Assistant City Attorney P.O. Box 1562 Houston, Texas 77251 (713) 222-5151 Counsel for Appellee City of Houston TABLE OF CONTENTS SD. oe. = Art. 709. Classes | to 7.—Warehouses for the storage of bonded merchandise shail be used exclusively for that pur- pose, and for the storage of unclaimed goods under Govern- ment control, and shail be divided into the following classes: CLASS 1. Warehouses which are owned or leased by the Government and used for the storage of merchandise under- going examination by the appraiser; for the storage of seized and unclaimed goods and for other purposes, shall be known as “public stores.” Such warehouses or parts thereof used exclusively for the storage of seized and unclaimed goods shall be known as “general-order stores.” Where such stores are not sufficient or available for the storage of seized and unclaimed goods, such goods [353] may be stored in a warehouse of class 3. If there be no warehouse of the latter class at a port, the collector may, with the approval of the Department, rent suitable premises for the temporary storage of seized or unclaimed goods. Act Oct. 3, 1913, sec. IV, par. K. T. Ds. 13101, 13467, 22327, 22006, 29999. R. S., 2989. 55a CLASS 2. Importers’ private bonded warehouses used exclusively for the storage of imported merchandise owned and entered for warehouse by the proprietors. Cellars and vaults may, in the discretion of the Depart- ment, be bonded in this class for the storage of wines and spirits only. CLASS 3. Bonded warehouses used for the general storage of imrorted goods. A warehouse of this class shall consist of an entire build- ing, or of a part of a building entirely separated from the rest of the building by suitable partitions or walls. CLASS 4. Bonded yards or sheds for the storage of heavy and bulky imported merchandise. Warehouses of this class shall be used exclusively for the storage of heavy or bulky articles. The yards must be inclosed by substantial fences, not less than 12 feet in height, with entrance gates capable of being secured by customs locks. The collector may send to such yards unclaimed or seized goods of the character described in this article. Stables or parts thereof may be bonded upon approval of the department for the storage of animals. CLASS 5. Bonded bins or parts of buildings or of eleva- tors to be used for the storage of grain. The bonded portion must be separated from the rest of the buildings. Warehouses of class 4 or 5 may be bonded exclusively for the storage of goods imported by the proprietor, in which case they will be designated as “‘Importers’ private ware- houses.”’ CLASS 6. Warehouses for the manufacture in bond, solely R. S. 2960. R.S. 2958. R. S. 2959. Act Oct. 3, 1913, sec. IV, for exportation, of articles made in whole or in part of ™™ imported materials or of materials subject to internal-reve- nue tax; for the manufacture for home consumption or exportation of cigars in whole of tobacco imported from one country; also for the storage and cleansing of imported rice intended for exportation. Act Mar. 24, 1874, 56a [354] CLASS 7. Warehouses for smelting and refining im- porte ores and crude metals for exportation or domestic consumption. STORAGE WAREHOUSES. Art. 710. Application to bond.—In order to establish a bonded warehouse the owner or lessee shall make applica- tion in writing to the collector, describing the premises and location and stating the class of warehouse. The application must be accompanied by a certificate signed by the president or secretary of a board of fire underwriters, where such board exists, and at other ports by the officers or agents of two or more insurance companies, stating that the building is a suitable warehouse, acceptable for fire insurance purposes. After the collector has examined or caused an examina- tion to be made of the premises he will transmit to the Department with his recommendation the application, the insurance certificates, and a report stating the particulars relative to the location, construction, and dimensions of the building, its suitability for the storing of merchandise, whether the building is detached or adjoins other buildings, the location of doors, and all other material facts. Art. 711. Execution of bond.—On approval of the appli- cation, a bond shall be executed in duplicate on the pre- scribed form, in such penalty and with such security as the collector may deem proper, and forwarded to the Depart- ment for approval. Bonds may be executed in anticipation of approval and transmitted with the application. Art. 712. Bond—Renewal of.—The proprietors or occu- pants of bonded warehouses may be required on 10 days’ notice from the collector to renew their bonds; and if they fail so to do no more goods shall be sent to their ware- houses, and those therein shall be removed at their expense. 