Petition for Writ of Certiorari — Texas Liquor Control Board v. Ammex Warehouse Co.
Supreme Court brief1966
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INDEX OF CONTENTS
Page
p EE IO EET LT Lee TO FIST cp TE TEE i
ee I oS. so nats be cae eee ees ii
NS os ee ee eee ee ae 1
ee es ca rr ica ics ath 2
“ee eae ne 8
I. Chronology ce ois Sh I Ria gaa ak a ee | oe 2
II. Statutory Provision Conferring Jurisdiction...... 3
Questions Presented for Review....................... 3
The Constitutional and Statutory Provisions Involved..... 6
I, ,The Texas Statute in Question.................. 6
II. Provisions Relied Upon by Petitioners........... 10
III. Provisions Upon the Basis of Which Texas Courts -
Ruled the Statute in Question Unconstitutional... 12
IV. Other Statutes and Regulations Involved......... 13
a Or TE CD. enc ai noo wil es own AE 14
Reasons Relied on For Allowance of Writ.............. 28
PD AE GI a a. since wiiinn sane nwassvdeeel 37
Certificate of Serwies: ... 02.005 Les saad. cece 38
Appendix (Separately Indexed)........................ 39
We ick iA IRIE 0 see et
INDEX OF AUTHORITIES
Cases
¢
Ammex Warehouse Company of San Ysidro,
Inc. v. Department of Alcoholic Beverage 19,21, 22, 28,
Control for the State of California, 224 F. 25, 27, 28, 31,
Supp. 546 (D.C., S.D.Cal., 1968) ..-........ $2, 33
Collins v. Yosemite Park Company, 304 USS.
518, 58 S.Ct. 1009, 82 L.Ed. 1502 (1938)... 32
Department of Alcoholic Beverage Control for
the State of California, et al. v. Ammex
Warehouse Company of Ysidro, Inc., 378 5, 13, 19, 21,
U.S. 124, 84 S.Ct. 1657, 12'L.Ed.2d 743..... 31, 32
Department.of Revenue v. James B. Beam Dis-
tilling Company, 377 U.S. 341, 84 S.Ct. 1247,
12 L.Ed. 2d 862 (1964).................. 31
Hostetter v. Idlewild Bon-Voyage Liquor Cor- 5
poration, 377 U.S. 324, 84 S.Ct. 1293, 12 21 25
eS rr re ree > 31, 33
Idlewild Bon-Voyage Liquor Corporation v. /
Epstein, 212 F.Supp. 376 (D.C., S.D.N.Y., /
ae ASSURE Rater 2k SG LS mln SRI Satcher a 15, 16, 20, 29, 31
J. F. Fitzgerald Construction Co. v. Pedersen,
824 U.S. 720, 65 S.Ct. 892, 89 L.Ed. 1316
Re ee teehee Ce ee 34
Michigan-Wisconsin Pipeline Co. v. Calvert,
347 U.S. 157, 74 S.Ct. 396, 98 LEd. 588
& Stahl, 377 US. 184, 84 S.Ct. 1142, 12
LEd2d 752 (1964)........... 0000... eee. 84
“4
INDEX OF AUTHORITIES (Con’d)
hal)
Fee Page
State of Alaska v. Artic Maid, et-al., 366 U.S.
199, 81 S.Ct. 929, 6\L. 227 (1961) .. 34
Texas Liquor Coptrl Baar al, Appellants
v. Ammex W. pany, Inc., et al.,
Appellees, 384 S.W. 2d A Rae 2
eas }
Ziffrin v. Reeves, 308 U.S. 182, 60 S.Ct. 163,
oe See eer 31
= Constitutional Provisions
Constitution of the United States, Article I, 4,12, 13,17,
Section 8, Clause 2 and3................. 20, 33, 34
Constitution of the United States, Article VI, 4, 13, 18,
sii RIE I ete aaa ere ote ee 20, 34
Constitution of the United States, Twenty-first 3, 10, 18, 19,
Amendment, Section | 2 ei ey 20, 32, 33
Federal Statutes
ee I I ni ec ere ae tans 14, 23, 24
19 U.S.C.A. 1555......... Pee ee ane reer ee oe 4, 13, 23
Hy ME I on oo cid dime wan cen akdn 4, 5, 18, 23, 24
e'
a ee ne ee 3, 10, 19
EE SE ae eT ee 3, 11, 19
gin os Re Rf a er teat 3, 11, 19
CNS 65 5.206455 8c USé ri eres - 4,11
ay. Ws I i os 5 eu ab ccc uke nea ewes 3
49 U.S.C.A. 1002......... Bich Mee det 14
INDEX OF AUTHORITIES (Con’d)
Page
Federal Regulations
Title 19, Code of Federal Regulations, Customs
Regulations, Part 18, Section 18.1, CR 363. . 14
Title 19, Code of Federal Regulations, Customs
Regulations, Part 19, Section 19.1, CR 379- ™
Title 19, Code of Federal Regulations, Customs
Regulations, Part 19, Section 19.11, CR 386-
ES Se a oy oe ee ee 13, 23, 24
Title 19, Code of Federal Regulations, Customs
Regulations, Part 19, Section 19.13, CR 387-
Ree BOS wre eae ber i 14, 23, 24
Title 26, Code of Federal Regulations, Customs
Regulations, Part 252, Subpart B, § 252.11. . 14, 27
Title 26, Code of Federal Regulations, Customs
Regulations, Part 252, Subpart B, § 252.40. . 14, 27
Texas Statutes
Article 666-15, V.A.P.C. ...... GbE ess dias 15
Article 666-15(6), V-A.P.C. ................. 15
Article 667-15(7b), V.-A.P.C. ............... 4, 5, 6, 15, 18, 30
Article 666-288, VAPC.................... 15
”
a
NO. ————
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1965
Texas Liquor ConTROL BOARD, ET AL.,
Petitioners,
Vv.
AMMEX WAREHOUSE CoMPANY, INC.; ET AL.,
Respondents.
From the
Court of Civil Appeals for
The Third Supreme Judicial District of Texas
At Austin
PETITION FOR CERTIORARI
TO THE HONORABLE SUPREME COURT OF
THE UNITED STATES:
Petitioners, the Texas Liquor Control Board and
Coke R. Stevenson, Jr., Administrator of the Texas
Liquor Control Act, respectfully request that this
Court grant certiorari to review the judgment of the
Court of Civil Appeals for the Third Supreme Judi-
cial District of Texas at Austin, affirming the judg-
ment of the 53rd District Court of Travis County,
Texas, which held to be unconstitutional a statute
amending the Texas Liquor Control Act.
par
THE OPINIONS BELOW
The opinion of the Court of Civil Appeals for the
Third Supreme Judicial District of Texas at Austin
‘is styled Texas Liquor Control Board, et al., Appel-
lants v. Ammex Warehouse Company, Inc., et al., Ap-
pellees, and is reported, 384 S.W.2d 768, and is ap-
pended hereto, Appendix, p. 41, et seq.
The final judgment of the 53rd District Court of
Travis County, Texas, which formed the basis of the
appellate opinion noted above was numbered and styled
Consolidated Cause No. 132,400, Ammex Warehouse
Company, Inc., et al. v. Texas Liquor Control Board,
et al., and is appended hereto, Appendix, p. 53, et seq.
THE GROUNDS UPON WHICH
-JURISDICTION OF THIS COURT IS INVOKED
L
CHRONOLOGY
The decision of the Court of Civil Appeals for the
Third Supreme Judicial District of Texas from which
appeal is here taken is dated December 2, 1964 (Ap-
pendix, p. 41, et seq.).
Appellants’ motion for rehearing, duly filed on De-
cember 9, 1964, was by the Court of Civil Appeals for
the Third Supreme Judicial District overruled on De-
cember 16, 1964, as certified by the Clerk of the Court
of Civil Appeals.
Application for Writ of Error to the Supreme Court
of the State of Texas was timely filed on January 15,
1965, as certified by the Clerk of the Supreme Court
of the State of Texas.
pa
— ‘ >
The Supreme Court of the State of Texas refused
the application for writ of error, with the notation
“no reversible error,’’ on June 23, 1965, as certified
by the Clerk of the Supreme Court of the State of
Texas.
Motion for rehearing on the application for writ of
error was by the Supreme Court of the State of Texas
overruled on July 28, 1965, as certified by the Clerk of
the Supreme Court of the State of Texas.
Il.
