Amicus Curiae Brief — United States v. United States Shoe Corp.

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Jn the Supreme Court

of the Guited States

OCTOBER TERM, 1997

UNITED STATES OF AMERICA,

Petitioner,

UNITED STATES SHOE CORPORATION,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals for the

Federal Circuit

BRIEF OF AMICUS CURIAE

STATE OF OREGON

HARDY MYERS

Attorney General of Oregon

DAVID SCHUMAN

Deputy Attorney General

*MICHAEL D. REYNOLDS

Solicitor General

ROBERT M. ATKINSON

Assistant Attorney General

400 Justice Building

Salem, Oregon 97310

Phone: (503) 378-4402

Counsel for Amicus Curiae

*Counsel of Record

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QUESTION PRESENTED

Whether application of the Harbor Maintenance Tax (26

U.S.C. 4461(a)) to goods loaded at ports of the United States for

export shipment violates the Export Clause of the Constitution.

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

Page

Cases Cited

Capitol Greyhound Lines v. Brice, 339 U.S. 542

nn Seuee hae eee twee eeee su eeces 5

Edye v. Robinson, 112 U.S. 580 (1884) ....... 5, 6, 10

Evansville-Vanderburgh Airport Authority District v.

Delta Airlines, 405 U.S. 707 (1972) ........ 4-6

Massachusetts v. United States, 435 U.S. 444 (1978) .. 3-6

Pace v. Burgess, 92 U.S. 372 (1876) .............. 3

United States Shoe Corp. v. United States, 114 F.3d

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Constitutional Provisions

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Statutory Provisions

PD GAD hiieees ees eeeccéebences i

Pub. L. No. 102-240, 105 Stat. 1914 .............. 8

Other Authorities

Hayes, Anxious Shippers Divert Containers, THE

OREGONIAN, November 4, 1997 ............ 9

Lynch, Railroad Crisis a Boon for Port, THE

OREGONIAN, November 1, 1997 .......... 7-9

MARITIME ADMINISTRATION OFFICE OF PORTS AND

DOMESTIC SHIPPING, UNITED STATES

DEPARTMENT OF TRANSPORTATION, A REPORT

TO CONGRESS ON THE STATUS OF THE PUBLIC

PORTS OF THE UNITED STATES 1994 - 1995

NS hk ae i re ee ee ee. won 7

Mongelluzzo, Big Jams Cause Cargo Diversion at Los

Angeles, JOURNAL OF COMMERCE, Oct. 29,

TRADE STATS NORTHWEST, OREGON’S EXPORT TRADE

WITH THE WORLD (1997) ..............

TRANSPORTATION RESEARCH BOARD, NATIONAL

RESEARCH COUNCIL, LANDSIDE ACCESS TO

See PINS 6 6c Gon 6 6 6 6b 045 60 oe

Turnquist and List, Charting a Course for Intermodal

Policy and Research, 47 TRANSPORTATION

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INTEREST OF AMICUS CURIAE

In recent years, Oregon, like much of the rest of the nation,

has become deeply involved in what is now commonly referred

to as the “global economy.” In only five years, for example,

Oregon’s exports of high technology products increased over 190

percent.’ In the same period, exports of agricultural products

increased more than 70 percent.’ A large variety of other

products, ranging from leather goods and textiles to transporta-

tion equipment and “second hand goods,” all registered signifi-

cant export increases.’ Because of its proximity, the Port of

Portland on the Columbia River is the logical choice for most

Oregon exporters to get their products to foreign markets.

Others, however, find it more convenient, more economical! or

both to use ports in neighboring states. Similarly, exporters from

other states are regular customers of the Port of Portland.