4” ov ze S7a Art. 713. New bond—When necessary.—The collector will promptly notify the Secretary of the Treasury of the death, pecuniary embarrassment, insolvency, or change of status of any of the parties to the bond, or of any circum- stances which require a new bond. If a bonded warehouse is destroyed and rebuilt a new bond will be required. [358] a a Art. 728. Transfer to another warehouse.—Merchandise may be transferred from one bonded warehouse to another in the same port on the written request of the owner or importer to the collector, who will issue an order, Customs Form 3725, directing the removal of the merchandise under customs supervision at the risk and expense of the party requesting it. All charges must be paid before goods are transferred from a warehouse of class 1. Art. 729. Examination packages.—Merchandise sent from a bonded warehouse to the appraiser’s stores for examination shall be returned to the warehouse for delivery unless the warehouseman shall indorse on the duty-paid permit that his charges have been paid. Art. 730. Proprietor responsible for goods.—The ware- houseman is responsible for the safe-keeping of the goods stored in any bonded warehouse, the Government being concerned solely for the security of the revenue. Art. 731. Control of merchandise in bonded ware- house.—Merchandise in bonded warhouse is subject only to the orders and decrees of the United States courts. It is not subject to levy, attachment, or other process of a State court, and collectors can not be enjoined by State courts from delivering such merchandise to importers or their assigns. 16896, 17720, . S., 9M. T. Ds. 16693, 58a The Government will not compel a warehouseman to deliver bonded goods, as the interest of the Government is in the collection of the duty on the merchandise or its exporta- tion, and any question of infringement of private rights by the warehouseman must be left to parties in interest. Imported goods in bonded warehouse are exempt from taxation under the general laws of the several States. 59a TREASURY DEPARTMENT DIVISION OF CUSTOMS CUSTOMS REGULATIONS OF THE UNITED STATES Prescribed for the Instruction and Guidance of Customs Officers EDITION OF 1923 [SEAL] Washington Government Printing Office 1924 60a ORDER OF PUBLICATION. TREASURY DEPARTMENT, May 27, 1924. The following regulations are published for the instruction and guidance of al! officers and employees of the customs. This volume is to be known and cited as the “Customs Regulations of 1923,” and is revised in accordance with the pertinent treasury decisions up to and including T. D. 39938 of December 31, 1923. References to these regulations in official! correspondence are to be made to the article numbers and not to the chapters or pages. Collectors and other chief officers of the customs are directed io require all officers and employees under their jurisdiction to familiarize themselves with the regulations, and particularly with those portions thereof pertaining to the spe- cific duties to which such officers or employees are assigned. These regulations are to be strictly observed and followed by all customs officers and employees unless compliance be ex- pres © waived in writing. A. W. MELLON, Secretary of the Treasury 6la [246] . > * MERCHANT VESSELS OF THE UNITED STATES— WITHDRAWAL OF SUPPLIES FOR. Art. 433. Form of withdrawal.—When articles of foreign or domestic production are withdrawn from a bonded ware- house or a bonded manufacturing warehouse for supplies of a vessel of the United States engaged in foreign trade, or in trade between the Atlantic and Pacific ports of the United States, free of duty or of internal-revenue tax, the owner of the articles or his agent must file with the collector a withdrawal on Custom Form 7506. Art. 434. Bond.—If the vessel named in the withdrawal is clearing coastwise, or goes from port to port in the United States to complete lading or unlading of cargo to and from foreign ports, or to and from Atlantic and Pacific ports of the United States, a bond must be taken on Customs Forin 7561 and in a penal sum equal to double the duties on the articles withdrawn. Art. 435. Delivery permit—Lading.—Upon the filing of the withdrawal and executing a bond, when required, the collector, if satisfied that the quantities mentioned in the withdrawal are not excessive for the purpose intended, shall issue a permit on Customs Form 7506A, directing the storekeeper to deliver the supplies to the surveyor. A copy of the withdrawal will be transmitted to the surveyor or inspector acting as such, with directions in- dorsed thereon in the following form: Port of —_ To the Surveyor: You will direct an inspector to examine the goods described in this withdrawal, and if found to agree exactly therewith, to superintend the lading thereof on board the __, and make return thereof. Collector. Act June 25, 1894, sec. 16; act July 24, 1897, sec 4 T.Ds. 9776, 9787, 18379, 18922, 23237 T.D. 35535 62a Art. 436. Intermediate ports.