Respondents Brief — Limbach v. Hooven & Allison Co.

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No. $3-96

IN THE

Supreme Court of the United States

October Term, 1983

JOANNE LIMBACH,

TAX COMMISSIONER OF OHIO.

Petitioner

THRE HOOVEN & ALLISON COMPANY,

Respondent

On Writ OF CERTIORARI TO

THE SUPREME Court OF Onto

MEICHAEL A. NIMS

Counsel of Record

KENNETH E. UPDEGRAFT, JR.

CHARLES H. MOELLENBERG, JR.

Jones, Day, REAvIs & POGUE

1700 Huntington Building

Cleveland, Ohio 44115

(216) 696-3939

Attorneys for Respondent

I].

QUESTIONS PRESENTED FOR REVIEW

Whether the Supreme Court of Ohio correctly held

under Ohio law that the Tax Commissioner of Ohio

was collaterally estopped from assessing Ohio's ad val-

orem personal property tax against respondent Hoo-

ven & Allison Company's inventory of imported raw

materials held for future use in manufacturing, on the

basis of this Court's decision in Hooven & Allison Co.

v. Evatt, 324 U.S. 652 (1945).

Whether this Court should decide the federal consti-

tutional issues presented for review in the absence of

a factual record and a decision by the court below on

these issues.

Whether Ohio's assessment of its ad valorem personal

property tax against respondent Hooven & Allison

Company's inventory of imported raw materials held

for future use in manufacturing violates the Foreign

Commerce Clause or Import-Export Clause of the

United States Constitution.

PARTIES

Respondent The Hooven and Allison Company

changed its name in January, 1983 to H & A Industries,

Inc. Respondent has one subsidiary, Bolen Leather

Products, Inc.

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ........

PME 4b heedd cece eee Rd oD ed eR E Ree er eho es

py oF al pe 8 ly +. Re ae

CONSTITUTIONAL AND STATUTORY

ce ag fe es 3)

STATEMENT OF THE CASE ...............005..

SUMMARY OF THE ARGUMENT ...............

| 5 A Se EA ae aE TNS

I. This Court In Michelin Tire Did Not Overrule

Il.

Ill.

Hooven |. Therefore, The Supreme Court Of Ohio

Correctly Applied State Law Principles Of Col-

lateral Estoppel To Bar The Tax Commissioner

From Assessing The State Personal Property Tax

Against Hooven & Allison’s Inventory Of Imported

Raw Materials Held For Future Use In Manu-

RE hci tin chk coy PORE DA eee Ulal> Ubinas

This Court Lacks An Adequate Factual Record To

Decide The Federal Constitutional Issues And

Should Dismiss Its Writ Of Certiorari As Im-

UCU THMMMNNEE 5 os dios Sab 03 keds 2 oleesal

The Imposition Of The Ohio Personal Property Tax

On Hooven & Allison's Inventory Of Imported Raw

Materials Held For Future Use In Manufacturing

Violates The Foreign Commerce Clause And The

eB Pe ee rere Terry rere

A. Ohio Personal Property Taxation Of Hooven &

Allison's Inventories Of Imported Fibers Would

Subject Those Fibers To International Multiple

EN Gos Whe GRa/ COR cer Oe td PERT CLE Cien

B. State Personal Property Taxation Of Imported

Raw Materials Would Conflict With Federal

Regulation Of Foreign Commerce ..........

C. State Personal Property Taxation Of Manu-

facturers Inventories Of Imported Raw

Materials Would Create Interstate Commercial

ME rc et ie US ans Cy Ly tia ta hed

I Sa coal are 17k Sak gn atin g's 0 one wae ka

CERTIFICATE OF SERVICE .......... 2c cccccens

APPENDICES

Agidavit of Jolin P. Back 2.5.05. 0 eve cc ceee:

Ohio Supreme Court Rule VII, §7 .........

A-]

B-1]

TABLE OF AUTHORITIES

Cases

PAGE

A & P Tea Co. v. Cottrell, 424 U.S. 366 (1976) ....... 36

Adams Mfg. Co. v. Storen, 304 U.S. 307 (1938) ...... 29

Arkansas Electric Cooperative Corp. v. Arkansas Public

Comm'n, 103 S.Ct. 1905 (1983) ............0.005 19

Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935) .. 25, 30

Best & Co. v. Maxwell, 311 U.S. 454 (1940) .. 0.000... 16

Boston Stock Exchange v. State Tax Commission, 429

a EET a Oa CN e 5 kab eR eta cckes Cues dt 14, 36

Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827) .. 7, 13,

15, 35

City of Columbus v. Union Cemetery Ass'n, 45 Ohio St.

OS Si, eee Me OU IGM... . ids ccswnaceceret 10

Commissioner of Internal Revenue v. Sunnen, 333 U.S.

Re Tat ee Noe a'cin ys. vip hw Wea NS 10, 11

Commonwealth rdison Co. v. Montana, 453 U.S. 609

Ne i gd Se gt ae Cee. o' a a niks 14

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274

ee GCs er aw ah We eae Saws > b6e es 19, 22

Dean Milk Co. v. Madison, 340 U.S. 349 (1951) ...... 36

Department of Revenue of Washington v. Ass'n of

Washington Stevedoring Cos., 435 U.S. 734 (1978) . 14,19

Gwin, White & Prince, Inc. v. Henneford , 305 U.S. 434

a Faint hind vice nie wv igh p ree Cara Oe e.o% vs 21, 29

Halliburton Oil Well Co. v. Reily, 373 U.S. 64 (1963) . 27

Henneford v. Silas Mason Co. , 300 U.S. 577 (1937)... 27

Hercules Powder Co. v. United States , 337 F.2d 643 (Ct.

SRT os ahs aly cb Ln CAR ER WER eA 6 ones 12

PAGE

International Harvest. rCo.v. Department of Treasury,

Se RN oF 6a cae hein Pa eRe 27, 29, 30

Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434

CRTs Mane cA ehiae's chee whine Rekiene eo trae passim

Johnson v. Massachusetts , 390 U.S. 511 (1968) ....... 17

Low v. Austin, 80 U.S. (13 Wall.) 29 (1872) .......... 6, 8,

11, 13

Maryland v. Louisiana, 451 U.S. 725 (1981) ......... 16

McGoldrick v. Gulf Oil Corp., 309 U.S. 414 (1940)... 34

McLeod v. J]. E. Dilworth Co., 322 U.S. 327 (1944)... 36

Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976) ... passim

Minnesota v. Blasius, 290 U.S. 1 (1933) ..........0.. 30

Mitchell v. Oregon Frozen Foods Co., 361 U.S. 231

SE hie WON en had eaten de vine One eis. een 17

Montana v. United States, 440 U.S. 147 (1979) ....... 1]

Nippert v. City of Richmond, 327 U.S. 416 (1946) .... 28,31, 3!

Norwood v. McDonald, 142 Ohio St. 299, 52 N.E.2d 67

SR aia aee ahiee aes ated And oo wwe e Rie eee 10

Richfield Oil Corp. v. State Board of Equalization , 329

Bt | ear array ce eer ay Pree he a ee 28

Rowland v. Collins , 48 Ohio St.2d 311, 358 N.E.2d 582

CUEUNE d eeca ck ee er een es oe Os av WIG Sloe er acess 5

S.S. Kresge Co. v. Bowers, 170 Ohio St. 405, 166 N.E.2d

139 (1960), appeal dism'd, 365 U.S. 466 (1961) ..... 5, 23

Tait v. Western Maryland R. Co., 289 U.S. 620 (1933) 1]

Wainwright v. City of New Orleans , 392 U.S. 598 (1968) 17

Western Live Stock v. Bureau of Revenue , 303 U.S. 250

fo BPI ert Anne ae Pree Dr ane ry et eee 21

PAGE

Whitehead v. General Telephone Co. , 20 Ohio St.2d 108,

ee CUO 6 Sa iae hs ceded apie eeaciaxes 10

Wolf v. Weinstein, 372 U.S. 633 (1963) ....... eawnes 17

Zee Toys, Inc. v. County of Los Angeles , 85 Cal. App. 3d

763, 149 Cal. Rptr. 750 (1975), affd sub nom., Sears,

Roebuck & Co. v. County of Los Angeles, 449 U.S.

AUER Fc ara es Cost esc s eon Lee hae AS, 37

Constitutional and Statutory Provisions

Roe UN WERE OS i nt hore eas Sihe RAN Ss 6, 23

Tariff Schedules of the United States Annotated (1982

§§304.02-.58, 315.25, 315.35, 315.40, 315.50 ..... 34, 36

United States Code, Title 19, §2411 ..............4. 25

United States Constitution, Article I, §8, cl. 3......... l

Books and Periodicals

Belassa, The Process of Industrial Development and Al-

ternative Development Strategies, (World Bank Staff

Working Paper No. 438, October, 1980) ........... 26

Belassa, The Tokyo Round and the Developing Coun-

tries, 14 JOURNAL OF WORLD TRADE Law 93 (1980). 26

Dam, Tit GATT: LAW AND INTERNATIONAL ECONOMIC

Ea ee err a Pier ee 26

Froomkin, Some Problems of Tax Policy in Latin Ameri-

ca, LO NATIONAL TAN JOURNAL 370 (1958) 0000, 26

Grilli, The Future for Hard Fibers and Competition from

Synthetics (World Bank Staff Occasional Papers No.

garth SRO Are aot ee mee ir ibe Repine Site a eae OF 24-25,

viii

Hellerstein, State Taxation and The Supreme Court: To-

ward A More Unified Approach To Constitutional Ad-

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King, Tax Conventions to Which United States is a Party

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Latin America Commodities Report, March 18, 1977 ..

Latin America Commodities Report, February 17, 1978

Manners, The Changing World Market for Iron Ore

FREED | seid wid aera Capen wind cds elec ucae le

OECD Model Convention For The Avoidance Of Double

Taxation With Respect To Taxes On Income And Capi-

tal, Chapter II, Article 2, reprinted in 1 Tax Treaties

(CAset) WEE CEE cs cba ekackhvasdakeoceeiens

Price, Waterhouse & Co., Information Guide: Doing

ee re rar

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CE ors. 5 3 acbon ¢ ae 6 Pes eee RE Gordo Be

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I, CRD 5-4. ripieh hgh inal 5, Feeaeaed aes dade s

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Secretary of Commerce And The United States Trade

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United States International Trade Commission, Sum-

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Waste, Thread, and Yarn; Vegetable Fibers (Except

Cotton and Yarns) (September, 1982) .............