This movement of goods contributes to the economic

development of the State of Oregon and to the prosperity of its

people. None of it, however, happens in isolation. Congress has

recognized that most freight is transported over an “intermodal”

national system. That is, freight moves to market by use of a

combination of transportation methods, perhaps leaving the

factory by truck, traveling cross country by rail and being

shipped overseas by water. The nation’s ports are the termini of

that national, intermedal freight transportation system. The

overwhelming majority of Oregon’s and the nation’s foreign

trade moves through those ports. Changing and developing

markets, movement of manufacturing operations, mergers and

other changes in various components of the freight transportation

"TRADE STATS NORTHWEST, OREGON’S EXPORT TRADE WITH THE WORLD

3 (1997) (reporting increase from 1991 through 1996).

Ibid.

Id. at 5.

system and even natural disasters can slowly or suddenly

transform the needs of exporters, making yesterday’s transport

solution today’s bottleneck. To ensure their ability to compete,

the nation’s exporters, including those in Oregon, depend on the

availability of a flexible network of road, rail, air and water

transportation and a “menu” of ports that allows them to select

the route that gets their products overseas in the most efficient

and economical manner and to change their transportation

strategy as needs and conditions change. The health of the ports,

an essential link in the national freight transportation system, is,

therefore, of vital importance to Oregon’s continued economic

development. Because the Harbor Maintenance Tax contributes

significantly to the federal government’s ability to maintain those

ports, its continuation is a matter of serious concern for the State

of Oregon.

STATEMENT OF THE CASE

Oregon adopts the Statement of the Case in the Petition for

Certiorari filed by the United States.

SUMMARY OF ARGUMENT

It is beyond dispute that Congress may impose on exports a

fee to recover federal funds expended to maintain the nation’s

ports. The question presented here is whether the method

Congress chose to apportion that fee among those who use the

ports transforms the fee into a general revenue measure forbid-

den by the Export Clause. The court of appeals’ conclusion that

the chosen method makes the fee into a tax is based in part on

an atomistic view of the national freight transportation system in

which each load of freight exported may be required to pay fees

to maintain only the particular port from which it is in fact

shipped. Not only is that analysis based upon a misinterpretation

of this Court’s cases, it is also based upon a misunderstanding of

the nature and operation of the national freight transportation

system.

That a fee is collected at one facility and used to maintain

another facility of the same type has never been a valid objection

to that fee. Especially in the area of transportation, this Court

has recognized that the benefit that flows from the fee is not the

creation or maintenance of the specific facility at which it is

paid, but the availability of the system of which that individual

facility is a part. A majority of the nation’s foreign trade passes

through the nation’s ports. As the developing nature of the global

economy suggests and as the recent events illustrate, those who

use One port today may require the services of a different port

tomorrow. It is against the overall availability of the nation’s

ports that the benefits flowing from the port use charge must be

measured.

ARGUMENT

Even in those contexts in which Congress is forbidden to

impose taxes, it may require those who benefit from the use of

federally supported facilities to pay the costs the federal govern-

ment incurs in creating or maintaining those facilities. Massa-

chusetts v. United States, 435 U.S. 444 (1978). As a result, even

though Congress may not impose a tax or duty on exports, U.S.

Const. Art. I, § 9, Cl. 5, it may impose fees to recover costs it

incurs in creating or maintaining the facilities through which

those exports flow. Pace v. Burgess, 92 U.S. 372 (1876). Here,

the government incurs costs for the maintenance of the nation’s

harbors. That it may recover those costs, therefore, should not

be open to dispute. The question is from whom and by what

formula.

The distinction between a permissible fee and an impermissi-

ble tax is revealed by a three-part test. A permissible fee (1)

does not discriminate against constitutionally protected interests

or activities, (2) is based upon a fair approximation of use and

(3) is not excessive in relation to the costs incurred by the

government in providing the service in question. Massachusetts

v. United States, 435 U.S. at 464; Evansville-Vanderburgh

Airport Authority District v. Delta Airlines, 405 U.S. 707,

716-20 (1972). The Federal Circuit concluded that the port use

charge is not based upon a fair approximation of use. United

States Shoe Corp. v. United States, 114 F.3d 1564, 1574 (Fed.

Cir. 1997).