—The articles withdrawn and taken on board as supplies shall be noted on the manifest, and if the vessel touches at an intermediate port in the United States the collector at such port shall see that no portion of the supplies so noted is landed except upon entry and payment of duties. [247] Art. 437. Cancellation of bond.—The bond given on withdrawai of supplies shall be canceled upon the produc- tion of an affidavit of the master and mate, showing that such supplies have been used on board the vessel, and no portion thereof landed within the limits of the United States without the payment of duty thereon. FOREIGN VESSELS OF WAR, WITHDRAWAL OF SUPPLIES FOR. Art. 438. Countries accorded privilege.—The privilege of purchasing supplies from t':e public or bonded warehouses and from bonded manufacturing warehouses, free of duty or of internal-revenue tax, shall be extended to the vessels of war of any nation in ports of the United States which may reciprocate such privilege toward the vessels of war of the United States in its ports. The privilege of purchasing supplies from such war:- houses, duty free, is accorded to the vessels of war of the following countries: Argentina, Austria, Brazil, Chile, Den- mark, England, France, Greece, Holland, Italy, Japan, Ko- rea, Norway, Rumania, Russia, Salvador, Siam, Sweden, and Venezuela. ARTICLES EXPORTED FOR EXHIBITION. Art. 439. Articles entitled to privilege.—Animals and other articles of foreign or domestic origin sent out of the United States for temporary use or exhibition at a public exhibition, fair, or conference held in a foreign country may be admitted free of duty on their return to the United States, provided that dutiable articles shall have once paid duty in the United States, and no drawback has been allowed Tariff act of 1922, sec. 309 Act May 18, T. Ds. 17202 20819, 29950, 3730 63a thereon, and that internal-revenue tax shall have been paid before exportation and not refunded on domestic articles subject to such tax. Art. 440. Procedure on entry.—There shall be required on the entry of such articles— (a) A certificate of exportation, Customs Form 4467, or a bond for its production on Customs Form 7551. (b) A declaration made by the foreign shipper before the United States consul, stating that such articles were sent from the United States for temporary exhibition, or a bond for its production on Customs Form 7551. (c) A declaration of the importer on Customs Form 3329 for merchandise of either domestic or foreign origin. [439] , ss Art. 829. Public stores and bonded warehouses—Classes 1 to 8.—CLASS 1. Premises owned or leased by tie Govern- ment and used for the storage of merchandise undergoing examination by the appraiser, under seizure or pending final release from customs custody, shall be known as a “public store.” Unclaimed merchandise stored in such premises shall be held under “general order.” Where such premises are not sufficient or available for the storage of seized and un- claimed goods, such goods may be stored in a warehouse of class 3. If there be no warehouse of that class, the collector may, with the approval of the department, rent suitable premises for the storage of seized and unclaimed goods. CLASS 2. Importers’ private bonded warehouses used exclusively for the storage of merchandise belonging or consigned to the proprietor thereof. CLASS 3. Public bonded warehouses used exclusively for the storage of imported merchandise generally. A warehouse of this class shall consist of an entire building, or a part of a building entirely separated from the rest of the building by suitable partitions or walls. Tariff act of 1922, sec. S51. Sec. 535. 64a CLASS 4. Bonded yards or sheds for the storage of heavy and bulky imported merchandise. [440] Warehouses of this class shall be used exclusively for the storage of heavy and bulky articles. The yards must be inclosed by substantial fences, not less than 12 feet in height, with entrance gates capable of being secured by customs locks. The collectors may send to such yards unclaimed or seized goods of a character above described. Stables or parts thereof may be bonded upon approval of the department for the storage of animals. CLASS 5. Bonded bins or parts of buildings or of eleva- tors to be used for the storage of grain. The bonded portions must be separate from the rest of the building. Warehouses of class 4 or 5 may be bonded exclusively for the storage of goods imported by the proprietor thereof, in which case they will be designated as “importers’ private warehouses.” CLASS 6. Warehouses 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-reve- nue