STATUTORY PROVISION CONFERRING
’ \ JURISDICTION
The jarisdiction of this Court is here sought under
28 U.S.C.A. 1257(3), which authorizes this Court to ex-
ercise jurisdiction “‘by writ of certiorari, ... where
the validity of a State statute is drawn in question on
the ground of its being repugnant, to the Constitution
... or-laws of the United States.”
QUESTIONS PRESENTED -FOR REVIEW
The questions presented by this petition for certio-
rari pertain to the right of the State of Texas under
the Twenty-First Amendment to the Constitution of
the United States, the Wilson Act (27 U.S.C.A. 121),
the Webb-Kenyon Act (27 U.S.C.A. 122), and the Fed-
eral Alcohol Administration Act (27 U.S.C.A. 201, et
seq.). to regulate the business of selling, in less than
wholesale quantities, alcoholic beverages, tax free, from
United States Government Bonded Warehouses and
the extent, if any, to which the Export-Import Clause
<ialliei
of the United States Constitution (Article I, Sec. 8,
Cl. 2), the Commerce Clause of the United States Con-
stitution (Article I, Sec. 8, Cl. 3), the Supremacy
Clause of the United States Constitution (Article VI,
Cl. 2), or Federal statutes or regulations enacted pur-
suant thereto deprive the State of Texas of authority
to regulate such business. The questions are:
(1) Does there exist any conflict between any of the
above noted provisions of the Constitution of the Unit-
ed States, or Federal statutes or regulations enacted
pursuant thereto, and Article -667-15(7b), Vernon’s
Annotated Penal Code of the State of Texas, so as to
render the Texas statute unconstitutional?
(2) Does the State of Texas have the authority to
require that nersons and corporations holding feder-
ally issued basic importer’s permits under 27 U.S.C.A.
204 and engaged in the State of Texas in the business
of selling tax free liquor from United States Govern-
ment Bonded Warehouses, Class 2 and 8, authorized
under.19 U.S.C.A. 1555 and 1562, to secure, in addi-
tion to such Federal authorization, permits established
by Texas law to be issued by the Texas Liquor Control
Board ?
(3) Does the State of Texas, in order to prevent
unlawful diversion within the State of Texas, have
the authority to require that liquor sold tax free pur-
portedly for exportation actually“be exported in com-
pliance with Federal regulation?
(4) Where the admitted and undisputed facts show
conclusively that the Class 8 United States Customs
Bonded Warehouses maintained by the liquor sellers-
in Texas are being operated in violation of the con-
i
4
trolling Federal statute, 19 U.S.C.A. 1562, and the
applicable Customs regulations as construed by the
Court of Customs and Patent Appeals, there being no
United States Supreme Court decision directly in-
terpreting that statute, do the liquor sellers have the
right to claim Federal protection from State regula-
tion or does the State of Texas have the authority to
regulate the business of the liquor sellers in order to
prevent the unlawful diversion of the tax-free liquor
within the State of Texas?
(5) Did the Court of Civil Appeals for the Third
Supreme Judicial District of Texas, and, by inference
from its refusal of application for writ of error with
‘no reversible error” annotation, the Supreme Court
of the State of Texas correctly interpret the decisions
of the United States Supreme Court in Hostetter v.
Idlewild Bon-Voyage Liquor Corporation, 377 U.S.
324, 84 S.Ct. 1293, 12 L.Ed. 2d 350 (1964), and Depart-
ment of Alcoholic Beverage Control for the State of
California et al. v. Ammex Warehouse Company of
San Ysidro, Inc., 378 U.S. 124, 84 8. Ct. 1657, 12 L.Ed.
2d 743 (1964), as prohibiting the State of Texas from
regulating, as the State of Texas has attempted to do
by enactment of Article 666-15 (7b), Vernon’s Anno-
tatéd Penal Code, businesses similar to those involved
in the reported cases, where not only is the law of Texas
entirely different from the state laws in the reported
cases, but the businesses themselves also differ from
those involved in the reported cases in the types of
Customs Bonded Warehouses maintained, in various
operational procedures, in places of delivery, and in
legislative recognition of need for regulation? °
(6) Should a state statute regulatory of an aspect
a oe
of the liquor industry be declared unconstitutional on
the ground that the business constitutes foreign com-
merce authorized by Federal law and compliance with
~ the statute is ‘‘impossible’’ when (a) there is no com-
petent evidence that compliance is in fact impossible,
and (b) the business is conducted totally and entirely
within the State of Texas?
THE CONSTITUTIONAL AND
STATUTORY PROVISIONS INVOLVED
L
THE TEXAS STATUTE IN QUESTION
The statute in question, an amendment to the Texas
Liquor Control Act, was enacted in 1963 by the 58th
Legislature of the State of Texas (General and Spe-
cial Laws of the State of Texas passed by the Regular °
Session of the Fifty-Eighth Legislature, 1963, Ch. 108,
p. 196) and is codified as Article 666-15(7b), Vernon’s
Annotated Penal Code of the State of Texas. The meas-
ig parca leone w
“‘H.B. No. 782
‘‘An Act amending Chapter 467, House Bill No.
77, Second Called Sessioti, Forty-fourth Legisla-
ture, as such has been heretofore amended, being
the Texas Liquor Control Act, and being the pr
carried in Vernon’s Penal Code as Article 666
and 667, by adding to Section 15 of Article I a
new paragraph to be designated (7b) to provide
for a United States Bonded - Liquér Export Per-
mit authorizing the holder encod to engage in
the business of importing, transporting, and ware-
lilacs
housing United States bonded liquor and the ex-
porting of the same in less than wholesale quan-
tities; defining the authority of such permit hold-
ers; setting the fee for such permits; providing
that the authority granted to such permit holders
is cumulative of and not in lieu o requirements
of Federal Law in the conduct of such operations ;
specifying that such permits shall not be required
of the holder of any other type of permit which,
under the Texas Liquor Control Act and the ruljs
and regulations of the Texas rad Control
Board, authorizes the exportation of iquor in com-
pliance with the requirements of Federal Law:
authorizing those who on the effective date of
Act are engaged in the business of rting Unit-
ed States bonded liquor from the United States
to continue to engage in such operations until their
applications for permits under this Act have been
acted upon provided such applications are filed
within thirty (30) days after the effective date of
this Act; providing for severability; and declar-
ing an emergency.
‘“‘BE IT ENACTED BY THE LEGISLATURE
OF THE STATE OF TEXAS:
“Section 1. Section 15 of Article I of the Texas
Liquor Control Act is hereby amended by the ad-
dition of a new paragraph to be designated (7b),
reading as set out herein: weFia
(7b) United States Bonded Liquor Export Per- /
mit. A United States Bonded Liquor Export Per-/
mit shall authorize the holder thereof to: ~~~
‘‘(a) Purchase liquor in bond from holders of
Texas Wholesalers’ Permits. or purchase liquor
from distillers, brewers, wineries, wine
rectifiers, and manufacturers who are holders of
Nonresident Sellers’ Permits and import inté the
State of Texas at a United States bonded dock
such liquor in transit for exportation purposes.
iti
)
ty
**(b) Transport such liquor from the United
States bonded dock at point of entry under United
States bond to a United States bonded warehouse
within the State of Texas.
‘*(¢) Warehouse such liquor under United States
bond.
**(d) For the purpose of exportation only, solicit
orders for, take orders for, and accept payment
for any quantity of said liquor in unbroken orig-
inal containers.
**(e) Cause such liquor to be withdrawn from a
United States bonded warehouse for exportation,
in compliance with United States Custom regula-
tions, and delivered to a public common carrier
for transportation, in compliance with such car-
rier’s established rate schedule, into the country
of export by such common carrier or by such com-
mon carrier’s affiliated common carrier in the
country of export, for delivery to the purchaser
at a designated address outside the continental
limits of the United States or for delivery to a
named qualified person at a designated address
outside the continental limits of the United States.