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Development Issues (1979) ............ 000 eevee es

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DNUEPUD CRIES sce ccc ccc ees eseecees

The World Bank, Brazil: A Review of Agricultural Poli-

TG LEGENDS yrs seccecccccececess

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Staff Working Paper No. 313, 1979) ..............

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World Jute Economy (World Bank Staff Working Paper

CCC C ES gobs scceeccccccccccs

Developments in the Law — Federal Limitations on State

Taxation of Interstate Business, 75 Harv. L. Rev. 953

EGE cabs ecescccccccccce ss

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merce: The Contemporary Vitality of the Home-Port

Doctrine , 127 U. Penn. L. Rev. 817 (1979) ........

Recent Decisions, 47 Miss. L. J. 789 (1976) ..........

Miscellaneous

48 Fed. Reg. 23047 (May 27, 1983) .................

26, 27

21, 25

No. 83-96

IN THE

Supreme Court of the United States

October Term, 1983

JOANNE LIMBACH,

TAX COMMISSIONER OF OHIO,

Petitioner

Vv.

THE HOOVEN & ALLISON COMPANY,

Respondent

On Wait OF CERTIORARI TO

THE SUPREME Court OF OHIO

BRIEF FOR RESPONDENT

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

In addition to the constitutional and statutory pro-

visions cited by petitioner, this case involves the Foreign

Commerce Clause, which is contained within Article I, §5,

cl. 3 of the United States Constitution. Article I, §8, cl. 3

of the United States Constitution provides, in pertinent

part:

The Congress shall have Power... To regulate Commerce with

foreign Nations and among the several States . .

STATEMENT OF THE CASE

Respondent The Hooven and Allison Company

(“Hooven & Allison’) is a manufacturer of cordage products

made from natural fibers. These natural fibers are not

grown in the United States and must be imported. This

case concerns a personal property tax assessment issued by

petitioner Tax Commissioner of Ohio on Hooven & Alli-

son's inventory of imported raw materials held for future

use in manufacturing cordage. The Tax Commissioner in-

creased the assessed value of personal property for the tax

years 1976 and 1977 by including as part of Hooven &

Allison’s taxable manufacturing inventory the average value

of its imported raw materials inventory held for future use

in manufacturing. In its tax returns, Hooven & Allison had

deducted the value of such imported raw materials from its

manufacturing inventory on the authority of this Court's

decision in Hooven & Allison Co. v. Evatt, 324 U.S. 652

(1945) (hereinafter “Hooven I”).'

Upon application for review, the Tax Commissioner

sustained the increased assessments, disregarding Hooven

& Allison's collateral estoppel and federal constitutional

arguments. Pet. App. A-11. The Tax Commissioner relied

on Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976)

(hereinafter “Michelin Tire”), in which this Court held that

the Import-Export Clause did not proscribe the imposition

by the State of Georgia of a nondiscriminatory ad valorem

personal property tax on imported finished goods sorted,

arranged and held strictly for resale. Though the Tax Com-

In Hooven 1, this Court held, on the same facts, that Hooven &

Allison's imported raw materials stored in their original packages and

held for future use in manufacturing were immune under the Import-

Export Clause of the United States Constitution from Ohio's personal

property tax.

missioner recognized that this Court had not overruled

Hooven | in its Michelin Tire decision, the Tax Commis-

sioner reasoned that the “rationale” of the Michelin Tire

decision was “equally persuasive” in the context of Hooven

& Allison's imported raw materials stored for later use in

manufacturing. Pet. App. A-15.

Hooven & Allison appealed to the Ohio Board of Tax

Appeals. Hooven & Allison raised again the collateral es-

toppel and federal constitutional issues presented here.”

The Board of Tax Appeals adopted the essential facts, as

stated in the Tax Commissioner's Certificate of Deter-

mination:

The applicant is a manufacturer of cordage,

importing certain quantities of raw materials (hemp,

sisal, jute, manila, ete.) each year from Tanzania, Ec-

uador, Kenya, Thailand, Bangladesh, et al. Such im-

ported manufacturing inventory is ordered on credit

from foreign producers and shippers through their

brokers in various U.S. coastal cities, who then ar-

range for its transport by ocean-going vessel to the

United States. Upon arrival in this country, the im-

ports are transported overland by rail to the applicant's

Xenia plant. At the Xenia plant, the bales of raw mate-

rials are placed in a warehouse and inspected, with

payment then being made to the broker by pro forma

invoice; any weight variations or quality grade differ-

ences discovered upon inspection result in a claim for

partial refund. (However, whether the materials are

subsequently approved as inspected or a claim for

damage or misgrading is filed, Hooven & Allison takes

title to all the bales of materials when they are boarded

* Decision and Order of Board of Tax Appeals, entered March 19,

1982. Pet. App. A-10.

overseas on the ocean-going vessels.)' After complete

tagging and inspection, the imported bales of raw ma-

terials are then stored in a dry area in their original

packages until placed into production.

Pet. App. at A-11, A-12.

Upon the record and briefs submitted by the parties,

the Board of Tax Appeals held:

The evidence before the Board of Tax Appeals

establishes that the parties involved in this matter are

identical to those involved in Hooven 1. The taxability

of raw materials issue involved in the case at bar was

also an issue in Hooven 1, The raw materials and the

type of taxation involved in this cause are identical to

those involved in Hooven 1, Hooven 1 has not been

reversed by the U.S. Supreme Court and thus, has the

force and effect of law. Under the doctrine of collateral

estoppel, litigation of the instant [taxability of the in-

volved raw materials] [sic] issue is barred in’ this

matter and the exemption from taxation was im-

properly held to be unavailable.

The Board of Tax Appeals rejected the Tax Commis-

sioner’s argument that this Court in Michelin Tire had over-

ruled Hooven 1. Accordingly, the Board of Tax Appeals

reversed the Tax Commissioner.

’ Due to a misunderstanding, representatives of Hooven & Alli-

son advised the Tax Commissioner erroneously that Hooven & Allison

took title to the imported fibers at the time they were boarded on

vessels in foreign ports. In fact, Hooven & Allison's contracts for the

purchase of fibers provided, as did the contracts considered by this

Court in Hooven 1, that title passed to Hooven & Allison upon payment

of the purchase price. Hooven & Allison informed the Board of Tax

Appeals of this factual error in its brief at page ten, but apparently the

Board of Tax Appeals overlooked the correction. In any event, this

factual error is inconsequential. This Court stated in Hooven I that “the

time when title passes to [Hooven & Allison] is immaterial to decision. ”

324 U.S. at 662 n.3.

The Board of Tax Appeals decided only the collateral

estoppel issue. Because the Tax Commissioner took the

position that this Court in Michelin Tire had overruled

Hooven I, the Tax Commissioner deliberately chose to

present no evidence regarding the constitutional issues.

Furthermore, as the Tax Commissioner also contended be-

fore the Board of Tax Appeals, the Board of Tax Appeals

lacked jurisdiction under Ohio law to consider the federal

constitutional issues. 8. S. Kresyre Co. v. Bowers, 170 Ohio

St. 405, 407, 166 N.E.2d 139, 141 (1960), appeal dism'd,

365 U.S. 466 (1961). Therefore, Hooven & Allison also did

not present, and was not required to present, any evidence

concerning the constitutional issues to the Board of Tax

Appeals.

Hooven & Allison filed a Notice of Appeal to the Su-

preme Court of Ohio in order to raise the constitutional

issues, which the Board of Tax Appeals could not consider,

and to preserve its right to have the Supreme Court of Ohio

consider alternative grounds for affirming the Decision and

Order of the Board of Tax Appeals. Rowland v. Collins, 48

Ohio St.2d 311, 312, 358 N.E.2d 582 (1976).

The Tax Commissioner of Ohio filed subsequently a

Notice of Cross-Appeal to the Supreme Court of Ohio. The

Tax Commissioner's Notice of Cross-Appeal raised only a

question of state law—whether the Board of Tax Appeals

had correctly applied the state law principles of collateral

estoppel:

The Board erred in holding that the Tax Commis-

sioner is collaterally estopped by the decision of the

United States Supreme Court in Hooven and Allison

Co. v. Evatt, 324 U.S. 652 (1945), from assessing the

personal property tax for tax years 1976 and 1977 on

taxpayer's imported raw materials inventory retained

in its original packages on tax listing day and, based on

such holding, deciding that the final determinations of

the Tax Commissioner in issue in BTA Case Nos.

79-C-637 and 79-C-638 should be reversed.

As before the Board of Tax Appeals, the Tax Commis-

sioner again chose not to present any evidence relating to

the federal constitutional questions raised in Hooven &

Allison's appeal, though those questions arose within the

original jurisdiction of the Ohio Supreme Court. Hooven &

Allison sought to invoke the original jurisdiction of the

court and, pursuant to Ohio Supreme Court Rule VIII, §7,

presented certain facts pertaining to the constitutional is-

sues by means of an affidavit of John P. Buck, its Vice

President and Treasurer.’ It further requested an evi-

dentiary hearing, if the Ohio Supreme Court preferred to

ascertain the facts through a factual hearing. Reply Brief of

Appellant and Cross-Appellee, at 11. Because the Ohio

Supreme Court did not reach the federal constitutional

issues raised only in Hooven & Allison's appeal, the court

did not undertake any fact-finding and did not request the

parties to develop a factual record on those issues.

The Ohio Supreme Court affirmed the Board of Tax

Appeals. The court held that under Ohio law the principles

of collateral estoppel prohibited the Tax Commissioner

from assessing Ohio's personal property tax against Hooven

& Allison's imported raw materials held for future use in

manufacturing. It carefully considered the effect of this

Court's decision in Michelin Tire. It found that this Court

had not overruled Hooven I in Michelin Tire. Though this

Court had discussed Hooven I in Michelin Tire, this Court

explicitly overruled only Low v. Austin, 80 U.S. (13 Wall.)

29 (1872). Therefore, the Ohio Supreme Court held that

this “[C Jourt’s action—or inaction— must be accorded con-

clusive effect, at least in regard to its intent in reapprais-

* Counsel for the Tax Commissioner refused to include the Affi-

davit of John P. Buck in the Joint Appendix. Despite respondent's

designation of this affidavit, counsel for the Tax Commissioner im-

properly arrogated to himself the judicial power to determine that this

affidavit was not a part of the record below. This affidavit is therefore

included as Appendix A to this brief.

ing its earlier ruling in Hooven 1.” 4 Ohio St.3d at 172; 447

N.E.2d at 1298; Pet. App. at A-6.

Contrary to the Tax Commissioner's unjustified claim

that the Ohio Supreme Court resurrected the original pack-

age doctrine buried in Michelin Tire, the court recognized

that Michelin Tire sounded the “death knell” of the original

package doctrine. Id. But, it found ample distinguishing

facts between the imported finished goods held for resale in

Michelin Tire and the imported raw materials held for fu-

ture use in manufacturing in Hooven I (and this case), Id.