tax; and for the manufacture for home consumption or exportation of cigars in whole of tobacco imported from one country. CLASS 7. Warehouses bonded for smelting and refining imported ores and crude metals for exportation or domestic consumption. CLASS 8. Bonded warehouses established for the purpose of cleaning, sorting, repacking, or otherwise changing in condition, but not manufacturing, imported merchandise, under customs supervision and at the expense of the proprie- tor. Such merchandise may be withdrawn for exportation, without payment of the duties, o> for consumption upon the payment of duties accruing thereon in its condition at time of withdrawal. The scouring or carbonizing of wool in such Tariff act « 1922, sec. 311. See. 312. Secs. 535, 562, T.D. 35527. 65a bonded warehouse shall not be considered a process >of manufacture. Art. 830. Superintendent of warehouses. A customs offi- cer will be designated as superintendent of warehouses at ports where the business may require such an officer, whose duty it shall be to supervise the proceedings at the several bonded warehouses by visiting each of them frequently in order to insure the promptness and efficiency of ihe store- keepers, the accuracy of the books and reports, and the observance of all official orders and regulations. He will promptly report to the collector any irregularities which may occur. [445] Art. 845. Storage charges.—When merchandise is stored in a public store under warehouse entry, general order, or otherwise, the charges for storage due the Govern- ment must be collected before the packages are delivered therefrom. Art. 846. Examination of goods by importer—Sam- pling—Repacking.—Importers may, upon application ap- proved by the collector, examine, sample and repack (for preservation only) merchandise in bonded warehouse under the supervision of the storekeeper. Art. 847. Transfer to another warehouse.—Merchandise may be transferred from one bonded warehouse to another in the same port on the written request of the owner or importer to the collector, who will issue an order, Customs Form 7500-A, directing the removal of the merchandise under customs supervision at the risk and expense of the party requesting it. All charges must be paid before goods are transferred from a warehouse of class 1. Art. 848. Examination packages.—Merchandise sent from a bonded warehouse to the appraiser’s stores for examination shall be returned by the collector to the ware- Tariff act of 1922, secs. $57 $62. T.D. 35536. 66a house for delivery unless the warehouseman shall indorse on te duty-paid permit that his charges have been paid. Art. 849. Proprietor responsible for goods.—The ware- houseman is responsible for the safe-keeping of the goods stored in any bonded warehouse, the Government being concerned solely in the security of the revenue. Art. 850. Control of merchandise in bonded ware- house.—Merchandise in bonded warehouse is subject only to the orders and decrees of the United States courts. It is not subject to levy, attachment, or other process of a State court, and collectors can not be enjoined by State courts from delivering such merchandise to importers or their assigns. The Government will not compel a warehouseman to deliver bonded goods, as the interest of the Government is in the collection of the duty on the merchandise or its exporta- tion, and any question of infringement of private rights by the warehouseman must be left to parties in interest. Imported goods in bonded warehouse are exempt from taxation under the general laws of the several States. T.D. 24118. RS. 9M. T.Ds. 16693, 16896, 17188, 17 19340 T.Ds. 16545, 19242, 19378, 19 Low v. Austin 13 Wallace. 20; Clarke v. Clar\e 3 Woods. 405. Blount v. Munro © Ga. & State v. Pinck wey, 10 Rich. L. 474, T.D. 21158. 67a U.S. TREASURY DEPARTMENT BUREAU OF CUSTOMS CUSTOMS REGULATIONS OF THE UNITED STATES Prescribed for the Instruction and Guidance of Customs Officers EDITION OF 1931 [SEAL] United States Government Printing Office Washington : 1932 68a ORDER OF PUBLICATION TREASURY DEPARTMENT, OFFICE OF THE COMMISSIONER OF CUSTOMS, Washington, D.C. The following regulations are published for the instruction and guidance of all officers and employees of the customs. This volume is to be known and cited as the “Customs Regulations of 1931,” and is a revision of the customs regula- tions in accordance with the pertinent Treasury decisions up to and including T.D. 45347 of December 11, 1931. References to these regulations in official correspondence are to be made to the article numbers and not to the chapters or pages. Collectors and other chief officers of the customs are directed to require all officers and employees under their jurisdiction to familiarize themselves with the regulations, and particularly with those portions thereof pertaining to the spe- cific duties to which such officers and employees are assigned. These regulations are to be strictly observed and followed by ali customs officers and employees unless compliance therewith be expressly waived in writing. F.X.A. EBLE, Commissioner of Customs. Approved January 6, 1932: A.W. MELLON, Secretary of the Treasury. 