The court gave three reasons for that conclusion. First, the

court noted that the tax is imposed on the exporter, whom the

court described as an “indirect user,” rather than the ship owner,

whom the court characterized as “the direct user.” 114 F.3d at

1573. Second, because the charge is calculated based on the

value of the exported goods, the court determined that the benefit

received is not tied closely enough to the amount of the charge

paid. /d. at 1572-74. Finally, the court noted that exporters are

forced to pay for harbor maintenance “across the entire country,

even though they receive no benefit from maintained harbors at

any port other than the one they actually use.” /d. at 1574.

Although this brief is addressed primarily to the last of these

reasons, each is demonstrably flawed.

1. As the dissenting opinion explained, the majority’s first

reason is faulty as a matter of the practical economics of the

marketplace. 114 F.3d at 1581-82 (Mayer, J., dissenting). This

Court has implicitly recognized that, notwithstanding the entity

to which the law imposes the fee, it is likely that it will actually

be paid by the consumer of the transportation services. Thus, the

Court did not “think it particularly important whether the charge

is imposed on the passenger himself, to be collected by the

airline, or on the airline, to be passed on to the passenger if it

era t --

chooses.” Evansville- Vanderburgh, 405 U.S. at 714. In the Head

Money Cases (Edye v. Robinson), 112 U.S. 580 (1884), the fee

was collected from the ship operator rather than the passengers,

the “direct” beneficiaries of the fee. The Court nevertheless

found that Congress was not exercising the taxing power. /d. at

595-96.* Here, if the fee were imposed directly on the ship

owners, they would be free to pass it along to the exporters. It

is difficult to see the constitutional significance in the congressio-

nal choice to impose it directly on the exporters, a choice

consistent with this Court’s express pronouncement in Evansville-

Vanderburgh.

2. This Court has also rejected the second basis of the

majority’s reasoning, that the fee is faulty because it is not

calculated by a method that, in the court of appeals’ view,

closely enough approximates the benefits realized by those who

pay it. In Massachusetts v. United States, for example, the Court

considered a “registration tax” on all civil aircraft to recoup the

cost of federal aviation programs. 435 U.S. at 446. The Court

explained that Massachusetts’ argument that the tax in that case

was “not directly related to the degree of use of the airways,”

“has been confronted and rejected in analogous contexts.” 435

U.S. at 463 citing Capitol Greyhound Lines v. Brice, 339 U.S.

542 (1950). In Massachusetts v. United States itself, the Court

rejected an intergovernmental tax immunity challenge to the

application of the registration charge to a state-owned helicopter

even though “a probable deficiency in the formula arises because

not all aircraft make equal use of the federal navigational

“The Court, somewhat obliquely, acknowledged the ability of the ship owner

to pass the fee on to the passengers, noting that although the fee did not protect

the ship owner, “[hje is the man who reaps the profit from the transaction, who

has the means to protect himself and knows well how to do it[.]” 112 U.S. at

595.

facilities or the airports that have been planned or constructed

with federal assistance.” 435 U.S. at 468. In other words, the

fee did not fail the fair apportionment test even though the fee

was not directly calculated upon the specific benefit realized by

the aircraft’s owners and might result in some paying more and

others less, in relation to benefit received, than some other

method of calculating the charge. Basing the fees on the value of

the product exported is hardly “wholly irrational as a measure of

the relative use of the facilities for whose benefit they are

levied.” Evansville- Vanderburgh, 405 U.S. at 719.

3. It is on the third leg of the court of appeals’ reasoning,

however, that Oregon wishes to concentrate. The court com-

plained that the fees were used for the maintenance of all

harbors, not just the one from which the cargo in question was

actually shipped. United States Shoe Corp., 114 F.3d at 1574.