This distinction was found to be particularly significant be-

cause this Court reserved judgment in Michelin Tire on the

constitutionality of the state personal property tax imposed

on imported tubes, which are more akin to the imported

raw materials of Hooven & Allison than Michelin Tire’s

finished tires held for resale. Id.; Pet. App. at A-7, Noting

that this Court, since Brown v, Maryland, 25 U.S. (12

Wheat.) 419 (1827), has disdained “an inflexible rule” re-

garding the constitutionality of state taxation of foreign

commerce, the Ohio Supreme Court aptly reasoned:

Finally, it has been suggested that we ignore the

dictates of Hooven | as Michelin indicates at the very

least the United States Supreme Court's intention

presently to abandon the principles embodied in the

former action. Were this court to comply with such a

request, we would be guilty of overreaching.

4 Ohio St.3d at 173; 447 N.E.2d at 1299; Pet. App. at A-9.

Therefore, on the basis of distinguishing character-

istics between the possible effect of state taxation on foreign

commerce in Hooven I (and this case) in contrast to Mi-

chelin Tire, the Ohio Supreme Court rejected the Tax

Commissioner's argument of the implicit overruling of

Hooven I and held under Ohio law that collateral estoppel

applied to bar state taxation of Hooven & Allison's imported

raw materials. Accordingly, it did not address the federal

constitutional issues raised solely by Hooven & Allison, not

by the Tax Commissioner, in its appeal. The Ohio Supreme

Court decided only the issue of collateral estoppel under

applicable principles of state law.

SUMMARY OF ARGUMENT

1. Before the Supreme Court of Ohio, the Tax Com-

missioner deliberately chose to argue only that Michelin

Tire overruled Hooven | as a matter of law, Consistent with

this conscious strategy, the Tax Commissioner chose not to

present any factual evidence concerning whether Hooven I

had been overruled or should be overruled on the authority

of Michelin Tire. Consequently, the Tax Commissioner

raised below only a narrow issue of law. The Supreme

Court of Ohio correctly decided this issue of law by holding

that this Court in Michelin Tire had not overruled Hooven

1. Though this Court discussed Hooven 1 in Michelin Tire,

it overruled only Low v. Austin, 80 U.S, (13 Wall.) 29

(1872). The different factual context of Hooven I from Mi-

chelin Tire provided good reason for the Michelin Tire

Court not to decide whether to overrule Hooven I before

examining the practical effect on foreign commerce of

Ohio's personal property tax as applied to Hooven & Alli-

son's inventory of imported raw materials held for future

use in manufacturing, Because the Tax Commissioner

presented no factual evidence, once the Ohio Supreme

Court correctly held that Michelin Tire had not overruled

Hooven | as a matter of law, it indisputably followed that

state law principles of collateral estoppel barred state per-

sonal property taxation of Hooven & Allison's raw materials

inventory,

2. This Court should dismiss its writ of certiorari as

improvidently granted. The Tax Commissioner failed to

develop any factual record below concerning the federal

constitutional questions. This Court, therefore, lacks an

adequate factual record on which to consider the practical

effect of the state personal property tax on foreign com-

merce as applied to Hooven & Allison's importation of raw

materials, Without a factual record, this Court should not

decide the important federal constitutional issues. The re-

maining collateral estoppel issue raises primarily a question

of state law and therefore does not warrant review by writ

of certiorari.

3. Ohio personal property taxation of Hooven & Alli-

son's imported raw materials inventory would violate the

Foreign Commerce Clause and the policies underlying the

Import-Export Clause, by subjecting Hooven & Allison to

unduly burdensome multiple taxation solely because of the

foreign origin of its raw materials, by interfering with na-

tional foreign policy on international trade, and by likely

causing interstate commercial conflict.

ARGUMENT

I, THIS COURT IN MICHELIN TIRE DID NOT

OVERRULE HOOVEN I, THEREFORE, THE SU-

PREME COURT OF OHIO CORRECTLY APPLIED

STATE LAW PRINCIPLES OF COLLATERAL ESTOP-

PEL TO BAR THE TAX COMMISSIONER FROM AS-

SESSING THE STATE PERSONAL PROPERTY TAX

AGAINST HOOVEN & ALLISON'S INVENTORY OF

IMPORTED RAW MATERIALS HELD FOR FUTURE

USE IN MANUFACTURING,

The Tax Commissioner took the position below that

this Court's opinion in Michelin Tire had the effect as a

matter of law of overruling Hooven 1, Consequently, the

Tax Commissioner deliberately chose not to establish a

factual record that would show why Hooven I should either

be held to have been overruled in Michelin Tire or should

now be overruled, The conscious decision of the Tax Com-

missioner to choose as his battleground the one argument

that Michelin Tire had overruled Hooven I and that facts

were not necessary to this determination left the Supreme

Court of Ohio with a very narrow issue — whether this

Court had overruled Hooven I as a matter of law. Plainly

this Court in Michelin Tire did not intend to overrule Hoo-

ven 1, Once the Supreme Court of Ohio decided this issue,

as it did correctly, its application of state law collateral

estoppel principles followed as a matter of course.

This Court held in Hooven I that the Import-Export

Clause prohibited the State of Ohio from assessing its per-

sonal property tax against Hooven & Allison's inventory of

imported raw materials held for future use in) manu-

facturing. It is undisputed that the facts surrounding Hoo-

ven & Allison's purchase, importation, storage and use of

the raw materials, on which the Tax Commissioner assessed

personal property taxes in tax years 1976 and 1977, were

identical in every material respect to the facts which this

Court considered in its 1945 opinion. Further, the present

litigation involved the same parties and raised the same

legal issues below as in Hooven 1, Therefore, the Supreme

Court of Ohio properly applied the principles of collateral

estoppel under Ohio law to prohibit the Tax Commissioner

from relitigating against Hooven & Allison the precise is-

sues Which this Court had previously decided in favor of

Hooven & Allison, City of Columbus ve. Union Cemetery

Ass'n, 45 Ohio St.2d 47, 341 N.E.2d 298 (1976) (Syllabus 1),

approving and following Whitehead v, General Telephone

Co,, 20 Ohio St.2d 108, 254 NE. 2d 10 (1969) and Norwood

v. McDonald, 142 Ohio St. 299, 52 N.E.2d 67 (1943),

The Tax Commissioner has argued, relying on Com-

missioner of Internal Revenue v, Sunnen, 333 U.S, 591

(1948), that a change in the legal atmosphere since Hooven

I makes collateral estoppel inappropriate. However, be-

cause Sunnen is a federal decision concerning federal tax-

ation, it is not controlling on the Ohio Supreme Court's

application of collateral estoppel principles,

Moreover, the Tax Commissioner has read Sunnen

much too broadly. The decision in Sunnen stands for the

accepted proposition that collateral estoppel does not oper-

ate in the event of a major change in the controlling facts or

a reversal in the applicable legal principles. Id. at 599. Sun-

nen does not hold, as the Tax Commissioner has contended,

that every change in the legal atmosphere surrounding a

prior decision of this Court empowers an inferior tribunal to

ignore the collateral estoppel effect of that decision.

Collateral estoppel must apply unless this Court has

overruled its prior decision. As this Court stated in Montana

vu. United States, 440 U.S. 147, 161 (1979), “unless there

have been major changes in the law governing inter-

governmental tax immunity since Kiewit 1, the Govern-

ments reliance on Commissioner v. Sunnen, 333 U.S. 59]

(1945), is misplaced.” This Court concluded in Montana v.

United States: “Because the factual and legal context in

which the issues of this case arise has not materially altered

since Kiewit 1, normal rules of preclusion should operate to

relieve the parties of redundant litigation [over] the identi-

cal question of the statute's application to the taxpayer's sta-

tus. Tait v. Western Maryland R. Co., 289 U.S. 620, 624

(1933)." 440 U.S. at 162. The principles of collateral estop-

pel, therefore, are applicable to this case, because neither a

major change in the controlling facts nor a reversal of legal

principles has occurred.

No relevant change in the controlling legal principles

and facts has occurred since Hooven I was decided. The

controlling facts in this case are indisputably identical to the

facts in Hooven 1. Likewise, the controlling principles of law

have not been reversed. This Court did not overrule in Mi-

chelin Tire its prior decision in Hooven 1. Though explicitly

referring to Hooven I in its opinion in Michelin Tire, this

Court overruled only Low v. Austin, 80 U.S. (13 Wall.) 29

(1872). 423 U.S. at 301. The Tax Commissioner has con-

ceded, therefore, as she must, that this Court has not ex-

pressly overruled Hooven I. Brief for the Petitioner, at 16.

Further, the controlling facts in Hooven I (and this

case) are distinguishable from the facts in Michelin Tire. The

Ohio tax in Hooven I was imposed on imported raw materi-

als held for later use in manufacturing. The Georgia tax in

Michelin Tire fell on imported finished goods arranged and

held strictly for resale. Michelin Tire did not address the

constitutionality of state taxation of imported raw materials

inventories and did not consider the fundamental economic

differences between taxation of finished goods held for re-

sale and raw materials stored for future manufacturing use.

This Court in Michelin Tire explicitly declined to decide the

constitutionality of the Georgia tax as applied to imported

tubes. 423 U.S. at 279. Before the decision in Michelin Tire

could be found to have caused a change in the legal atmo-

sphere sufficient to nullify the collateral estoppel effect of

Hooven I, the Tax Commissioner was required to demon-

strate that Michelin Tire involved facts “materially the

same’ as the facts in Hooven 1. See Hercules Powder Co. v.

United States, 337 F.2d 643, 646 (Ct. Cl. 1964). Because the

facts in Hooven I are not materially the same as the facts

involved in Michelin Tire, no change in the controlling facts

or law has occurred since Hooven I.

The fact that this Court in Michelin Tire referred ex-

pressly to Hooven I, but did not overrule it, forecloses the

Tax Commissioner's argument that Hooven | was overruled

by implication.” The only plausible conclusion is that this

Court decided deliberately not to overrule Hooven I. This

conclusion is strengthened by the fact that Hooven I is the

only decision of this Court to address directly the consti-

tutionality of state personal property taxation on imported

raw materials held for future use in manufacturing.

> This fact also demonstrates the lack of merit to the Tax Commis-

sioner s argument that this Court is ordinarily unable to give a complete

listing of every prior case which a new decision has the effect of over-

ruling. In this case, the Court was well aware of Hooven | and chose not

to overrule it.