‘The annual state fee for a United States Bonded
re rt Permit shall be Seven Hundred
Fifty Dollars ($750). ,
“The privileges authorized by this Section are
cumulative and not in lieu of requirements of Fed-
eral law in the conduct of such operations. It is
specifically provided, however, that its under
this Section shall not be required for the whole-
sale export of United States bonded liquor by the
holder of any other type of permit which, under
existing statutes and the rules and regulations of
the Texas Liquor Control Board, authorizes the
wholesale exportation of liquor in compliance with
Federal Law.
a Sm
‘‘Sec. 2. Any person who, on the effective date
of this Act, is engaged in the business of export-
ing bonded liquor from the United States in com-
pliance with Federal regulations may continue to
engage in such operation until his application for
a permit under this Act has been acted upon, pro-
vided, however, that such application is filed with-
in thirty (30) days after the effective date of this
&,
Act. os
“Sec. 3. If any provision of this Act or the ap-
plication thereof to any person or circumstance is
held invalid, such invalidity shall not affect other
eho age or applications of the Act which can
given effect without the invalid provisions or
applications, and to this end the provisions of this
Act are declared to be: severable. :
“Sec. 4. The fact that there is an urgent need to
amend the Texas Liquor Control Act to bring with-
in the scope of State regulatory authority the ju-
dicially declared legitimate business of exporting
United States bofded liquor in less than wholesale
quantities, together with the further fact that liq-
uor is presently being sold in the State of Texas
for exportation in violation of the laws of this
State, that the State of Texas is receiving. no tax
revenue from such sales, and that Texas has an
extensive international boundary along which the
sale of liquor can be effectively regulated and con-
trolled for the benefit of ae people of the State
of Texas oniy by requiring all persons in
any legitimate phase of the liquor industry to hold
permits or licenses issued by this State through
the Liquor Control Board, create an emergency
and an imperative public necessity that the Con-
stitutional Rule requiring bills to be on three
several days in each House be suspended, and said
Rule is hereby suspended, and this Act shall take
effect and be in force from and after its ‘passage,
and it is so enacted.
a en
a
‘*Passed the House, April 4,-1963, by a non-rec-
ord vote; passed the Senate May 2, 1963, by a viva-
voce vote.
‘‘ Approved May 7, 1963.
‘‘Effective 90 days after date of adjournment.’’
Il.
PROVISIONS RELIED UPON
BY PETITIONERS
The authority of the State of Texas so to regulate
an aspect of the liquor industry within its borders is,
Petitioners submit, established by Section 2 of the
Twenty-First Amendment to the Constitution of the
United States, which reads:
‘Sec. 2. The transportation .or importation into
ahy State, Territory, or possession of the United
“ States for delivery or use therein of intoxicating
‘ liquors, in violation of the laws thereof, is hereby
prohibited.’’
Petitioners also rely upon the Wilson Act (27
US. GA. 121), which specifies:
_ All fermented, distilled, or other intoxicating
» liquors or liquids transported into any State or
Territory ox tentieinizig therein for use, ¢onsump-
tion, sale or therein, shall upon arrival in
such State or itory be subject to the operation
and effect of thé laws of such State or Territory
enacted in the exégcise of its police powers, to the
same extent and > Paes same manner as though
such liquids or liquors had been produced in such
State or Territory, and shall not be exempt there-
from by reason of being introduced therein in orig-
inal packages or otherwise.’’
—10—
The Webb-Kenyon Act (27 U.S.C.A. 122) contains
similar but even more specific state authorization. It
reads:
“The shipment or transportation, in any manner
or by any means whatsoever, of any spirituous,
vinous, malted, fermented, or other intoxicating
liquor of any kind, from one State, Territory, or
District of the United States, or place noncontigu-
ous to but subject to the jurisdiction thereof, into
any other State, Territory, or District of the Unit-
ed States, or place noncontiguous to but subject
to the jurisdiction thereof, or from any foreign
country into any State, Territory, or District of
the United States or place noncontiguous to but
subject to the jurisdiction thereof, which said spir-
ituous, vinous, malted, fermented, or other intox-
icating liquor is intended, by any person interested
therein, to be received, possessed, sold, or in any
-Imanner used, either in the original package or
otherwise, in violation of any law of such State,
Territory, or District of the United States, or
place noncontiguous to but subject to the juris-
diction thereof, is hereby prohibited.”
The Federal Alcohol Admini#tration Act (27
U.S8.C.A. 201, et seq.), in its entirety, recognizes the
peculiar right of states to regulate all aspects of the
alcoholic beverage industry conducted within the boun-
daries of the states. Of particular significance here is
that portion of the Act relating to the issuance of per-
mits and reading (27 U.S.C.A. 204): :
. (a) Who entitled thereto. The following persons
. shall, on application therefor, be entitled to a basic
permit:
‘*(1) Any person who, on May 25, 1935, held a
basic permit as distiller, rectifier, wine producer.
or importer issued by an agency of the Federal
Government.
—l1—
‘*(2) Any other person unless the Secretary of
the Treasury finds (A) that such person (or in
case of a corporation, any of its officers, directors,
or principal stockholders) has, within five years
prior to date of application, beén convicted of a
felony under Federal or State law or has, within
three years prior to date of application, been con-
victed of a misdemeanor under any Federal Law
relating to liquor, including the taxation thereof ;
or (B) that such person is, by reason of his busi-
ness experience, financial standing, or trade con-
nections, not likely ‘o commence operations with-
in a reasonable period or to maintain such opera-
tions in conformity with Pederal Law; or (C) that
the operations proposed to be conducted by such
person are in violation of the law of the State in
which they are to be conducted.”’
Ill.
PROVISIONS UPON THE IS OF
WHICH TEXAS COURTS RULED THE
STATUTE IN QUESTION UNCONSTITUTIONAL
The Texas statute has been held to be in violation
of the Export-Import Clause, the Commerce Clause,
and the Supremacy Clause of the Constitution of the
United States, Article I, Section 8, Clauses 2 and 3,
and Article VI, Clause 2:
‘‘The Congress shall have Power To lay and col-
lect Taxes, Duties, Imposts, and Excises, to pay
the Debts and provide for the common Defence
and general Welfare of the United States; but all
Duties, Imposts and Excises shall be uniform
throughout the United States; ©
* * +
=|
v - ¢ Sotet pete mies pape
ener te ee eS RN, ATA
“To regulate Commerce with foreign Nations, and “
among the several States, and wath 'the Indian
Tribes ;’’
* +
“This Constitution, and the Laws of the. United
States which shall be made in Pursuance thereof ;
- and all Treaties made, or which shall be made, un-
der the Authority of the United States, shall be
the supreme Law of the Land; and the J udges in
every State ll be bound thereby, any Chi
in the Constitution or Laws of any State’to the
Contrary notwithstanding.”
\ IV. nes .:
OTHER STATUTES AND REGULATIONS
‘ INVOLVED _ f
The Respondenf liquor sellers in Texas maintain .
Class 2 and 8 United States Customs Bonded Ware-
"houses authorized by 19 U.S.C.A. 1555 ahd 19 U.S.C.A.
1562 and subject to the provisions of the Title 19, Code
of Federal Regulations, Customs Regulations, Part 19, °
Sections 19.1 and 19.11, CR. 379-381 and CR 386-387.
The statutes and regulations are set, out in the Appen- tom
dix, p. 57, et seq.
Those selling liquor for export in New York and
California, involved in Hostetter v. Idlewild Bon-V oy-
age Inquor Corporation, 377 U.S. 324, 84 S.Ct. 1293,
12 L.Ed.2d 350 (1964), and Department of Alcoholic
Beverage Control for the State of California v. Am-
mex Warehouse Company of San Y. sidro, Inc., 378
U.S. 124, 84 S.Ct. 1657, 12 L.Ed.2d 743 (1964), oper-
ated from Class 6 United States Customs Bonded
=
Warehouses authorized under 19 U.S.C.A. 1311 and
subject to the provisions of the Title 19, Code of Fed-
eral Regulations, Customs Regulations, Part 19, Sec-
tion 19.13, CR 387-388. The statute and regulation are
set out in the Appendix, p. 63, et seq. |
The Texas statute in question, as noted above, au-
thorizes permit holders ‘“‘in compliance with United
States Customs Regulations,’’ to withdraw liquor from
the warehouse and to deliver it to a common carrier
for transportation to the country of export. The Texas
statute, thus, incorporates not only the Federal stat-
utes and regulations applicable to the type warehouse
for which a liquor seller qualifies but also the ‘defini-
tion of ‘‘common carrier”’ as set out in Title 19, Code
of Federal ‘Regulations, Customs Regulations, Part 18,
Section 18.1, CR 363, set out in the Appendix, p. 70,
and Section (a), subsection (5) of 49 U.S.C.A. 1002,
which is incorporated by reference in the Customs Reg-
ulation definition and which is set out in the Appen-
dix, p. 72. . |
Respondent liquor sellers assert that the procedure:
which they follow in Texas constitutes exportation of
the liquor in compliance with Federal regulations. Pe-
titioners dispute that contention upon the basis of the
definition of ‘‘exportation,’’ Title 26, Code of Federal
Regulations, Part 252, Exportation of Liquors, Sub-
part B, § 252.11, quoted in Appendix, p. 74, and the
specified ‘‘evidence of exportation,’’ Title 26, Code of
Federal Regulations, Part 252, Exportation of Liquors,
Subpart B, § 252.40, quoted in Appendix, p. 75.