The court did not explain precisely why this aspect of the charge

was a defect in respect to the test this Court has applied. Nothing

in Massachusetts v. United States suggests that the Court had

concluded that fees collected at a particular airport could be used

to maintain only that airport. To the contrary, the Court ex-

plained that the availability of the services paid for by the fee

benefits a!! potential users. 435 U.S. at 468 and n. 23. Nor is

there any suggestion in the Head Money Cases that the charge

paid by an individual shipping line could be used only to provide

aid to the immigrants transported by that line. Here, as Judge

Mayer explained, all exporters have all ports available to them.

United States Shoe Corp., 114 F.3d at 1581 (Mayer, J.,

dissenting).

Even if the court of appeals’ focus were not too narrow

legally, it is too narrow factually. The requirement, implicit in

the court’s reasoning, that a fee collected at one port never be

used to maintain a different one takes no account of the benefits

provided by an interconnected system of freight transportation to

all exporters. As the national economy has become more

integrated into and dependent upon the worldwide marketplace,

imports and exports alike have increased dramatically. The total

value of the nation’s waterborne foreign trade increased by over

one hundred and sixty-one billion dollars between 1990 and

1995, a jump of over thirty-five percent. MARITIME ADMINIS-

TRATION OFFICE OF PORTS AND DOMESTIC SHIPPING, UNITED

STATES DEPARTMENT OF TRANSPORTATION, A REPORT TO

CONGRESS ON THE STATUS OF THE PUBLIC PORTS OF THE

UNITED STATES 1994 - 1995 Table 8 (1996) (hereinafter PUBLIC

PoRTS). Exports accounted for almost seventy billion dollars of

that increase, representing growth of over forty-four percent.

Ibid. Considered in sheer volume, rather than value, exports

expanded by almost seventy million metric tons, over twenty

percent, between 1994 and 1995 alone. /bid. The overwhelming

bulk of that foreign trade, ninety-five percent by volume, moves

through the nation’s port system. /d. at 60. And, foreign trade

is expected to double in little more than a decade. /bid.

These rapid increases have exposed significant weaknesses in

the national freight transportation system. “[A]ccess to many

port terminals in terms of navigation channels, and road and rail

links has not kept pace” with the growth in the volume of freight

or with improvements in port terminal facilities. PUBLIC PORTS

62. The result is “bottlenecks in the landside transportation

system serving the ports.” TRANSPORTATION RESEARCH BOARD,

NATIONAL RESEARCH COUNCIL, LANDSIDE ACCESS TO U.S.

PorTS 1 (1993) (hereinafter LANDSIDE ACCESS). “The transfer

of cargo between ports and inland transport is one of the

weakest, least efficient, and most costly links in the intermodal

transportation chain.” /d. at 143. Modern cargo vessels are

expensive to operate.’ Delays in loading or unloading are,

therefore, costly. LANDSIDE ACCESS at 41-42.

Congress has expressed its concern about weak linkage

between ports and land transportation and has called for a

national response. Acknowledging the need to improve the

nation’s ability to compete in “the global economy,” Congress

has declared the nation’s policy to develop a “National Inter-

modal Transportation System [that] shall provide improved

access to ports and airports, the Nation’s li** to world com-

merce.” Intermodal Surface Transportation Efficiency Act of

1991, § 2, Pub. L. No. 102-240, 105 Stat. 1914 (hereinafter

ISTEA). That national intermodal transportation system includes

“all forms of transportation in a unified, interconnected man-

ner[.]” /bid.°

Infrastructure weakness is not the only source of delay and

consequent expense for exporters. Both long and short term

considerations may overtax existing facilities. Containerization

and economies of scale, among other factors, have tended to

concentrate cargo at fewer terminals. LANDSIDE ACCESS 42. In

the long term, those terminals may not have the capacity to meet

all the demands their success has created, making it necessary

for cargo to move to other facilities to find available port

‘Container ships can cost as much as $50,000 as day to operate. Bill

Mongelluzzo, Big Jams Cause Cargo Diversion at Los Angeles, JOURNAL OF

COMMERCE, Oct. 29, 1997, at 1A.