69a [311] * * * VESSELS—WITHDRAWAL OF SUPPLIES FOR Art. 455. Exemption from customs duties and internal- revenue tax.—(a) Tariff act of 1930, section 309 (a): Articles of foreign or domestic manufacture or pro- duction may, under such regulations as the Secretary of the Treasury may prescribe, be withdrawn from bonded warehouses or bonded manufacturing warehouses free of duty or internal-revenue tax for supplies (not includ- ing equipment) of vessels of war, in ports of the United States, of any nation which may reciprocate such privi- lege toward the vessels of war of the United States in its ports, or for supplies (not including equipment) of vessels of the United States employed in the fisheries or in the whaling business, or actually engaged in foreign trade or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions, but no such article shall be landed at any port or place in the United States or in any of its possessions. (6) Unless a vessel is operating on a regular schedule in a class of trade which entitles it to the privilege, it is not considered to be actually engaged in the foreign trade, or in trade between the Atlantic and Pacific ports of the United States or between the United States and its possessions, unless it actually clears from the port where the withdrawal is made for a foreign port, a port on the opposite coast of the United States, or clears from a port in the United States to a port in one of its possessions (or [312] vice versa), as the case may be; but the fact that a vessel so clearing intends to stop at an intermediate port before reaching the port for which it cleared, for the purpose of lading or unlading cargo or passengers, will not debar it from claiming the privilege. Art. 456. United States Government vessels—Foreign war vessels.—(a) As United States war vessels, transports, and vessels belonging to the United States engaged exclusively in T.D. 9776, 9787 18379, 18922, 23237, 38835, 44477 T. D. 44500 70a the transportation of Government property, are not engaged in trade, they are excluded from the privilege of withdrawing supplies free of duty under section 309 (a). (b) The privilege may be accorded to vessels of war of the following countries: Argentina, Austria, Brazil, Chile, Den- mark, England, France, Germany, Greece, Holland, Italy, Japan, Korea, Norway, Rumania, Salvador, Siam, Sweden, and Venezuela. Art. 457. Form of withdrawal—Bond.—(a) Withdrawals shall be made on customs Form 7506. «b) If the vessel named in the withdrawal is clearing coastwise, or in the case of a vessel in the foreign trade, goes from port to port in the United States to complete lading or unlading of cargo or passengers, and the withdrawal is made by a person other than the importer of record, a bond must be taken on customs Form 7561. {c) No bond shall be required in the case of war vessels. Art. 458. Delivery permit—Lading.—(a) Upon the filing of the withdrawal and the execution of the bond, when required, the collector shall issue a permit on customs Form 7506A. (6) A copy of the withdrawal will be transmitted to the surveyor or inspector acting as such, who shall designate a customs officer to supervise the lading of the merchandise and make a return thereof. (c) The merchandise shall be entered on the store list of the vessel on which laden, which fact shall be certified by the marine clerk or officer acting as such on the withdrawal. Art. 459. Intermediate ports.—A copy of the store list showing the articles withdrawn and taken on board as supplies shall be made on or attached to the manifest, and if the vessel touches at an intermediate port in the United States the collector at such port shall see that no portion of Tila the supplies so noted is landed except upon entry and payment of duties. [313] Art. 460. Vessels diverted after clearance.—When, subsequent to clearance, a vessel which has withdrawn supplies free of duty is diverted to a class of trade not entitled to the privilege, the parties in interest shall immedi- ately notify the collector of customs at the poit of with- drawal, who shall cancel the conditional withdrawal and collect duty on such supplies. Whenever any such diversion comes to the attention of a collector of customs at any port in the United States, he shall likewise notify the collector at the port of withdrawal. Art. 461. Cancellation of bonds.