STATEMENT OF THE CASE
The specific question in this case is the constitution-
—14--
ality of Article 666-15(7b), Vernon’s Annotated Penal
Code of the State of Texas (Acts 1963, 58th Leg., Ch.
108, p. 196, quoted in full above). The statute, as it
shows on its face, is an amendment to the Texas Liquor
Control Act. It establishes a permit for those engaged
in selling liquor for export from United States Cus-
toms Bonded Warehouses and provides for such busi-
nesses regulations identical to or comparable with those
applicable to all other aspects of the alcoholic bever-
age industry in the State of Texas. The statute was
enacted after the three-judge Federal court in Jdle-
wild Bon-Voyage Liquor Corporation v. Epstein, 212
F.Supp. 376 (D.C., 8.D.N.Y., 1962), held that the State
of New York could regulate but could not constitu-
tionally prohibit a business similar to, but not identical
with, those then being operated in Texas towns along
the Mexican border. It had initially been the position
of the State of Texas, as it was New York’s position
in the reported case, that the state could absolutely
prohibit tax-free retail sales of liquor ‘‘for export.”’ .
Ammex Warehouse Company, Inc., a Respondent
here, was the first of the ‘“‘export’’ sellers in Texas.
Hal G. Ward, founder of the company (8.F. 7, 14, 81)
began operations in Laredo in June, 1961 (S.F. 10),
under a wholesaler’s permit provided in the Texas
Liquor Control Act (Article 666-15(6), Vernon’s An-
notated Penal Code). Such permits authorize expor-
tation of liquor but only in wholesale quantities (Ar-
ticles 666-15 and 666-23a, Vernon’s Annotated Penal
Code). When it became apparent that Ammex was
selling at retail, the Texas,Liquor Control Board can-
celled the permit. “
Ammex appealed from the cancellation by filing suit
= =
ne,
PS RE oe at we!
SAR OS thin. SS gn ni cates Petia tow oe Ss
against the Board, Cause No. 123,485 in the 53rd Dis-
trict Court of Travis County (Tr. 344). At that time
the Texas Liquor-Gontrol Act provided no permit ap-
plicable to the type of operations being conducted by
Ammex, and the trial court held that the Act could not
constitutionally be applied to the business and issued.
an injunction prohibiting the Liquor Control Board,
its officers and employees from in any manner inter-
fering with the operations of the liquor seller (Tr.
359). The Texas situation was, therefore, at that time
comparable with that which existed in New York at
the time of the Idlewild ease. The other liquor sellers
who are Respondents here began operations after judg-
ment was entered in the original Texas Ammex case
(Tr. 16, 344).
Under those circumstances, the Texas Legislature
accepted as correct the views expressed by the three-
judge Federal court in New York and drafted the
statute here in question to conform precisely with the
operations which the Federal Court had held to be a
legitimate business. Thereafter this Court, in Hostetter
v. Idlewild Bon-Voyage Liquor Corporation, 377 U.S.
304, 84 S.Ct. 1293, 12 L. Ed. 2d 350 (1964), affirmed
the lower Court’s decision, also limiting its holding to
the fact that New York was seeking absolutely to pro-
hibit—not to regulate. —
Before this Court’s decision in the Idlewil@ case
and before the effective date of the Texas statute, Re-
spondents, seven firms who at that time were operat-
ing, in the six major Texas towns along the Mexican
berder, seventeen liquor selling establishments’ of _the
1Respondents are (1) Ammex Warehouse Company, Inc.,
operating seven sales establishments, two in Brownsville, two
precise type to which the statute was designed to apply,
challenged the constitutionality of the statute, taking
the position, again in the 58rd District Court of Travis
County, Texas, that the State of Texas is completely
lacking in power to regulate or control their businesses
im any manner whatsoever.’
Federal questions were raised by all parties at the
earliest possible opportunity. The Original Petition
of Ammex Warehouse Company, Inc., the first of those
who are Respondents here to file a suit attacking the
validity of the statute, alleges in part (Tr. 6):
“*, .. The Twenty-first Amendment to the Consti-
tution does not provide the State of Texas with
the power it has attempted to assert over the busi-
in Laredo, and one each in Hidalgo, Eagle Pass and El Paso;
(2) Halem Ayoub and Sam Wardy, partners doing business
3) Yew by orn dg eg wt gprs in El Paso;
icente Garza, Jr., orge Garza, partners doing busi-
neon Beenie aa Tae oe sales establishments in
4) Albert Anzaldua, an in-
*The case originated as five separate but substantially iden-
tical suits filed oll'behalf of the various liquor selling estat
lishments. Each petition sought declaratory judgment holding
the statute titutional and permanent injunction pro-
hibiting the T. Liquor Control Board, its Administrator,
agents, and employees from enforcing or attempting to en-
force the new law. Separate temporary injunctions were is-
sued (Tr. 185, 189, 219, 223), but the five cases were formally
consoliated for trial on the merits (Tr. 290).
a ian
ness of Plaintiff by said House Bill 782, since the
liquor handled ‘2g Plaintiff is not liquor which
merely travels in interstate commerce, but all liq-
uor handled by Plaintiff is, from beginning to end,
in the stream of foreign commerce and is not in-
tended for consumption or use within the State of
Texas. The export business of Plaintiff is sanc-
tioned, controlled, and protected by the Export-
Import Clause of the United States Constitution
(Art. I, See. 8, Cl. 2) and the Federal Statutes
and Regulations enacted pursuant thereto; the
Commerce Clause of the United States Constitu-
tion (Art. I, See. 8, Cl. 3), and the Supremacy
Clause of the United States Constitution (Art. VI,
Cl. 2), and any attempt to enforce the Texas
Liquor Control Act, as amended, is violative of
the above clauses of the United States Constitu-
eS
Comparable allegations are contained in the orig-
inal petitions filed in the same Court by the other
liquor sellers who are Respondents here (Tr. 40-41, 54,
103, 133-134) and were repeated in all amended plead-
ings by all parties who are Respondents here (Tr. 198,
246, 281, 283).
The trial court adopted the contentions of the liquor
sellers, ruling in final judgment in the consolidated
cause that (Tr. 335 and Appendix, p. 54): "4
‘“‘The Texas Liquor Control Act, as amended by
House Bill 782, Acts of the 58th Leg. (1963) Ch.
108, p. 196, codified as Article 666-15(7b), Ver-
_ non’s Annotated Penal Code, cannot constitution-
ally be applied to Plaintiffs so long as they are
engaged in the ‘in bond’ liquor business which is
hereinafter described.’’
The judgment of the trial court further granted, in
conformity with the prayer of the liquor sellers, an
_ ae
injunction permanently enjoining the Texas Liquor
Control Board, its Administrator, agents, employees, —
representatives, and successors in office ‘‘from in any-
wise, directly or indirectly, interfering with, control-
ling or regulating any or all of the plaintiffs [ Respond-
ents here] . . . in the operation of their respective
businesses anywhere in the State of Texas” (Tr. 335,
Appendix, p. 55).
As they had done as Defendants in the trial court,
Petitioners as Appellants in the Court of Civil Ap-
peals for the Third Supreme Judicial District of Texas
took the position that the statute in question, a regula-
tory measure, is authorized by the Twenty-First
Amendment to the Constitution of the United States,
_ the Wilson Act (27 U.S.C:A. 121), the Webb-Kenyon
Act (27 U.S.C.A. 122), and the Federal Alcohol Ad-
ministration Act (27 U.S.C.A. 201, et seq.). The brief
in which those contentions are set out is a part of the
record certified to by the Clerk of the Court of Civil
Appeals for the Third Supreme Judicial District of
Texas and now before this Honorable Court (see es-
pecially pp. 73-78, reproduced in Appendix, p. 76, et
seq.). 2
After this Court’s decision in Hostetter v. Idlewild
Bon-V oyage Liquor Corporation, 377 U.S. 324, 84 8.Ct.