*Responding both to bottlenecks and the fluid needs of modern business in an

international economy, ISTEA envisions “an integrated, closely coordinated

system, providing ‘seamless’ multimodal service for both passengers and freight.”

Dr. Mark A. Turnquist and Dr. George F. List, Charting a Course for Intermodal

Policy and Research, 47 TRANSPORTATION QUARTERLY 257, 258 (1993). In that

“seamless” system, freight would move much like a letter or a telephone call,

choosing whichever means of transportation and route are most efficient and

economical at the moment the shipment is ready to move rather than moving over

a predetermined course. /d. at 267-69.

capacity. /bid. A short term example is provided by the exten-

sive delays in loading and unloading ships caused by the recent

shortages of labor and railcars at the Ports of Los Angeles and

Long Beach, which normally handle about twenty-five percent of

the nation’s ocean-going container traffic. Bill Mongelluzzo, Big

Jams Cause Cargo Diversion at Los Angeles, JOURNAL OF

COMMERCE, Oct. 29, 1997, at 1A (hereinafter Big Jams); Steve

Hayes, Anxious Shippers Divert Containers, THE OREGONIAN,

November 4, 1997, at D1 (hereinafter Anxious Shippers). Other

factors, such as market shifts or changes in commodity prices,

may make it more profitable to obtain supplies or suppliers from

new locations. See Dr. Mark A. Turnquist and Dr. George F.

List, Charting a Course for Intermodal Policy and Research, 47

TRANSPORTATION QUARTERLY 257, 266 (1993).

As one method of transportation achieves new efficiencies or

other competitive advantages, some ports may suffer. See

LANDSIDE ACCESS 43 (ports on the Gulf Coast and Great Lakes

have suffered as freight has moved to markets in adjacent areas

overtand; rather than by ship). Others may benefit. The recent

congestion at the Ports of Los Angeles and Long Beach, for

example, has caused some shippers to reroute ships, sending

goods through other ports. Jim Lynch, Railroad Crisis a Boon

for Port, THE OREGONIAN, November 1, 1997, at Bl (major

shipper moving business temporarily to Port of Portland); Big

Jams, supra (major retailer sending cargo by water to the East

Coast rather than through Los Angeles-Long Beach); Anxious

Shippers, supra (traffic being diverted to other ports on East and

West Coasts).

In a rapidly developing and changing worldwide market,

exporters must be able to adapt rapidly to altered circumstances.

If the exporter cannot get its product into the nearest port

because of weakness in rail or road links, or out of that port

because of congestion that delays unloading the vessels that will

carry its products overseas, it must be able to look elsewhere to

find the capacity to move its products or face the risk of losing

customers to those who can deliver more promptly. Just as the

availability of many airports benefits all air travelers, the

availability of many ports benefits even those exporters who may

use only one of them today. Just as those businesses whose

goods were primarily coming through the Ports of Los Angeles

and Long Beach yesterday have benefitted from the availability

of the other ports they are using today, so will other importers

and exporters benefit from the availability of those other ports as

their needs or external circumstances make it more expedient for

their products to move through different channels and other

ports.

A tax is, in general terms, an exaction that goes to the

general support of the government. Head Money Cases, 112

U.S. at 595-96. It is consistent neither with this Court’s cases

nor with reality to suggest that a charge that is demonstrably

used only for the purposes of maintaining harbors, see United

States Shoe Corp., 114 F.3d at 1579 (Mayer, J., dissenting), is

transformed into a general revenue measure merely because a

class of beneficiaries pays for a system of harbors that actually

or potentially benefits all members of that class. The Constitution

does not require Congress to blind itself to the realities of

economic life, and this Court has repeatedly rebuffed requests

that it do so. The court of appeals’ overly narrow view of who

benefits from the maintenance of a vibrant national freight

transportation system and how they do so is out of step with the

reality of modern intermodal freight transportation as well as

inconsistent with this Court’s practical fair apportionment

jurisprudence.

CONCLUSION

This court should reverse the judgment of the Federal

Circuit.

Respectfully submitted,