The Tax Commissioner has argued that Hooven I has

been overruled because it is premised on the reasoning of

Low v. Austin, which this Court overruled in Michelin Tire.

This argument is both mistaken and immaterial. The deci-

sion of this Court in Hooven I was not based on Low v.

Austin. In fact, the majority opinion in Hooven I mentioned

Low v. Austin only twice,” and never relied on Low v. Aus-

tin as authority for its decision. This Court noted that Hoo-

ven 1 was decided “|i}n another context” from Low v. Austin,

423 U.S. at 301 n.13.

Instead of Low v. Austin, the decision in Hooven I is

grounded firmly in the opinion of Chief Justice John Mar-

shall in Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827),

which relied on the Foreign Commerce Claw © in addition

to the Import-Export Clause to strike down a state tax. Like

Hooven 1, Brown v. Maryland was not overruled in Mi-

chelin Tire. The Court recognized in Hooven I that state

personal property taxation could also violate the Foreign

Commerce Clause, whether or not the imported raw mate-

rials were retained in their original packages. 324 U.S. at

665-66. Thus, the original package doctrine is not the only

basis on which the result in Hooven I can now be sustained,

contrary to the Tax Commissioner's contention. In any

event, the Tax Commissioner's argument is simply imma-

terial for the reason that this Court chose deliberately in

Michelin Tire not to overrule Hooven I, and only to overrule

Low v. Austin.

The Tax Commissioner has also argued incorrectly that

the new mode of analysis adopted in Michelin Tire has the

consequence of overruling Hooven. Again, this contention

is mistaken for the reason that this Court did not apply the

reasoning of Michelin Tire to the different context found

in Hooven I. Furthermore, this Court has made clear in

determining the constitutionality of state taxation under

the Commerce Clause that its disapproval of the method of

See 324 U.S. at 657, 666.

analysis of a prior decision does not mandate overruling the

result of that decision without further consideration. Com-

monwealth Edison Co. v. Montana, 453 U.S. 609, 617

(1981). This Court has emphasized its need to have the ben-

efit of a complete factual record and full argument before

considering any overruling of a prior case. Department of

Revenue of Washington v. Ass'n of Washington Stevedoring

Cos., 435 U.S. 734, 757 (1975).

This judicious restraint is particularly warranted in

considering the constitutionality of state taxation, because

this Court has consistently followed a pragmatic approach to

applying the Import-Export and Foreign Commerce

Clauses, as demonstrated in both Hooven I and Michelin

Tire.’ 423 U.S. at 285-89; 324 U.S. at 66S. It reached differ-

ent conclusions in these cases based on the divergent impact

of the taxes. This Court was well aware in Hooven I of “the

exclusive power of the national government to tax imports,”

“the burden of unequal local taxation by the seaboard, at the

expense of the interior states,” and “the national concern in

protecting national commercial relations’ — factors all uti-

lized in Michelin Tire. 324 U.S. at 656, 664, 675. The thor-

oughness of Mr. Justice Black's analysis of these concerns in

~ More recently the Court has said

On various occasions when called upon to make the delicate

adjustment between the national interest in free and open trade

and the legitimate interest of the individual States in exercising

their taxing powers, the Court has counseled that the result turns

on the unique characteristics of the statute at issue and the partic-

ular circumstances in each case.

Boston Stock Exchange v. State Tax Commission, 429 U.S. 315,

329 (1977). Since Michelin Tire, the Court has struck down under the

Commerce Clause a state transfer tax on interstate securities trans-

actions, Boston Stock Exchange, supra, and a state ad valorem property

tax on foreign-owned containers used exclusively in international com-

merce, Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434 (1979).

In each case the Court's decision turned on the specific tax at issue and

the specific context in which it was levied.

his dissent in Hooven I demonstrates the depth of consid-

eration which the Court gave these factors. The impact of

Ohio's personal property tax on Hooven & Allison's raw ma-

terials inventory rendered the tax unconstitutional. In con-

trast, the impact of the state tax in Michelin Tire passed the

Court's scrutiny.

Michelin Tire did not hold that all forms of facially non-

discriminatory state personal property taxation are permit-

ted. In Japan Line, Ltd. v. County of Los Angeles, 441 U.S.

434 (1979), this Court struck down a state nondiscriminatory

ad valorem personal property tax as applied. Consequently,

the constitutionality of state personal property taxation,

even if facially neutral, must be evaluated in a specific fac-

tual context. Therefore, the Ohio Supreme Court was en-

tirely correct in holding that Michelin Tire had not over-

ruled Hooven I as a matter of law and that, accordingly, the

Tax Commissioner was collaterally estopped from taxing

Hooven & Allison's imported raw materials. In the absence

of a factual record, it could properly reach no other result.

Il. THIS COURT LACKS AN ADEQUATE FACTUAL

RECORD TO DECIDE THE FEDERAL CONSTI-

TUTIONAL ISSUES AND SHOULD DISMISS ITS

WRIT OF CERTIORARI AS IMPROVIDENTLY

GRANTED.

Resolution of the important federal constitutional is-

sues in this case requires consideration of the practical effect

of Ohio's personal property tax on foreign commerce. This

Court concluded in Hoeven 1: “As was emphasized in Brown

v. Maryland, supra, the reconciliation of the competing de-

mands of the constitutional immunity and of the state's pow-

er to tax, is an extremely practical matter.” 324 U.S. at 668.”

A state tax must be assessed in light of its actual effect

considered in conjunction with other provisions of the

* See also pages 20-21, 27-31 infra.

State's tax scheme. “In each case it is our duty to deter-

mine whether the statute under attack, whatever its

name may be, will in its practical operation work dis-

crimination against interstate commerce. Best & Co.

vu. Maxwell, 311 U.S. 454, 455-56 (1940).

Maryland v. Louisiana, 451 U.S. 725, 756 (1981) (emphasis

added).

This practical effect cannot be determined by a super-

ficial look at the face of the taxing statute, as the Tax Com-

missioner contends. However, except for the affidavit of

John P. Buck, the record is barren of any facts relating to the

federal constitutional issues. The record is empty because

the Tax Commissioner has taken the position throughout

this litigation that Michelin Tire had overruled Hooven I and

because the Tax Commissioner further contended that the

Ohio Board of Tax Appeals lacked jurisdiction to consider

the federal constitutional issues. The Tax Commissioner has

even contended before this Court that the affidavit of John

P. Buck is not a part of the record.

Because the Ohio Board of Tax Appeals decided only

the collateral estoppel issue, the Tax Commissioner

presented only this state law question in its appeal to the

Ohio Supreme Court. Since the Ohio Supreme Court affir-

med the Board of Tax Appeals on the basis of collateral es-

toppel, it did not address the federal constitutional issues

and had no need to exercise its original jurisdiction over

these issues to hear evidence and to make findings of fact.

Consequently, through no fault of Hooven & Allison, the

record is devoid of the facts necessary to resolve the federal

constitutional issues.

This Court should not, and indeed cannot consistently

with its prior case law, decide this case in the absence of a

factual record. Therefore, on the basis of its judicious prac-

tice of not deciding important constitutional questions in

cases in which “the facts necessary for evaluation of the dis-

positive constitutional issues . . . are not adequately

presented by the record,” this Court should dismiss its writ

of certiorari as improvidently granted. Wainwright v. City

of New Orleans, 392 U.S. 598, 599 (1968) (per curiam) (For-

tas, J., concurring). See also Johnson v. Massachusetts, 390

U.S. 511 (1968) (per curiam); Mitchell v. Oregon Frozen

Foods Co., 361 U.S. 231 (1960) (per curiam),

Furthermore, the remaining collateral estoppel issue

raises primarily a question of state law. The Ohio Supreme

Court's application of collateral estoppel as a matter of state

law was indisputably proper, once it had correctly deter-

mined that the Michelin Tire Court had not overruled

Hooven 1. Because the court below decided only the issue of

state law raised by the Tax Commissioner and expressly de-

clined to decide the federal constitutional issues raised by

Hooven & Allison, no federal constitutional questions are

properly before this Court. It is indeed anomalous that the

Tax Commissioner has sought to have this Court decide fed-

eral constitutional issues which she did not raise below and

which the Ohio Supreme Court did not address because of

its decision based on the primarily state law issue of col-

lateral estoppel. Whether or not the Ohio Supreme Court

correctly decided the collateral estoppel issue does not

present a federal constitutional isswe and does not raise an

issue of such importance as to merit this Court's review by

writ of certiorari. For this reason, too, the writ of certiorari

should be dismissed as improvidently granted. Wolf v

Weinstein, 372 U.S. 633 (1963).

Ill. THE IMPOSITION OF THE OHIO PERSONAL

PROPERTY TAX ON HOOVEN & ALLISON'S IN-

VENTORY OF IMPORTED RAW MATERIALS

HELD FOR FUTURE USE IN MANUFACTURING

VIOLATES THE FOREIGN COMMERCE

CLAUSE AND IMPORT-EXPORT CLAUSE.

The Tax Commissioner has not advanced any argu-

ments of fact to support her contention that Ohio may

constitutionally assess its personal property tax against Hoo-

ven & Allison's imported fibers inventory. Instead, consis-

tent with her deliberate litigation strategy below, the Tax

Commissioner has cavalierly dismissed the need for any fac-

tual analysis by making the bald and unsupported claim that

“{t]here is no logical or legal justification which would sup-

port a retention of the ‘original package’ doctrine in cases

involving imported manufacturing inventory while ap-

plying the fundamentally different analysis of Michelin in

cases involving imported goods held for resale.” Brief for

Petitioner, at 21. Though the only issue properly before this

Court is whether the Supreme Court of Ohio correctly de-

termined the issue of collateral estoppel, it is important for

the resolution of that issue that the need for a factual record

on which to decide the constitutional issues is clear. Accord-

ingly, the factual framework, which demonstrates the un-

constitutionality of the state personal property tax in this

case and the error of the Tax Commissioner's argument, is

set forth below.

The Tax Commissioner's argument is premised on

several fundamental misconceptions. The Tax Commis-

sioner has contended that this Court should examine only

the label of the tax at issue in this case and that because this

case involves an ad valorem personal property tax as in

Michelin Tire, this Court should hold without further anal-

ysis that the Ohio tax automatically satisfies the Import-

Export Clause. The Tax Commissioner would have this

Court simply substitute the magical litany of “non-

discriminatory ad valorem personal property tax” in place of

“original package.” The Tax Commissioner's argument in-

vites the Court to undertake the same kind of formalistic,

mechanical analysis which this Court has condemned in its

recent state taxation decisions. E.g., Arkansas Electric Co-

operative Corp. v. Arkansas Rubber Comm'n, 103 S.Ct.