1293, 12 L.Ed.2d 350 (1964), and per curiam opinion
in Department of Alcoholic Beverage Control for the
State of California v. Ammezx Warehouse Company
of San Ysidro, Inc., 378 U.S. 124, 84 S.Ct. 1657, 12
L.Ed.2d 743 (1964), affirming Ammex Warehouse
Company of San Ysidro, Inc. v. Department of Alco-
holic Beverage Control for the State of California, 224
F. Supp. 546 (D.C., S.D.Cal., 1963), became available,
—_
OL SR Ah
y
Petitioners, in a reply brief submitted in the Court of
Civil Appeals for the Third Supreme Judicial District
of Texas (Appellants’ Reply to Appellees’ Brief, a
copy of which certified to by the Clerk of that Court is
now before this Honorable Court) contended, as they
now contend as Petitioners here, that those decisions
conclusively establish the right of the State of Texas
to regulate the business of selling for export tax-free
liquor from United States Government Customs
Bonded Warehouses and, therefore, the validity of
the Texas regulatory measure here in question. That
statute, as noted above, ‘was drafted after the decision
of the three-judge court in the Idlewild case and is
quite obviously based upon the facts and the law as
declared by that Court.
The ‘‘export’’ liquor sellers, who were Appellees
below and are Respondents here, emphasized the super-
ficial similarities between their operations and those
of the sellers in the New York and California cases
and contended, as the Court of Civil Appeals noted (384
S.W.2d 768, at 770 and Appendix, p. 45), that this
Court’s rulings in the two cases were “‘controlling and
that the 21st Amendment to the.Constitution does not
permit the State to regulate liquor passing through
its territory under the supervision of the United States
Bureau of Customs.’’ The Court of Civil Appeals
adopted the Appellees” argument and held (384 S.W.
2d 768 at 772 and Appendix, p. 50):
‘“We believe that the Statute is in the face of the
Commerce Clause and the Supremacy Clause, as
set out in the Idlewild and California —
cases, supra.”’
Quite obviously the parties here have drawn from -
—) |
this Court’s rulings diametrically opposite conclusions.
Petitioners believe that this Court clearly authorized
. State regulation. Respondents and the majority of the
Austin Court of Civil Appeals apparently believe that
any form of State regulation is prohibited. The con-
curring opinion (384 S.W.2d 768 at 772 and Appen-
dix, p. 51, et seq.) takes the position that the Legis-
lature of the State of Texas has no authority upon the
basis of existing conditions and facts before it to find
a need for regulation and that regulation should be
sustained only upon sworn testimony that a “‘signifi-
cant quantity of liquors” sold by these ‘‘export”’ sell-
ers had in fact been diverted for consumption in Texas.
Such divergent interpretations of this Court’s ral-
ings—particularly in a matter of the significance of
the State’s right to regulate an aspect of the liquor
industry—and the resulting need for clarification might
alone be abundant reason for the grant of certiorari
here.
There are, however, a number of other facts mate-
rial to consideration of the questions presented. Those
facts are most plainly demonstrated by noting the dif-
ferences between the facts in Texas and the New York
and California situations which. were before this Court
in Hostetter v. Idlewild Bon-Voyage Liquor Corpor-
atton, 377 U.S. 324, 84 S.Ct. 1293, 12 L.Ed.2d 350
(1964), and Department of Alcoholic Beverage Con-
trol for the State of California v. Ammex Warehouse
Company of San Ysidro, Inc., 378 U.S. 124, 84 S.Ct.
1657, 12 L.Ed.2d 743 (1964), affirming, per curiam,
Ammex Warehouse Company of San Ysidro, Ine. v.
Department of Alcoholic Beverage Control for the
State of California, 224 F.Supp. 546 (1963).
=<
ete cera e Rit TA OA ine ew eben ARV Cn dog
The law of Texas is entirely different from the laws
of New York and California. The Texas statute in ques-
tion, quoted above (p. 6), authorizes the business of
selling alcoholic beverages for export from United
States Customs Bonded Warehouses and provides a
permit for those desiring to operate such businesses.
New York contended that the Idlewild business was
‘‘illegal under the provisions of the New York Alco-
holic Beverage Control Law, because the business was
unlicensed’ and unlicensable, under that law” (377 U.S.
326, 84 S.Ct. 1294). New York was attempting ‘‘to pro-
hibit absolutely’”’ (377 U.S. 329, 84 S.Ct. 1296). In Cal-
ifornia ‘none of the state’s licensing provisions fit the
proposed operation of the plaintiffs’? (224 F.Supp.
551) ; ‘‘no licensing provision of the present state act
cover plaintiff’s operations. Defendant would therefore
bar Plaintiffs from this business’? (224 F.Supp. 552).
The Texas statute is regulatory. It declares that it
is based upon ‘‘an urgent need to... bring within
the scope of State regulatory authority’’ the business
in which Respondents are engaged because ‘‘Texas has
an extensive international boundary along which the
sale of liquor can be effectively regulated and con-
trolled . . . only by requiring all persons engaged in
any legitimate phase of the liquor industry to hold
permits or licenses’? (Emergency Clause of statute in
question, quoted above, p. 9). New York had ‘“‘not
sought to regulate or control the passage of intoxicants
through her territory in the interest of preventing
their unlawful diversion into the internal commerce
of the State. .. . Rather New York has sought totally
to prevent [the] transactions [of Idlewild]”’ (377 U.S.
*All emphasis has been supplied unless the contrary is noted.
—29—
333-334, 84 S.Ct. 1299). In California the Liquor Au-
thority did “‘not seek to use the power of Califorma
to regulate or supervise. It seeks to terminate” (224
F.Supp. 557).
The warehouses maintained by the Texas liquor sell-
ers are completely different from those out of which
the liquor in New York and California is sold. Other
than Border Bonded which has only a Class 2 United
States Customs Bonded Warehouse (S.F. 355, 369,
433), all of the Respondents have Class 2 and 8 United
States Customs Bonded Warehouses (S8.F. 21, 135, 162,
174, 304, 434, 542). The Class 2 and 8 Warehouses are
ordinary storage establishments (19 U.S.C.A. 1555,
1562, quoted in Appendix, p. 57, et seq.) ; the only dis-
tinction between them is that in a Class 8 Warehouse
the collector of Customs may authorize repackaging
if ‘‘it is necessary to the safety or preservation of the
merchandise”’ (19 U.S.C.A. 1562; 19.11 Customs Reg-
ulations: of the United States, CR-386-387, quoted,
Appendix, p. 58, et seq.). The Idlewild operation in
New York is conducted out of a warehouse authorized
under ‘19 U.S.C.A. § 1311’? (377 U.S. 327, 84 S.Ct.
1295, ftn. 3). The California operation is conducted
from the same type warehouse. ‘‘Pursuant to the Com-
merce Clause the Congress enacted Section 311 of the
Tariff Act of 1930 (19 U.S.C.A. § 1311) providing for
bonded manufacturing warehouses’? (224 F.Supp.
503). The bonded manufacturing warehouses, identi-
fied as Class 6, were created and designed and are op-
erated primarily for exportation. They are controlled
by totally different statutes and regulations (19
U.S.C.A. 1311 and 19.13 Customs Regulations of the
United States, CR 387-388, quoted, Appendix, p. 63,
et seq.).
_—
ot athioale
Od hen ocala ed mold
Only Ammex purported to introduce documentary
evidence of authority to operate as a Class 2 and 8
United States Customs Bonded Warehouse. A Xerox
reproduction (Pl.Ex. 3, S.F. 21, 587) was identified
as the authorization for the Ammex warehouse at Hi-
dalgo, Texas. There was testimony that similar letters
had been issued for each Ammex warehouse (S8.F. 21),
and the other Respondents, except Border Bonded,
testified that they had the same type of authority (S.F.
135, 162, 174, 304, 318, 319). The reproduction (P1.Ex.
3, S.F. 21, 587), bears the typed signature, ‘‘O. H.