—The bond given on withdrawal of supplies shall be canceled upon the produc- tion of an affidavit of the master or other cfficer of the vessel having knowledge of the facts, showing that such supplies have been used on board the vessel, and no portion thereof landed within the limits of the United States or any of its possessions. Art. 462. Tobacco products.—(a) Tariff act of 1930, sec- tion 317: The shipment or delivery of manufactured tobacco, snuff, cigar>. or cigarettes, for consumption beyond the jur! wiction of the internal-revenue laws of the United States, as defined by section 3448 of the Revised Statutes, shall be deemed exportation within the mean- ing of the customs and internal-revenue laws applicable to the exportation of such articles without payment of duty or internal-revenue tax. (b) As provided in section 3448 R. S. (U.S. Code, title 26, sec. 1178), the jurisdiction of the internal-revenue laws extends to all territory within the exterior boundaries of the United States; that is, within the 3-mile limit. (c) Imported manufactured tobacco, snuff, cigars, and cigarettes in bonded warehouse or otherwise in customs 72a custody, and such articles manufactured with the use of imported materials in a bonded manufacturing warehouse of class 6, may be withdrawn under section 317 for consump- tion beyond the 3-mile limit or international boundary, as the case may be, on vessels whether foreign or domestic, actually engaged in the foreign trade, or operating on a regular schedule in trade between one great district of the United States and another great district thereof, or between the United States and the Philippine Islands, the Virgin Islands, American Samoa or the island of Guam, or actually clearing for such places or on vessels of war or other governmental activity, including vessels belonging to the United States, in, or en route to, places outside the jurisdic- tion of the internal-revenue laws. {579} (c) Tariff act of 1930, section 560: The Secretary of the Treasury [Commissioner of Customs] may cause to be set aside any available space in a building used as a customhouse for the storage of bonded merchandise or may lease premises for the storage of unclaimed merchandise or other imported merchandise required to be stored by the Government, and set aside a portion of such leased premises for the storage of bonded merchandise: Provided, That no part of any premises owned or leased by the Govern- ment may be wsed for the storage of bonded merchan- dise at any port at which a public bonded warehouse has been established and is in operation. All the prem- ises so leased shall be ieased on public account and the storage and othe: citerges shall be deposited and ac- counted for as customs receipts, and the rates therefor shall not be less than the charges for storage and similar services made at such port of entry by commer- cial concerns for the storage and handling of merchan- dise. No collector or other officer of the customs shall own, in whole or in part, any bonded warchouse or 73a enter into any contract or agreement for the lease or use of any building to be thereafter erected as a public store or warehouse. No lease of any building to be so used shall be taken for a longer period than three years, nor shall rent for any such premises be paid, in whole or in part, in advance. (d) Tariff act of 1930, section 561: Any premises owned or leased by the Government and used for the storage of merchandise for the final release of which from customs custody a permit has not been issued shall be known as a “public store.” (e) Tariff act of 1930, section 562: Unless by special authority of the Secretary of the Treasury [Commissioner of Customs] no merchandise shall be withdrawn from bonded warehouse in less quantity than an entire bale, cask, box, or other pack- age; or, if in bulk, in the entire quantity imported or in a quantity not less than one ton weight. All merchan- dise so withdrawn shall be withdrawn in the original packages in which imported unless, upon the applica- tion of the importer, it appears to the collector that it is necessary to the safety or preservation of the merchan- dise to repack or transfer the same: * * * (/) Tariff act of 1930, section 312: The works of manufacturers engaged in smelting or refining, or both, of ores and crude metals, may, upon the giving of satisfactory bonds, be designated as bonded smelting warehouses. * * * CLASSES OF CUSTOMS WAREHOUSES Art. 921. Public stores and bonded warehouses—Classes 1 to 8.