1905, 1916 (1983); Japan Line, Ltd. v. County of Los

Angeles, 441 U.S. 434, 443 (1979); Complete Auto Transit,

Inc. v. Brady, 430 U.S. 274, 279 (1977).

In so arguing, the Tax Commissioner has completely

ignored the Foreign Commerce Clause,” as well as the pol-

icies underlying the Import-Export Clause, as enunciated

in Michelin Tire. Hooven & Allison is definitely not at-

tempting to resurrect the “original package” doctrine, as the

Tax Commissioner has claimed. Rather, Hooven & Allison

is contending that the cumulative tax burden resulting from

the assessment of the Ohio personal property tax con-

travenes the Foreign Commerce Clause and Import-Export

Clause. In Japan Line, Ltd., supra, this Court struck down

a state nondiscriminatory ad valorem personal property tax

as violating the Foreign Commerce Clause. Thus, the Tax

Commissioner has improperly asked this Court to engage in

hasty overgeneralization by deciding this case without con-

sideration of the practical effect of the Ohio personal proper-

ty tax on foreign commerce as applied to Hooven & Allison's

* This Court has recently acknowledged the different inquiry re-

quired by the Foreign Commerce Clause from the Import-Export

Clause. Department of Revenue of Washington v. Ass'n of Washington

Stevedoring Cos., 435 U.S. 734, 751 (1975). Therefore, a state personal

property tax may satisfy the Import-Export Clause, but run afoul of the

Foreign Commerce Clause. Compare Michelin Tire with Japan Line

Ltd., supra.

inventory of imported raw materials held for future use in

manufacturing.

Examination of the practical effect of the state taxation

will demonstrate that Hooven & Allison is not seeking pref-

erential tax treatment, as the Tax Commissioner has myop-

ically contended; instead, it is seeking to survive as an

American company by removing the undue burden of mul-

tiple taxation. Contrary to the Tax Commissioner's con-

tention, Hooven & Allison is not asking this Court to grant

ita competitive advantage over manufacturers using domes-

tically produced raw materials. Nor would tax immunity in

this case cause manufacturers to switch from domestically

produced fibers to foreign grown fibers. As the Tax Com-

missioner well knows, Hooven & Allison’s raw materials,

consisting of natural fibers, such as jute, sisal, henequen,

and manila, are not produced domestically. Its raw materi-

als must be imported. Therefore, its choice is whether to

keep its manufacturing facilities in the United States or in-

stead to surrender to the Third World economic pressures

to locate its manufacturing plant overseas.

Examination of the facts shows that state personal prop-

erty taxation of Hooven & Allison's inventories of imported

raw materials violates the Foreign Commerce and Import-

Export Clauses of the United States Constitution on three

grounds. First, it would subject Hooven & Allison to inter-

national multiple taxation. '” Second, it would interfere with

federal regulation of foreign commerce and it could reduce

federal tariff revenues significantly. Third, it is likely to pro-

voke interstate commercial conflict. In taking a pragmatic

and case-specific approach to these constitutional pro-

visions, this Court has found that the Import-Export and

This possibility was not considered by this Court in Michelin

Tire, but has been a major factor in subsequent decisions. E.g., Japan

Line, Ltd., 441 U.S. at 446.

Foreign Commerce Clauses reflect these overlapping con-

cerns. Japan Line, Ltd., 441 U.S. at 446-50.

A. Ohio Personal Property Taxation Of Hooven & Alli-

son's Inventories Of Imported Fibers Would Subject Those

Fibers To International Multiple Taxation.

State property taxation of Hooven & Allison's imported

raw materials would burden those raw materials with dou-

ble taxation in violation of the Foreign Commerce Clause.

When goods of foreign origin which move in foreign com-

merce are taxed by several jurisdictions, the resulting cu-

mulative tax burden discriminates against such commerce.

State taxation which results in double taxation “in its prac-

tical operation discriminates against interstate commerce,

since it imposes upon it, merely because interstate com-

merce is being done, the risk of a multiple tax burden to

which local commerce is not exposed.” Gwin, White &

Prince, Inc. v. Henneford, 305 U.S. 434, 439 (1939). It

could, indeed, “spell the destruction of interstate com-

merce and renew the barriers to interstate trade which it

was the object of the commerce clause to remove.” Western

Live Stock v. Bureau of Revenue , 303 U.S, 250, 256 (1938),

Accordingly, it is a “commonplace of constitutional

jurisprudence’ that multiple taxation of foreign commerce,

like interstate commerce, is constitutionally prohibited.

Japan Line, Ltd., 441 U.S, at 446.

In the case of foreign commerce, the mere risk of inter-

national multiple taxation makes a state tax constitutionally

suspect. Japan Line, Ltd., 441 U.S. at 448, 451. See Devel-

opments in the Law — Federal Limitations on State Tax-

ation of Interstate Business, 75 Harv. L. Rev. 953, 965-68

(1962). This strict standard is necessary because the extent

of a foreign tax burden may be disguised and therefore diffi-

cult to document. Foreign taxes may not be denominated as

such, or may actually be concealed for commercial or politi-

cal reasons. A state-run enterprise can easily conceal an ex-

port tax in its export price, Or, a change in the exchange rate

may have the same effect as an export tax.

Moreover, a merchant in foreign commerce, unlike his

counterpart in interstate commerce, does not have the judi-

cial remedy of apportionment for multiple taxation, He can-

not come to this Court to force several taxing jurisdictions to

apportion their respective tax burdens, and thus avoid mul-

tiple taxation, “|N Jeither this Court nor this Nation can en-

sure full apportionment when one of the taxing entities isa

foreign sovereign.” Japan Line, Ltd., 441 U.S. at 447,

Therefore, this Court has held that, “|wihen construing

Congress’ power to ‘regulate Commerce with foreign Na-

tions, a more extensive constitutional inquiry is required,”

Id. at 446, “This case concerns foreign commerce, Even a

slight overlapping of tax — a problem that might be deemed

de minimis in a domestic context — assumes importance

when sensitive matters of foreign relations and national sov-

ereignty are concerned,” Id. at 456, Accordingly, this Court

has set forth a stringent test of constitutionality under the

Foreign Commerce Clause:

In addition to answering the nexus, apportion-

ment, and nondiscrimination questions posed in Com-

plete Auto, acourt must also inquire, first, whether the

tax, notwithstanding apportionment, creates a substan-

tial risk of international multiple taxation, and, second,

whether the tax prevents the Federal Government

from “speaking with one voice when regulating com-

mercial relations with foreign governments.” Ifa state

tax contravenes either of these precepts, it is uncon-

stitutional under the Commerce Clause.

Japan Line, Ltd., 441 U.S. at 451,

Ohio's personal property tax subjects Hooven & Alli-

son not just to the risk of multiple taxation, but to multiple

taxation in fact. Some of Hooven & Allison's imported fibers

are taxed abroad by the exporting countries because they

are destined for export. The foreign suppliers. from which

Hooven & Allison purchases raw fibers and assemblages of

fibers include firms which are state-owned, — state-

controlled, or subject to state regulation as to quantity of

output, price, or ownership. Affidavit of John P. Buck, ©4"';

Latin America Commodities Report, March 18, 1977, at 42.

In a number of instances, Hooven & Allison has paid and

continues to pay these suppliers, per pound of fibers, prices

which actually are greater than the prevailing prices that

those suppliers charge their export customers, per pound,

for the rope that these suppliers manufacture from such fi-

bers. Affidavit of John P. Buck, at 7. In other instances,

state-owned suppliers from which Hooven & Allison has

purchased fibers are offering fibers for sale at prices which

are only slightly lower than the prices which they charge

export customers for rope. Id. at ©"5-6. This small price

differential is far less than the $.28 per pound that it costs

Hooven & Allison to manufacture rope from these fibers.

Id. at 4 5.

Obviously these foreign suppliers are charging Hooven

& Allison a price for fibers far higher than the price that they

charge for fibers consumed in domestic manufacturing.

Such price discrimination, when practiced by a state enter-

prise, or by a firm subject to state regulation of its export

prices, is the functional equivalent of an export tax,

* This Court should consider the facts stated in the appended

affidavit of John P. Buck, which was presented to the Ohio Supreme

Court. The constitutionality of Ohio personal property taxation of Hoo-

ven & Allison's inventories of imported raw materials was an issue

which arose originally before the Ohio Supreme Court. “|T}he Board

of Tax Appeals, being an administrative agency and not a court, was

without jurisdiction to consider and determine a question of consti-

tutional validity.” S. 8. Kresge Co. v. Bowers, 170 Ohio St. at 407, 166

N.E. 2d at 141. Because the constitutional issue was raised pursuant to

the original jurisdiction of that Court, Hooven & Allison was permitted

to present additional facts related to the constitutional issues in order

to facilitate the court's consideration of these issues. Ohio Sup. Ct. Rule

VIII, §7 (set forth in Appendix B). Moreover, even if Mr. Buck's

affidavit is not considered to be a part of the record, it shows the kinds

of facts which must be in the record before this Court can meaningfully

address the constitutional issues.

It is an export tax, moreover, that is designed to place

foreign manufacturers, like Hooven & Allison, at a com-

petitive disadvantage in relation to native industry. Devel-

oping nations frequently employ discriminatory taxation as

an aid or incentive to capital formation, See, e.g., Ross,

Foreign Governments’ Tax Incentives for Investment, in

Proceedings of the 1959 Institute on Private Investments

Abroad, at 285-336, Price discrimination against export

customers for raw materials, in part accomplished through

export tax incentives granted for exported manufactured

goods, but not for exported raw materials, has been docu-

mented in the case of countries from which Hooven & Alli-

son must purchase fibers. United Nations Food and Agricul-

ture Organization, Review of Oilseeds, Oils and Oilmeals

Policies; Brazil (January, 1982), at 6; Price, Waterhouse &

Co., Information Guide; Doing Business In Mexico (1981),

at 37; Price, Waterhouse & Co., Information Guide: Doing

Business in Brazil (1980), at 18, 88-89; The World Bank,

Brazil: A Review of Agricultural Policies (1982), at 78. See

Manners, The Changing World Market for Lron Ore (1971),

at 265.

Such price discrimination exists in the case of the fibers

imported by Hooven & Allison. Brazil and Mexico, two pri-

mary suppliers of sisal fibers of the type imported by Hoo-

ven & Allison, together control 40% of the world export

market for sisal and henequen, Latin America Commodities

Report, March 18, 1977, at 42. In both countries, govern-

ment agencies strictly control the export sale of fibers. E.