Kazen, Collector of Customs,” and appears to have
been signed by S. W. Trout, Assistant ‘Collector. The
letter grants no authority whatsoever to ‘repackage any
liquor or merchandise of any kind. The controlling stat-
utory provision (19 U.S.C.A. 1562, Appendix, p. 58)
and Customs regulation (19.11, CR 386-387, Appendix,
p. 61), therefore, is that ‘“‘no merchandise shall be with-
drawn from bonded warehouse in less quantity than
an entire bale, cask, box, or other package .. . the
original package in which imported.’”’ Respondents
themselves testified ‘that they receive their shipments
“ of liquor in cases, ‘‘twelve bottles to a case’’ (S.F. 109,
117, 170-171, 276, 311, 318, 372) and that they remove
the liquor from the cases in which it was received and
package it in ordinary paper sacks for delivery to
their customers (S.F. 109, 171, 180, 276, 311, 552, Tr.
355). There are no restrictions on packaging or re-
packaging of withdrawals from the Class 6 Bonded
Manufacturing Warehouses (19 U.S.C.A. 1311; Ap-
@ pendix, p. 63; 19.13 Customs Regulations of the United
States, CR 387-388, Appendix, p. 67), from which the
New York and California liquor sellers operate. The
operations of the Texas sellers are in violation of their
—24—
»
\. Federal authority; they have no permit to repackage,
‘and, since removing a bottle of whiskey from a case
and putting it in a paper sack could hardly be said to
be for the “‘safety or preservation’’ of the whiskey,
the operation could not be authorized under the stat-
ute. There was no showing of violation in New York
or California, and the operations as described in the
opinions, are not contrary to the authority the sellers
were said to have.
There is a marked and significant difference in the
areas of delivery. The liquor sold by the Texas sellers
is delivered within the ordinary confines of the State
of Texas, on open street corners of the Texas towns
in which Respondents’ businesses are conducted (S.F.
115, 162, 275, 304, 312, 319, 338, 350, 351). The liquor
sold by Idlewild in New York “‘is transferred directly
to the departing aircraft . . . and is not delivered to
the customer until he arrives at his foreign destina-
tion” (377 U.S. 325, 84 S.Ct. 1294). In California the
liquor ‘‘is delivered to the customer as he departs...
into Mexico’’ from ‘‘a 60 foot strip declared by the
President to be a public reservation as a protection
against smuggling . . . [over which] the United States
has jurisdiction’’ (294 F.Supp. 548-549).
There is a marked and significant difference in the
amount of business being conducted. At the time of
trial there were in Texas seven firms operating seven-
teen liquor selling establishments in the six major
Texas towns along the Mexican border (see footnote
1, p. 16). In New York only one small business, Idle-
wild, operating at an international airport, was in-
volved (377 U.S. 325, 84 S.Ct. 1294). In California
‘‘plaintiffs’’ were ‘‘two California corporations’’ (224
F.Supp. 548).
—25—
eee eee ne en a eee ee ene ne Panes BeBe
(|
f
—_
There ts a difference in possibility and likelihood of
diversion for use within the State. Because the liquor
is tax-free, Respondents’ prices are less than half the
prices charged for the same liquor by State authorized,
tax-paying package stores (S.F. 214, 280, 551). Liquor
sold by Respondents is delivered to the customers on
the Texas side of the international bridges on public
streets of the Texas towns in which Respondents op-
erate their businesses (S.F. 115, 138, 162, 275, 304, 312,
‘319, 338, 350, 351). The so-called ‘‘export offices’’ main-
tained near the bridges and in the vicinity of which
the deliveries are made, are hardly larger than an or-
dinary telephone booth (Plaintiffs’ Exhibit 9-17, S.F.
53, 54, 62, 64, 66, 67, 69, 593-601). Only one export. of-
ficer is on duty (S.F. 117). The liquor is packaged \in
ordinary paper sacks (S.F. 108, 171, 180, 276, 311, 355,
552). The paper sacks of liquor, sometimes as many
as a hundred or more, are lined up along unfenced
sidewalks (S.F. 200, 201, 234). Deliveries are frequent-
ly being made by three of the Respondents at one time
in the same general area (S.F. 208, 518, 519, 549).
Deliveries are made on both sides of the street (S.F.
178, 519) to pedestrians as well as persons in automo-
biles (S.F’. 45, 67-68, 104, 184, 248, 519, 548-549). Traffic
of all types is heavy (S.F. 207, 518, 520, 549). In
Brownsville there is an ordinary supermarket between
the so-called export office and the international bridge
(S.F. 177, Plaintiffs’ Exhibit 16). There is also an
alley-way behind the Humble station at the side of
which one of the Respondents makes its deliveries
(S.F. 177, 518). There is no physical barrier which
would prevent persons from accepting delivery of the
liquor and then going down the alley and remaining
in Texas (S.F. 520). Persons can also accept delivery,
—26—
walk part way to Mexico, turn around, and walk back
into Texas (S.F. 287). There is nothing except a per-
son’s own conscience to determine whether he will go
into Mexido or remain in Texas (S.F. 311).
The method of park of the Texas sellers does
not fulfill the definition of exportation or evidence of
exportation as provided in Title 26, Code of Federal
Regulations, Exportation of Liquofs, Subpart B, §
252.11 and § 252.40 (Appendix, p.\74, et seq.). The
liquor sold by Idlewild in New York is exported; it
“is transferred directly to the departing aircraft .. .
and is not delivered to the eustomer until he arrives
at his foreign destination” (377 U.S. 325, 84 S.Ct.
1294). In contrast with the oversize telephone booth
type “‘export offices”? maintained on the public streets
of some Texas towns, with most of the thousand mile
Texas-Mexican border unbarricaded and unguarded,
“‘at the boundary between California and Mexico there
is a 60 foot wide strip declared by the President to
be a public reservation as a protection against smug-
gling. ... The state of California and the United
States have concurrent jurisdiction over the 60 foot
strip” (224 F.Supp. 548-549). The “‘office-of the U.S.
Bureau of Customs [is] located within such-strip’’
(224 F.Supp. 548). The liquor sold in California is
“‘delivered to the customer as he departs from the 60
foot strip into Mexico”’ (224 F. Supp. 549). The liquor
would be confiscated if not exported. ‘‘If he does not
cross the border, the custody [of the liquor] may be
taken from the customer’? (224 F.Supp. 549). :
A bottle of Chivas Regal Scotch whiskey sold in
Texas by one of the Respondents is in evidence before
this Court, together with the paper sack in which it
me ee
Catntteteiaten
+r,
f
i .
was ‘‘packaged” for.sale (Int. Exhibits 3 and 4, S.F.
552-553). Other liquor apparently sold by Respondent
liquor sellers in Texas has been brought back into
Texas (S:F. 516, 517, 523, 526, 532-533, 534). In New
York ‘‘the Liquor Authority ... neither alleged nor
proved the diversion of so much as one bottle of plaint-
iff’s merchandise to users within the state of New
York’’ (212 F.Supp. at 386, quoted 377 U.S. 328, 84
S. Ct. 1296). In California at the time of trial the
liquor sellers’ operations were only ‘‘proposed’’ (224
F.Supp. 548). Lex
The Court of Civil Appeals for the Third Supreme
Judicial District of Texas in the opinion her brought
before this Court ruled that the State of Texas is by
the Constitution of the United States, prohibited from
regulating the businesses of the Respondent liquor sell-
ers and affirmed the trial court judgment permanently
enjoining the Texas Liquor Control Board, its Admin-
istrator, officers, agents, and successors in office from
in anywise, directly or indirectly, interfering with, con-
trolling or regulating any of the Respondent liquor
sellers.
The Court of Civil Appeals for the Third Supreme
Judicial District of Texas was the highest court of the
state in which a decision could be had. In view of the
procedures specified above (p. 2), the decision meets
the jurisdictional requirements of this Court. Michi-
gan-Wisconsin Pipeline Co. v-Calvert, 347 U.S. 157, at
160, 74 S.Ct. 396 at 397, 98 L.Ed. 583 (1954).
REASONS RELIED ON FOR
ALLOWANCE OF WRIT
Unless this Court grants petition for certiorari, the
a
tis
\
\
State of Texas will be forever prohibited from exer-
cising any control over a portion of the liquor indus-
try operated exclusively within the State. The pres-
ent significance of the problem is shown—and future
prospects are indicated—by the fact that between June
of 1961 and August of 1963 the extent of this type op-
eration in Texas increased from a single firm at one
location (S.F. 10) to seven firms with seventeen differ-
ent establishments (Tr. 334-336). During that- period _
the State could not and did not attempt to interfere
because of the injunction incorporated in a trial court
decision in the first Texas Ammex case (Tr. 12-16).