—CLASS 1. Premises owned or leased by the Govern- ment and used for the storage of merchandise undergoing 74a examination by the appraiser, under seizure or pending final release from customs custody, shall be known as a “public store.” Unclaimed merchandise stored in such premises shall be held under “general order.” Where such premises are not sufficient or available for the storage of seized and un- claimed goods, such goods may be stored in a warehouse of class 3. If there be no warehouse of that class, the collector may, with the (580] approval of the bureau, rent suitable premises for the storage of seized and unclaimed goods. CLASS 2. Importers’ private bonded warehouses used exclusively for the storage of merchandise belonging or consigned to the proprietor thereof. Warehouses of class 4 or 5 may be bonded exclusively for the storage of goods imported by the proprietor thereof, in which case they will be designated as “importers’ private warehouses.” CLASS 3. Public bonded warehouses used exclusively for the storage of imported merchandise generally. A warehouse of this class shall consist of an entire build- ing, or a part of a building entirely separated from the rest of t! e building by suitable partitions or walls. CLASS 4. Bonded yards or sheds for the storage of heavy and bulky imported merchandise. Warehouses of this class shall be used exclusively for the storage of heavy and bulky articles. If the collector deems it necessary yards must be inclosed by substantial fences, with entrance gates capable of being secured by customs locks. The collectors may send to such yards unclaimed or seized goods of a character above described. Stables or parts thereof may be bonded upon approval of the bureau for the storage of animals. CLASS 5. Bonded bins or parts of buildings or of eleva- tors to be used for the storage of grain. The bonded portions must be separate from the rest of the building. CLASS 6. Warehouses for the manufacture in bond, solely for exportation, of articles made in whole or in part of 75a imported materials or of materials subject to internal-reve- nue tax; and for the manufacture for home consumption or exportation of cigars in whole of tobacco imported from one country. CLASS 7. Warehouses bonded for smelting and refining imported res and crude metals for exportation or domestic consumption. CLASS 8. Bonded warehouses established for the purpose of cleaning, sorting, repacking, or otherwise changing in condition, but not manufacturing, imported merchandise, under customs supervision and at the expense of the proprie- tor. A warehouse of this class shall consist of an entire building, or a part of a building entirely separated from the rest of the building by suitable partitions or walls. [581] Warehouses of class 1 and storage warehouses of classes 2, 3, 4, 5, and 6 may be designated as ‘‘constructive manipula- tion warehouses’’ when the exigencies of the service so require. GENERAL PROVISIONS Art. 922. Application to bond.—(@) In order to establish a bonded warehouse the owner or lessee shall make applica- tion in writing to the collector, describing the premises and location and stating the class of warehouse. (b) The application must be accompanied by a certificate + ps. sss, signed by the president or secretary of a board of fire ™” underwriters, where such board exists, and at other ports by the officers or agents of two or more insurance companies, stating that the building is a suitable warehouse, acceptable for fire-insurance purposes. (c) After the collector has examined or caused an exami- nation to be made of the premises he will transmit to the bureau with his recommendation the appiication, the insur- ance certificates, and a report stating the particulars relative to the location, construction, and dimensions of the build- 76a ing, its suitability for the storing of merchandise, whether the building is detached or adjoins other buildings, the location of doors, and all other material facts. (d) The collector will also state whether or not, in his opinion, the business of the port requires the establishment of such warehouse. Art. 923. Execution of bond.—On approval of the appli- cation to bond warehouses, classes 2, 3, 4, 5, and 8, a bond shall be executed in duplicate on customs Form 3581 in such penalty and with such security as the collector may deem ‘proper and forwarded to the bureau for approval. When approved, one copy will be retained by the bureau and the other returned to the coliector. Bonds may be executed in anticipation of approval and transmitted with the applica- tion. All storage warehouses operated by one proprietor in the same customs district may be included in one bond. The penalty on the bond shall not de less than $5,000 on each of the premises, with a maximum penalty on all premises covered by the bond of $50,000. This amount may be increased if additional security is deemed necessary. [586] *_ * * Art. 939. Transfer to another warehouse.—(a) With the concurrence of the proprietors of the delivering and receiv- ing warehouses, merchandise may be transferred u [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385008_1986%3A0. Public record. Not legal advice.