Grilli, The Future for Hard Fibers and Competition from

Synthetics (World Bank Staff Occasional Papers No. 19,

1975), at 43 (hereinafter “Grilli’), In| Mexico, COR-

DOMEX,"* a government agency, has sole internal and ex-

ternal marketing rights for raw fiber and manufactured cor-

dage products. Id. Consequently, the Mexican govern-

ment, through its agency CORDOMEX, establishes the ex-

" The official name of the agency is Cordeleros de Mexico.

port price of fibers. In Brazil, the Sisal Chambers of Com-

merce of the producing states, with the approval of the

Foreign Trade Department of the Bank of Brazil (CACEX)

issue licenses, which regulate the size of shipments, and

impose strict quality and price controls, including a min-

imum export price.'’ Id. The governments of both coun-

tries are encouraging internal cordage production and are

seeking to divert raw fibers from export sale to use in

domestic manufacturing. Latin America Commodities Re-

port, March 18, 1977, at 42. “Brazil seems likely to follow

the trend of exporting a minimum of fibre and concen-

trating on competing in twine markets,” while most Mex-

ican henequen now is “{clonsumed or processed inter-

nally.” Id. To implement these policies apparently, COR-

DOMEX and CACEX have engaged in discriminatory ex-

port pricing practices that result in an insignificant export

price differential, if any, between raw fiber and assem-

blages of fiber, on the one hand, and domestically manu-

factured rope, on the other hand. These discriminatory

export pricing practices have the effect of imposing a levy

on exported raw fibers and assemblages of fibers of these

two countries. Hooven & Allison must pay this export levy

as part of the price of importing its raw materials.'*

'* This Court has recognized that a minimum price has the equiv-

alent effect on commerce as an export tax or tariff. Baldwin v. G.A.F.

Seelig, Inc., 294 U.S. 511, 521 (1935)

'* In addition, there may be no remedy available to Hooven &

Allison for such discriminatory practices, other than this Court. The

National Soybean Processor Association attacked, pursuant to the Tariff

Act of 1974, 19 U.S.C. § 2411 et seq., the differential and discrimi-

natory export taxes levied by Brazil, Malaysia, and Argentina. As part

of these countries policies to encourage domestic manufacturing, they

imposed export taxes which favored the export of processed soybean

oils over the export of unprocessed soybeans. The United States Trade

Representative determined that such differential export taxes did not

constitute an export subsidy and, accordingly, declined to initiate an

investigation. 45 Fed. Reg. 23947 (May 27, 1983).

On numerous occasions, the exporting countries, from

which Hooven & Allison acquires its raw materials, have

imposed an explicit export tax on their raw materials. India,

Mexico, Brazil, Bangladesh and the Philippines have all

from time to time levied an export tax on their exports of

raw fibers. The World Bank, Brazil: Industrial Policies and

Manufactured Exports (1983), at 32, 46, 51; The World

Bank, Export Promotion Policies (World Bank Staff Work-

ing Paper No. 313, 1979), at 46, 68; The World Bank,

Bangladesh: Current Trends and Development Issues

(1979), at 56. Therefore, Hooven & Allison has paid multi-

ple taxes on its imported raw materials to which domestic

manufacturers of synthetic rope have not been subject."

It is also possible for the cost of the exporting coun-

tries’ internal taxes to be passed by the seller to the pur-

chaser, such as Hooven & Allison, resulting in a multiple

tax burden. For example, Mexico taxes inventories held for

sale, and a seller may reflect this tax in the price charged

to a purchaser.'” The similar effect of tariffs and internal

taxes on trade is apparent. K. Dam, THE GATT: Law anp

INTERNATIONAL ECONOMIC ORGANIZATION (1970), at 115.

Cf. Belassa, The Tokyo Round and the Developing Coun-

tries, 14 JOURNAL OF WorRLD TRADE Law 93 (1980) (domes-

tic subsidies have the same effect on exports as direct ex-

port subsidies). However, only tariffs are regulated at this

time under the General Agreement on Tariffs and Trade.

Id. Therefore, the mu!tiple tax burdens resulting from in-

ternal taxes assessed in the exporting countries remains

unchecked.

'* Export taxes on other raw materials have also been imposed in

the past, such as Malaysian rubber, Argentinian caustic soda, and

Ghanaian cocoa. Belassa, The Process of Industrial Development and

Alternative Development Strategies (World Bank Staff Working Paper

No. 438, October, 1980), at 7, 14, Stern, The Export Tax on Malayan

Rubber, 16 NaTIONAL TAX J. 51 (1962). The practice is not rare.

10 NATIONAL TAX J. 370, 377 (1958).

The exporting countries have also used a variety of

measures to promote the export sales of their manufactured

cordage products, such as export subsidies, tax and duty

concessions, preferential financing, and devaluation.

United States General Accounting Office, Report To The

Secretary Of Commerce And The United States Trade Rep-

resentative: Benefits Of International Agreement On

Trade-Distorting Subsidies Not Yet Realized (August 15,

1983), at Appendix II, 66-67; The World Bank, Brazil:

Industrial Policies and Manufactured Exports (1983), at 67;

The World Bank, Bangladesh: Current Trends and Devel-

opment Issues (1979), at 10, 52, 56; The World Bank, Ex-

port Promotion Policies, at 9, 24, 45-46, 52 (World Bank

Staff Working Paper No. 313, 1979). By increasing the cost

of Hooven & Allison's cordage products relative to those

exporting countries’ products, these measures have the

equivalent effect of a tax.

The Ohio personal property tax would duplicate the

export levy that Hooven & Allison now pays on its imported

raw fibers and cause a constitutionally impermissible multi-

ple tax burden. This Court has held that, in determining

whether two taxes create a multiple tax burden, the prac-

tical effect and not the name of a tax is controlling. “[Wle

are dealing in this field,” this Court has stated, “with

matters of substance, not with dialectics.” International

Harvester Co. v. Department of Treasury, 322 U.S. 340,

347 (1944). In Henneford v. Silas Mason Co., 300 U.S. 577,

586 (1937), this Court noted explicitly that a use tax was

“equivalent” to a “tax upon property after importation is

over. This Court has similarly held a sales tax paid by the

buyer in an interstate transaction to be equivalent to a gross

receipts tax paid by the seller in a like transaction. “There

is the same practical equivalence whether the tax is on the

selling or the buying phase of the transaction.” Inter-

national Harvester , 322 U.S. at 348. In short, “equality for

the purposes of competition and the flow of commerce is

measured in dollars and cents, not legal abstractions.” Hall-

iburton Oil Well Co. v. Reily, 373 U.S. 64, 70 (1963).

This Court, therefore, has often made clear that the

facial neutrality of a state tax statute is not determinative.’

E.g., Japan Lines, Ltd., 441 U.S. at 446-51. In Nippert v.

City of Richmond, 327 U.S. 416, 431 (1946), this Court

said:

It is no answer, as appellee contends, that the tax

is neither prohibitive nor discriminatory on the face of

the ordinance; or that it applies to all local distributors

doing business as appellant has done. Not the tax in a

vacuum of words, but its practical consequences for

the doing of interstate commerce in applications to

concrete facts are our concern. To ignore the variations

in effect which follow from application of the tax, uni-

form on the face of the ordinance, to highly different

fact situations is only to ignore those practical con-

sequences. In that blindness lies the vice of the tax and

of appellee's position.

The Foreign Commerce Clause thus prohibits multi-

ple tax burdens, which have the effect of discriminating

against foreign commerce, regardless of the names given to

the various taxes. “That issue turns not on the character-

ization which the state has given the tax, but on its oper-

ation and effect.” Richfield Oil Corp. v. State Board of

Equalization , 329 U.S. 69, $4 (1946). See Developments in

the Law — Federal Limitations on State Taxation of Inter-

state Business, 75 Harv. L. Rev. 953, 967-65 (1962) (non-

repetitive state taxes may cause a discriminatory multiple

tax burden). By carving a possible exception in Michelin

Tire for taxation of imported goods in transit, this Court

" This Court's decision in Michelin Tire is not authority for the

proposition that the Ohio personal property tax as applied to Hooven

& Allison's imported raw materials is not discriminatory because the tax

does not fall on imports as such because of their place of origin. The

Michelin Tire Court did not examine the practical effect of a personal

property tax as applied to imported raw materials held for future use in

manufacturing. The burdens of double taxation were not discussed in

Michelin Tire.

recognized that a multiple tax burden may render uncon-

stitutional an otherwise nondiscriminatory state personal

property tax. 423 U.S. at 290. See W. Hellerstein, State

Taxation and The Supreme Court: Toward A More Unified

Approach To Constitutional Adjudication? , 75 Micu. L.

Rev. 1426, 1447 (1977) (hereinafter “Hellerstein’)

(“Michelin qualified the nondiscrimination doctrine by dis-

approving even nondiscriminatory taxes on goods in tran-

sit. for such a tax would threaten to saddle imports with

burdens not necessarily borne by domestic products.)

“The [Foreign Commerce] clause would thus forbid a

tax that threatened to impose a special burden upon im-

ports, even though the levy did not explicitly discriminate

against them.” Id. at 1431-32. The prohibition against cu-

mulative tax burdens was well stated by Justice Rutledge,

concurring in International Harvester:

Again, the state may not impose cumulative bur-

dens upon interstate trade or commerce. Gwin, White

& Prince v. Henneford , 305 U.S. 434; Adams Mfg. Co.

v. Storen, 304 U.S. 307. Thus, the state may not im-

pose certain taxes on interstate commerce, its inci-

dents or instrumentalities, which are no more. in

amount or burden than it places on its local business,

not because this of itself is discriminatory, cumulative

or special or would violate due process, but because

other states also may have the right constitutionally,

apart from the commerce clause, to tax the same thing

and either the actuality or the risk of their doing so

makes the total burden cumulative, discriminatory or

special.

322 U.S. at 355 (footnote deleted). Therefore, consistent

with Michelin Tire, this Court must investigate the burden

which a state personal property tax imposes on foreign

commerce and forbid any tax which imposes a multiple tax

burden:

By reexamining the underlying policies of the

clause and the seminal decision construing it, the

Court shifted the focus of the analysis away from the

intricacies of the “original package” test to the more

tractable question of the character of the tax. And in so

doing, the Court made clear that the crux of the consti-

tutional inquiry was whether the exaction at issue dis-

criminated against or imposed a special burden upon

imported goods.

Hellerstein, 75 MICH. L. Rev. at 1434.