The growth of the businesses and their activities, how-
ever, caused the Texas Legislature to find a need for
regulation and to enact the statute here in question
for that purpose. |
a
The measure, therefore, was passed in an effort to
bring the businesses already established in Texas under
State control and, as noted above, was based directly —
upon Idlewild Bon-Voyage Liquor Corporation v. Ep-
stein, 212 F.Supp. 376 (D.C., S.D.N.Y., 1962), where
the three-judge Federal Court held that New York
could not ‘‘absohitely' prohibit’? the Idlewild business
but carefully explained that ““New York no doubt has
the power to regulate plaintiffs’ operation for local
protection” (212 F.Supp. 383). Previously the Court
had pointed out that (212 F.Supp. 382) :
**. . Plaintiff’s operation is a small one. We are
not made aware that there is any other like it in
New York or elsewhere. If others exist apparently
no effort has been made to eliminate them. More-
over the very nature of the business allows for
only a few such enterprises and an operation very
limited in size and scope. .. .”’
— |
Since even under those circumstances New York
‘no doubt’”’ had ‘‘the power to regulate . . . for local
protection,’’ the decision provided abundant authority
for the State of Texas, with an unbarricaded, unguard-
ed international boundary approximately a thousand
miles in extent and with the number of ‘‘export”’ liquor
sellers rapidly increasing, to enact the statute in ques-
tion upon the basis of findings, as declared in the emer-
gency clause, that:
. there is an urgent need to amend the Texas
Laer Control Act to bring within the scope of
State regulatory authority the judicially declared
legitimate business of exporting United States
bonded liquor in less than wholesale quantities . . .
and that Texas has an extensive international
boundary alosg which the sale of liquor can be
effectively regulated and controlled for the bene-
fit of the people of the State of Texas only by re-
all persons engaged in any legitimate phase
of the liquor industry to hold permits or licenses
ae by this State through the Liquor Control
The body of the inate (quoted above, p. 6) pro-
vides a permit and authorizes procedures in conform-
ity with the Idlewild operation. Its regulatory meas-
ures are obviously designed to prevent unlawful di-
version within the State of Texas. Nevertheless, and
in spite of the fact that this Court affirmed the deci-
sion of the New York three-judge court, the Court of
Civil Appeals for the Third Supreme Judicial District
of Texas has held that the Texas statute is unconstitu-
tional under the Commerce and Supremacy Clauses
of the Constitution of the United States.
In making that holding the State court has decided
+
.
substantial Federal questions in a manner which does
not appear to be in accord with applicable decisions
of this Honorable Court, notably Hostetter v. Idlewild
Bon-V oyage Liquor Corporation, 377 US: 324, 84 S.Ct.
1293, 12 L.Ed.2d 350 (1964) ; and Department of Alco-
holic Beverage Control for the State of California v.
Ammex Warehouse Company of San Ysidro, Inc., 387
U.S. 124, 84 S.Ct. 1657, 12 L.Ed2d 743 (1964), a per
curiam opinion affirming Ammex Warehouse Company
of San Ysidro, Inc. v. Department of Alcoholic Bev-
erage Control for the State of rire 224 F.Supp.
546 (D.C., S.D.Cal., 1963). The right of a)state to re-
quire permits of persons yee ob an aspect of the
liquor industry has been repeatedly recognized, De-
partment of Revenue v. James B. Beam Distilling
Company, 377 U.S. 341, 84 S.Ct. 1247, 12 L.Ed.2d 362
(1964). In Ziffrin v. Reeves, 308 U.S. 132, 60 8.Ct. 163,
84 L.Ed. 128 (1939), as well as in other decisions, this
Court has upheld the state’s right to regulate the trans-
portation of intoxicants in a manner comparable with
that provided in the Texas statute. “
Although this Court im affirming Idlewild did not
repeat the three-judge court’s specific holding that
New York could regulate for locdl protection, such a
holding is clearly implied. This Court’s final ruling
was (377 U.S. 333-334, 84 S.Ct. 1299) :
‘*... The State has not sought to regulate or con-
trol the passage of intoxicants through her terri-
tory in the interest of preventing their unlawful
diversion into the internal commerce of the State.
As the District Court emphasized, this case does
not involve ‘measures aimed at preventing w-
ful diversion or use of alcoholic beverages within
New York.’ 212 F.Supp., at 386. Rather, the State
=
has sought totally to prevent transactions carried
on under the aegis of a law passed by Congress
in the exercise of its explicit power under the Con-
stitution to regulate commerce with foreign na-
tions. This New York cannot constitutionally do.”’
Moreover, after citing Collins v. Yosemite Park
Company, 304 U.S. 518, 58 S.Ct. 1009, 82 L.Ed. 1502
(1938), as reflecting the principle applicable to the.
situation under consideration, this Court explained
that (377 U.S. 333, 84 S.Ct. 1298) :
‘“‘We may assume that if in Collins California
had sought to regulate or control the transporta-
tion of the liquor there involved from the time of
its entry into the State until its delivery at the
national park, in the interest of preventing un-
lawful diversion into her territory, California
would have been constitutionally permitted to do
OT es
A footnote to that statement cites two of the Fed-
eral statutes upon which Petitioners here rely. The
Twenty-First Amendment, also urged by Petitioners,
had been previously discussed at length (377 U.S. 329-
332, 84 S.Ct. 1296-1298), and the ultimate ruling was
identified as an ‘‘accommodation of the Twenty-First
Amendment with the Commerce Clause’’ (377 U.S.
333, 84 8. Ct. 1299).
The holdings are substantially identical in Ammezx
Warehouse Company of San Ysidro, Inc. v. Depart-
ment of Alcoholic Beverage Control for the State of
California, 224 F.Supp. 546 (D.C., S.D.Cal., 1963),
which this Court in Department of Alcoholic Beverage
Control for the State of California v. Ammex Ware-
house Company of San Ysidro, Inc., 378 U.S. 124, 84
S. Ct. 1657, 12 L.Ed.2d 743 (1964), affirmed with a per
— es
curiam opinion citing the Idlewild case. Like the New
York court, the California Federal court specifically
construed Commerce Clause ‘‘cases as holding that a
State may reasonably regulate interstate or foreign
shipments of liquor for good cause’’ (224 F.Supp.
557, emphasis by the Court). The Court had previously
noted that ‘‘none of the state’s licensing provisions fit
the proposed operations of the plaintiffs’? (224
F.Supp. 551) and emphasized that situation in the
final ruling that (224 F.Supp. 557) :
‘6... the injunction is limited to activities of the
State in enforcing the Alcoholic Beverage Control
statutes as they now exist. If the State of Cali-
fornia sees fit to pass statutes and regulations di-
rected towards reasonable regulation of plaintiffs’
business, this will be another case for another day.”’
By the enactment of the statute here in question, the
State of Texas has attempted to regulate the business
of selling liquor for export from United States Customs
Bonded Warehouses. There was no comparable stat-
ute either in New York or California. In the phrase-
ology of the California Federal court, this should have
been viewed as ‘‘another case for another day.”’
The Texas court, however, neither approached the
case in that manner) nor applied the general princi-
ples laid down and approved in this Court. The State
court failed to construe Commerce Clause cases as hold-
ing that a state may regulate; it sought no ‘“‘accommo-
dation of the Twenty-First Amendment with the Com-
merce Clause’’ as this Court had made; it disregarded
this Court’s view of the Twenty-First Amendment ex-
pressed in cases which have ‘‘remained unquestioned’’
(377 U.S. 330, 84 S.Ct. 1297) ; it ignored the fact that
‘‘quite independently of the Twenty-First Amend-
ee
sa ci
hap a a le a ti
Pe eee a eS eS ee eee
ment, the Court has sustained a State’s power within
the confines of the Commerce Clause to regulate and
supervise the transportation of intoxicants through its
territory’’ (Ftn. 10, 377 U.S. 331, 84 S.Ct. 1297). Never-
theless it was upon the basis of this Court’s decisions
discussed above that the State court held the Texas
regulatory statute unconstitutional ‘‘in the face of the
Commerce Clause and the Supremacy Clause, as set
out in the Idlewild and California Ammex cases’’ (384
S.W.2d 772 and Appendix, p. 50).
It is, therefore, respectfully submitted that the State
court has decided Federal questions of substance in
a way not in accord with applicable decisions of this
Court and that grant of certiorari is clearly indicated
here by such decisions as J. F. Fitzgerald Construction
Co. v. Pedersen, 324 U.S. 720, 65 S.Ct. 892, 89 L.Ed.