Unduly burdensome taxation would result from the

Ohio personal property tax and the explicit or de facto

export taxes to which portions of Hooven & Allison's im-

ported fibers frequently are subject. Both the Ohio tax and

the export levy would be imposed cumulatively on fibers

that Hooven & Allison imports from particular foreign

countries. While it is true that one tax would be assessed

against the exporting phase, and the other following the

importing phase of the transaction, this is a matter of form

and not substance. The practical effect on foreign com-

merce is the same in either case. The two taxes here are no

more different than the taxes on the buying and selling

phases of the interstate transaction at issue in International

Harvester. When both are paid by Hooven & Allison, it is

truly taxed twice.

It is no answer to the substantial risk of multiple tax-

ation that the imported raw materials have come to rest,

before future use in manufacturing, in a warehouse located

in Ohio. Though the imported raw materials have come to

rest in Ohio, the state still may not subject them to a

cumulative tax burden. Baldwin v.G.A.F. Seelig, Inc., 294

U.S. 511, 526 (1934); Minnesota v. Blasius, 290 U.S. 1, 8-9

(1933). As this Court has observed,

If the only thing necessary to sustain a state tax

bearing upon interstate commerce were to discover

some local incident which might be regarded as sepa-

rate and distinct from ‘the transportation or inter-

course which is’ the commerce itself and then to lay

the tax on that incident, all interstate commerce could

be subjected to state taxation and without regard to the

substantial economic effects of the tax upon the com-

merce . .

Nippert v. City of Richmond, 327 U.S. at 423. Under the

Foreign Commerce Clause, the Court must focus not on

the due process nexus question, but “the substantial ef-

fects, actual or potential, of the particular tax in suppressing

or burdening unduly the commerce.” Id. at 424. Accord,

Japan Line, Ltd., 441 U.S. at 451.

The Tax Commissioner cannot argue that Hooven &

Allison does not face at least a substantial risk of, if not

actual, multiple taxation solely because it must rely on

imported raw materials. If Hooven & Allison were able to

acquire its raw materials from domestic sources, in all like-

lihood the only tax burden to which these raw materials

would be exposed is the Ohio personal property tax. Yet,

the identical raw materials obtained in foreign commerce

are exposed to both the foreign export taxes and Ohio per-

sonal property tax. The double taxation results solely be-

cause of the foreign origin of the raw materials.

This cumulative tax burden could jeopardize Hooven

& Allison's business and eventually force it to discontinue

all manufacture in this country of cordage products made

from natural fibers. Because of discriminatory foreign pric-

ing and taxing practices, it is already possible to purchase

imported rope on the American market at approximately

the same price per pound as Hooven & Allison must pay for

imported fibers. In other cases, as noted above, the export

price differential between fibers and rope is so slight that it

is nearly impossible for an American manufacturer to con-

vert imported fibers into rope at a competitive price. Since

the raw materials that Hooven & Allison requires can be

grown only abroad in a few parts of the world, moreover,

Hooven & Allison cannot obtain its raw materials from

domestic producers. Consequently, if the Tax Commis-

sioner’s position were sustained, Hooven & Allison would

be required to bear a cumulative tax burden on its raw

materials solely by virtue of its involvement in foreign com-

merce.

Thus, contrary to the Tax Commissioner's contention,

Hooven & Allison is obviously not seeking preferential tax

treatment. Hooven & Allison already pays substantial per-

sonal property taxation on its goods in process and finished

goods inventories. Hooven & Allison is seeking merely to

avoid the heavy burden of double taxation, which does not

fall on its foreign competitors or its domestic competitors

that use domestically available synthetic fibers. Hooven &

Allison asks only to be able to compete on an equal basis,

as protected by the Foreign Commerce Clause and the

Import-Export Clause. Because of foreign export taxation,

Hooven & Allison gains no competitive advantage through

immunity from Ohio's personal property taxation. Note,

Limitations on State Taxation of Foreign Commerce: The

Contemporary Vitality of the Home-Port Doctrine, 127 U.

PENN. L. Rev. 817, 852-53 (1979).

Because of the unduly burdensome impact of the Ohio

state personal property tax as applied to Hooven & Allison,

it is apparent that the Tax Commissioner has framed the

wrong question in this case:

The problem comes down therefore to whether

the state or municipal legislative bodies in framing

their taxing measures to reach interstate commerce

shall be at pains to do so in a manner which avoids the

evils forbidden by the commerce clause and puts that

commerce actually upon a plane of equality with local

trade in local taxation, not as is said to a question of

whether interstate trade shall bear its fair share of the

cost of local government, the benefit and protection of

which it enjoys on a par with local business.

Nippert, 327 U.S. at 434. Accord, Japan Line, Ltd., 441

U.S. at 456-47. Indeed, the Tax Commissioner's narrow-

minded focus on foreign commerce paying its share of the

state's general tax burden proves too much — the adoption

of the Tax Commissioner's argument would immunize all

state taxation from judicial review. Furthermore, as the

personal property tax, unlike an income or real property

tax, bears no relationship to Hooven & Allison's actual use

of or benefit from state services, much closer scrutiny than

the Tax Commissioner has suggested is required to sustain

the tax on the ground that Hooven & Allison is receiving

from the state benefits for which it has not paid. Note,

Limitations on State Taxation of Foreign Commerce: The

Contemporary Vitality of the Home-Port Doctrine, 127 U,.

PENN. L. Rev. 817, 847-48 (1979).

In sum, the imposition of Ohio's personal property tax

on Hooven & Allison's imported fibers results, in certain

cases, in actual international multiple taxation of its imports

and, in other cases, in the substantial risk of international

multiple taxation of these imports. The Foreign Commerce

Clause forbids Ohio from engaging in this multiple tax-

ation.

B. State Personal Property Taxation Of Imported Raw

Materials Would Conflict With Federal Regulation Of

Foreign Commerce.

International multiple taxation is preeminently a

matter for exclusive federal regulation and an area in which

national uniformity is essential. Japan Lines Ltd., 441 U.S.

at 448. Only through international negotiation and agree-

ment can the problem of international multiple taxation be

resolved. The United States is party to a large number of

international tax and trade conventions designed, in part,

to address this problem. See, e.g., King, Tax Conventions

to Which United States is a Party, in Proceedings of the

1960 Institute on Private Investments Abroad, at 479-492.

The need for tederal uniformity is demonstrated in the

model tax treaties of the Organization For Economic Coop-

eration and Development and the United Nations. These

treaties state that negotiated tax rates include any state

taxes. OECD Model Convention For The Avoidance Of

Double Taxation With Respect To Taxes On Income And

Capital, Chapter II, Article 2, reprinted in 1 Tax Treaties

Taxation Convention Between Developed And Developing

Countries, Chapter I, Article 2, reprinted in 1 Tax Treaties

Ohio's taxation of imported raw materials would seri-

ously impair federal regulation of foreign commerce in

several significant respects. State taxation could nullify the

effect of trade and tax concessions that the federal govern-

ment has granted in return for foreign concessions and thus

disrupt foreign trade patterns. For example, the United

States has granted tariff preferences to a number of devel-

oping countries, including Brazil, Mexico, India, Ban-

gladesh, the Philippines, and Tanzania, for their exports of

hard fibers and cordage. See Tariff Schedules of the United

States Annotated (1982), §§$304.02-.58. A’ state personal

property tax could negate this tariff advantage and hence

defeat national foreign policy goals. See McGoldrick v. Gulf

Oil Corp., 309 U.S, 414, 429 (1940),

The need for the federal government to speak with one

voice also arises from the continuing negotiations among

producer nations concerning price stabilization for hard

fibers exports. In past years, the producer nations have

acted pursuant to an informal agreement, setting export

quotas and a minimum price. Grilli, supra at 3, 24-31.

Negotiations are continuing under the auspices of the

United Nations Food and Agriculture Organization and

also the United Nations Conference on Trade and Devel-

opment. Latin America Commodities Report, February 17,

1978. Because of the fierce price competition arising from

synthetic fibers, a small change in price caused by the effect

of state personal property taxation on imported natural fi-

bers could cause substantial trade distortion and thus com-

plicate international trade and price stabilization nego-

tiations. '

Therefore, because of the need for the federal govern-

ment to speak with one voice in matters of international

trade and commodity negotiations, this Court should hold

that the Foreign Commerce Clause does not permit the

State of Ohio to impose its personal property tax against

Hooven & Allison's unused, imported raw materials."”

' See United States International Trade Commission, Summary of

Trade and Tariff Information; Cotton Linters, Waste, Thread, and

Yarn; Vegetable Fibers (Except Cotton and Yarns) September, 1952),

at 28-29, The World Bank, A Dynamic Simulation Model of the World

Jute Economy (World Bank Staff Working Paper No. 391, 1980), at 5.

Grilli, supra at 32, 65.

The Import-Export Clause is also designed to protect imports and

duties as a source of federal revenue. Brown v. Maryland, 25 U.S. (12

Wheat.) at 439. As noted above, an Ohio personal property tax levied

against Hooven & Allison's inventories of imported fibers could risk pricing

Hooven & Allison out of the market. As a result, the imposition of Ohio's

personal property tax on Hooven & Allison's heamerted fibers risks de-

priving the federal government of tariff revenues

The potential loss of tariff revenues may be illustrated by the following

example involving sisal. Unless imported from a foreign country desig-

nated as a “beneficiary developing country” with respect to the material

imported, assemblages of sisal fiber are subject to a duty of 13.7% of the’

price prevailing on the date of importation (Tariff Schedules of the United

States Annotated (1982), Schedule 3, Part 2, item No. 315.25) (hereinafter

“TSUS?), sisal rope of less than ¥4" diameter is subject to a duty of |S cents

per pound plus 7.4% of the price prevailing on the date of importation for

small size rope (TSUS item No. 315.40), and sisal rope of more than

diameter is subject to a duty of .95 cents per pound (TSUS item no.

315.55). A similar pattern exists with respect to manila (TSUS items No.

315.25, 315.35 and 315.50),

Mexico is one example of a fiber and rope exporting country which is

not currently eligible for “beneficiary developing country” status (TSUS, p.

4). As of July, 1982, CORDOMEX, a state-run Mexican concern, sold sisal

assemblages of fibers (varn) for export at 55 cents per pound, and sisal rope

rates, the United States tariff on imported CORDOMEX yarn was thus 7.5

cents per pound, while the tariff on imported CORDOMEX rope was only

5.1 cents per pound for small-sized rope, and .95 cents per pound for rope

of larger size. Consequently, the loss in federal tariff revenues would be

substantial, were imports of sisal yarn displaced by imports of sisal rope.

C. State Personal Property Taxation Of Manu-

facturers’ Inventories Of Imported Raw Materials Would

Create Interstate Commercial Conflict.

The overriding purpose of the Commerce Clause is to

create a free trade area among the states. Boston Stock

Exchange, 429 U.S. at 317; A & P Tea Co. v. Cottrell, 424

U.S. 366 (1976); McLeod v. J.E. Dilworth Co., 322 U.S.

327, 330 (1944). Any form of state taxation which might

provoke a “multiplication of preferential trade areas” would

be destructive of this purpose. Dean Milk Co. v. Madison,

340 U.S. 349, 356 (1951). State taxation of manufacturers’

inventories of imported raw materials is likely to provoke

such interstate commercial rivalry and, therefore, should

be prohibited.”

Manufacturers, like Hooven & Allison, who are de-

pendent on imported raw materials must maintain large

inventories of such materials. They are forced to stockpile

raw materials to guard against an uncertain world market,

disruption in transportation, and similar factors. In the case

of Hooven & Allison, certain of its raw materials are avail-

able only seasonally, so that an entire year's supply must be

purchased from a supplier at one time and stored in inven-

tory.”' State property taxation of such inventories repre-

sents for Hooven & Allison and other cordage manu-

facturers a significant cost of doing business.

Whether a state imposes a tax on inventories of raw

materials is obviously a major factor in a manufacturer's

*” Hooven & Allison does not intend to suggest that all forms of tax

exemption, which states regularly use to attract interstate, domestic

business, should be constitutionally prohibited. It is only because the

likelihood of preferential trade areas would adversely distort the pat-

tern of foreign commerce that Hooven & Allison contends that Ohio's

taxation of imported commodities would contravene the Foreign Com-

merce and Import-Export Clauses.

*! The seasonal nature of Hooven & Allison's import purchases of

fibers is reflected in the variations of the dollar values of its monthly raw

material inventories.

decision on where to locate. States use property tax conces-

sions currently to attract importers and exporters of fin-

ished goods. Until recently, for instance, California had a

“free port statute” designed for this purpose.” The poten-

tial for conflict is demonstrated by the brief for amicus

curiae, The International Association of Assessing Officers,

which indicates that perhaps only eighteen states levy taxes

on raw materials, like Ohio. Motion for Leave to File Brief

Amicus Curiae of The International Association of Assess-

ing Officers, at 3. Given the large amount of economic

activity and taxable revenue that manufacturing generates,

states would have great incentive to use property tax con-

cessions to lure manufacturers to locate or relocate within

their boundaries. The decision in Michelin Tire, for this

reason, had doubtful value to New York City, which disap-

proved the assessment of a personal property tax on im-

ports out of fear that it would precipitate a mass exodus of

importers to neighboring states. Recent Decisions, 47

Miss. L. J. 789, 798 (1976). Thus, it was predicted that

“Michelin Tire will induce even greater competition be-

tween seaport cities for the rich foreign trade which has

shown dramatic increases in recent years.” Id. Such a mul-

tiplication of preferential trade areas would conflict with

the most basic aim of the Foreign Commerce Clause by

fostering interstate commercial conflict and distorting the

flow of foreign commerce. For this reason, too, the imposi-

tion of a state personal property tax on imported raw mate-

rials should be held unconstitutional.

= The California Supreme Court has struck down this statute as

violating the federal Commerce Clause. Zee Toys, Inc. ve. County of

Los Angeles, 85 Cal. App. 3d 763, 149 Cal. Rptr. 750 (1975) aff'd sub

nom., Sears, Roebuck and Co. v. County of Los Angeles, 449 U.S. 1119

19S1). However, because this Court was evenly divided, its summary

affirmance of this case lacks precedential force. Thus, while the Com-

merce Clause has been construed to bar state taxes which discriminate

against foreign commerce, this Court has not held that it bars taxation

which discriminates selectively in favor of such commerce.

CONCLUSION

For the foregoing reasons, this Court is urged to dis-

miss its writ of certiorari as improvidently granted. If the

Court should reach the merits of this case, the judgment of

the Supreme Court of Ohio should be affirmed.

Respectfully submitted,

MICHAEL A, NIMS

Counsel of Record

KENNETH E,. UPDEGRAFT, JR.

CHARLES H. MOELLENBERG, JR.

JONES, Day, REAVIS & POGUE

1700 Huntington Building

Cleveland, Ohio 44115

(216) 696-3939

Attorneys for Respondent

The Hooven and Allison

Company

CERTIFICATE OF SERVICE

I hereby certify that the requisite number of copies of

the foregoing Brief for Respondent have been served on

petitioner by forwarding such copies to Richard C. Farrin,

30 East Broad Street, Columbus, Ohio 43215, counsel for

petitioner, by United States mail, postage paid, this 19th

day of December, 1953. I further certify that all parties

required to be served have been served.

MICHAEL A. NIMS

Attorney for Respondent

APPENDIX A

IN THE SUPREME COURT OF OHIO

Appeal From The Ohio Board of Tax Appeals

THE HOOVEN & ALLISON — | _— Case No. 82-559

COMPANY,

Appellant and Cross-Appellee, Affidavit of

John P. Buck

v. > in Support of the

Brief of

EDGAR L. LINDSEY, Cross-Appellee,

Tax Commissioner of Ohio, The Hooven &

Appellee and Cross-Appellant | — Allison Company

STATE OF OHIO ss

COUNTY OF GREENE

John P. Buck, being first duly sworn, says:

1. Lam the Vice President and Treasurer of the Hoo-

ven & Allison Company (“Hooven’). I have been Treasurer

of Hooven since 1965, and Vice President and Treasurer

since 1974.

2. I have personal knowledge of all the facts set forth

herein, which facts were compiled by me or for me by

persons under my supervision from records maintained as

part of Hooven’s regularly conducted business activity.

3. Hooven imports raw fibers and assemblages of fi-

bers, which in the trade are commonly referred to as

“yarns, consisting of sisal, jute and manila, which it pro-

cesses into rope and cordage products that it sells in its

business. Hooven imports, and in prior years has imported,

these fibers from a number of foreign countries, including

Portugal, Brazil, Bangladesh, Thailand, Ecuador, the Phil-

ippines, Haiti, Mexico, Kenya, and Tanzania.

A-2

4. Several of the suppliers from which Hooven pur-

chases fibers are foreign corporations that are subject to

varying degrees of foreign government regulation as to

their ownership, the annual quantity of fibers that they may

harvest and sell in export transactions, or the price at which

they may sell such fibers and the finished products that

they manufacture from them. Foreign corporations oper-

ating in the Philippines, from which Hooven regularly pur-

chases manila yarns of Philippine origin, and in Brazil, from

which Hooven purchases sisal yarns of Brazilian origin, are

subject to government imposed restrictions of one or more

of these types. Hooven has also made purchases of fibers

from foreign suppliers which are either state-owned or

state-controlled entities, such as Cordomex, a Mexican cor-

poration, from which Hooven has acquired sisal fibers of

Mexican origin.

5. During the years 1975 and 1976, and for a number

of preceding years, as well as for years subsequent to 1976,

Hooven has experienced situations in which the price that

it pays its suppliers in particular foreign countries for fibers

is less by only an insignificant amount than the prices that

those suppliers are then charging for rope or other finished

cordage products manufactured from the same fiber mate-

rials. Currently, Hooven is experiencing this situation in

Thailand, where it purchases jute yarn of Thai origin from

C.P. Textile. This supplier currently is selling jute yarn for

40.5 cents per pound F.O.B. Baltimore, and two ply jute

twine at the price of 41 cents per pound, F.O.B. Baltimore.

Hooven is also experiencing this situation currently in

Brazil, where it purchases sisal yarn at 48 cents per pound,

F.O.B. Baltimore, from Brascorda. This same supplier cur-

rently is selling sisal rope at 54 cents per pound, F.O.B.

Baltimore. Hooven is also experiencing the same situation

currently with respect to sisal products of Mexico origin

that Cordomex offers for sale. Cordomex currently is

offering sisal yarn for sale at 55 cents per pound, F.O.B.,

A-3 7

Laredo, Texas, and sisal rope at the price of 55 cents per

pound, F.O.B. Laredo, Texas. At the present time, it costs

Hooven approximately 28 cents per pound to process sisal

yarns into a rope product of the same grade that Brascorda

and Cordomex are selling for 54 cents per pound and 55

cents per pound, respectively.

6. Hooven has also experienced the same situation as

that described in paragraph 3 above in earlier periods. In

19758, for example, Hooven paid 34 cents per pound for jute

yarn that it purchased F.O.B. Baltimore from foreign sup-

pliers in Thailand, which at the same time were selling

three ply twine manufactured from the same materials for

34.5 cents per pound, F.O.B. Baltimore.

7. In recent years, Hooven has experienced situations

in which the price that it pays its suppliers in particular

foreign countries for certain grades and sizes of fiber mate-

rials equals or exceeds the price which those suppliers are

then charging for rope and other finished cordage products

manufactured from the same fiber materials. Currently,

Hooven is experiencing this situation in the Philippines,

where, with respect to the manila yarn that it imports from

that source, it must pay its Philippine suppliers 50.5 cents

per pound, F.O.B. Manila, for manila yarn. These same

suppliers currently are offering finished manila rope for sale

at the following prices:

Grade of Price Per Pound

Manila Rope F.O.B. Manila

Heavy 45 cents

Medium 50 cents

Sinall 53 cents

8. Hooven has also experienced the same situation as

that described in paragraph 5 above in earlier periods. In

1978 and 1979, for example, African sisal fibers of Por-

tuguese East African origin were selling for 43 cents per

A-4

pound, F.O.B. Baltimore. In those same years, Hooven

paid 40.75 cents per pound, F.O.B. Baltimore, for two and

three ply sisal twine of Portuguese East African origin that

it purchased from Sicor.

9. The examples of pricing and the price differentials

referred to in paragraphs 3, 4 and 5 above do not reflect the

universal practice of all foreign suppliers which sell fibers

and cordage products in export transactions. The instances

in which Hooven has experienced such pricing practices,

however, have occurred frequently in connection with its

purchases of fibers from foreign suppliers.

John P. Buck

Sworn to before me and subscribed in my presence

this 12th day of July, 1982.

Anne C. Buettner

Notary Public

APPENDIX B

Ohio Supreme Court Rule VIII, §7 provides:

To facilitate the consideration and disposition of origi-

nal actions, counsel should, whenever possible, file an

agreed statement of facts.

Where a case has not been submitted by the parties to

the Court for final determination at the time of or for filing

of a reply, it shall be referred to the Clerk of the Supreme

Court, and the parties shall appear before such Clerk at

such reasonable time and place as he may designate on not

less than ten days notice and shall there present or make

arrangements for presenting all evidence which they desire

to offer.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.