1316 (1945), and Missouri Pacific Railroad Company
v. Elmore & Stahl, 377 U.S. 134, 84 S.Ct. 1142, 12 L.Ed.
2d 752 (1964).
In State of Alaska v. Artic Maid, et al., 366 U.S. 199,
81 S.Ct. 929, 6 L.Ed.2d 227 (1961), this Court granted
certiorari because of the importance of the case to the
State of Alaska. The present case is equally, if not
more, important to the State of Texas., Unless the pe-
tition is granted, the entire system of regulation of the
sale of alcoholic beverages within thé State is jeopar-
dized. This is not a small operation such as this Court
was considering in Idlewild nor a situation where ex-
isting and established Federal supervision could be
assumed to prevent unlawful diversion within the
State as the different type warehouses and the 60-foot
strip provided in the California case.
The Respondent liquor sellers have spread their op-
ae ae
erations along the entire Texas-Mexican border from
Brownsville to El Paso. Their effect on the regulated
liquor industry is demonstrated by the fact that Chivas
Regal Scotch, the most popular brand handled by
Respondents (S.F. 280), sells in State-authorized tax-
paying package stores at from $8.50 (S.F. 551) to
$9.85 a fifth (S.F. 281), while Respondents sell the
same identical liquor (S.F. 553; Int.Ex. 4) at from
$4.00 (S.F. 214) to as low as $3.33 a fifth (S.F. 280).
When it is recalled (see pp. 26-27, supra) that Re-
spondents package in paper sacks, deliver on open
streets during rush hours, in heavy traffic, at places
where there is ample opportunity for either persons in
cars or pedestrains to accept delivery of liquor,but re-
main in Texas, it appears unquestionable that the situ-
ation constitutes an open invitation to smuggling, tax
evation, or tax avoidance. A paper sack with two fifths
of Scotch in it does not, on the outside, present any
marked difference in appearance from another paper
sack containing a quart of milk or a carton of eggs.
Unfortunately there are many persons who are not
blessed with a standard of honesty so high that they
will pay $8.50 or $9.00 to purchase legally what they
can acquire for $3.00 or $4.00 by the simple expedient
of placing an order with one of the Respondents and
selecting a delivery time during rush hour when they
can pick up their liquor, go to a supermarket, turn
down an alley, drive into a filling station, or t_simply
fall in with the flow of the traffic moving in the oppo-
site direction.
Unless this Court grants the present petition for
certiorari, there is no doubt that the Texas situation
will continue, and, in all reasonable probability, it will
worsen. The significance of the case, however, is not
—35—
limited to Texas. If this Court denies certiorari here,
that ruling—whether justifiably or not—would be
urged and probably accepted as preventing either New
York or California from regulating the export sellers
in those states. State regulation may not be so n
sary there, but the implication of a right in such busi-
ness to operate free of state control which would r
sult from a denial of certiorari would encourage\the)
establishment of the same type of businesses along the.
entire Canadian border where duplicates of the Texas
situation could easily and likely would result. Not only
would the regulated liquor industry in every border
state suffer, but the states themselves would be forced
either to accept a situation where tax-free, uninspected,
unregulated liquor is readily available for being re-
tained in or brought illegally back into the state or to
provide constant and close supervision of the entire
state boundary.
=
These are operations from which the government
derives no benefit—by tax or otherwise. They seek to
use Federal authority to secure freedom from State
control in a type of transaction which Federal law
neither was designed nor is adapted to regulate. Local
sales of liquor, one, two or three fifths at a time, is—
or ought to be—a State matter, even in a border town.
That is particularly true in Texas, where Respondents
admit that they make no sales in Mexico (S.F. 172),
that neither they nor their agents.or employees have
ever transported any liquor across an international
boundary (S.F. 168, 283, 337), that they have never
shipped any liquor consigned to anyone in a foreign
country (S.F. 168, 314, 337), and that they have no
control over the liquor which they sell after its deliv-
_36—
ery to the purchaser within the State of Texas (S.F.
286).
It seems highly unlikely that this Court in making
its rulings in the Idlewild case intended to sanction
and approve the operations and the conditions which
exist in Texas today. The State court, however, has so
interpreted this Court’s decisions.
WHEREFORE, Petitioners pray that this Court
grant petition for certiorari and, upon final hearing
of this case, reverse the judgment of the Court of Civil
Appeals for the Third Supreme Judicial District of
Texas, clarify the meaning of previous decisions, and
uphold the State’s authority to regulate.
Respectfully submitted,
WAGGONER CARR ©
Attorney General of the
_. Howanp M. Fenver
Assistant Attorney Gener-
al of the State of Texas
Courts Building
Austin, Texas
Or COUNSEL: - Attorney for Petitioners
J. Sam WINTERS The Texas Liquor Control
Mary JoE CARROLL Board and Coke R. Ste-
CLARK, THomMas, Harris, venson, Jr., Administra-
Dentus & WINTERS tor of the Texas Liquor
Capital National Bank Control Act
Building
P. O. Box 1148
Austin, Texas
CERTIFICATE OF SERVICE
Howarp M. Fenper, a member of the bar of the
Supreme Court of the United States, hereby certifies
that he is attorney of record for the Petitioners in the
above entitled action, and that he has served a copy of
the above and foregoing motion upon Respondents by
mailing same to Mr. R. Dean Moorhead, First Federal
Building, Austin, Texas, Attorney for Respondents,
said copy being mailed by regular United States ma}
with the postage duly paid thereon, on this /A..
day of October, 1965.
a |
CONTENTS OF APPENDIX
Page
Opinion of the Court of Civil Appeals for the Third Su-
preme Judicial District of Texas at Austin, Texas,
Liquor Control Board v. Ammex Warehouse Company,
Ming We Tien B Ts ck cnc ccccics ddehbn un. Ute. 41
Federal Statutes and Regulations Under Which Respond-
ents assert their Warehouse Operations are Canducted
PR UE nen av dodsuesuess baceoesached 57
et SIE PIR Shs acne ie an os a ee eee oa 58
Title 19, Code of Federal Regulations, Customs Regula-
a A ees ON ioe als CEE PORES Fee, 60
Title 19, Code of Federal Regulations, Customs Regula-
I CURIE 5 so a cole RET Cana o oae cece ded. 61
Federal Statute and Régulation Under Which New York
ee Export Liquor Sellers’ Warehouses are
mn ~~,
Ss ain 5 Pk Canin sch ean es Bean 63
Title 19, Code of Federal Regulations, Customs Regula-
Ninn WAI Silocs. 1 6b; (USSESUAELY, MURSTERE 2 67
\
Definition of““Common Carrier” and Related Provisions
Title~19, Code of Federal Regulations. Customs Regula-
7 vena 18.1 AE ot ORNS 1s Secon 70
OCG ese. Sera ae oe 72
de
cs —39—
CONTENTS OF APPENDIX (Con’d)
Page
Definition of “Exportation”
Title 26, Code of Federal Regulations, Exportation of
Liquors, I ke a baa: FP Bs RS tt 74
Evidence of Exportation
Title 26, Code of Federal Regulations, Exportation of
Liquors, RES TE ey oes ae ee Oe FOL 75
Excerpt Showing Federal Questions as Raised in Brief
submitted by by Petitioners as Appellants in the Court of
Civil Appeals for the Third Supreme Judicial District of
“SNS S235 iS dS REE TE POS ei 76
* STATE APPELLATE COURT DECISION
IN QUESTION |
In THE CouRT oF Crvi. APPEALS, THIRD SUPREME
JUDICIAL DisTRICT OF TEXAS, AT AUSTIN
No. 11,248
Texas Liquor ConTROL BOARD ET AL.,
Appellants
V8.
AMMEX WAREHOUSE COMPANY, INCORPORATED ET AL.,
Appellees
From THE District Court oF Travis County, 53RD
JupiciaL District, No. 132,400, HonoraBLzE
HERMAN JONES, JUDGE.
This case involves the constitutionality of a State
law, a statute amending the Texas Liquor Control Act
to provide a permit for and to regulate the retail sale
of alcoholic beverages for export. Appeal is from a
judgment of the trial court in an action which consol-
idated five separate but substantially identical suits
filed on behalf of seven firms operating seventeen liq-
‘uor selling establishments in the six major Texas
towns on the Mexican border. Jb
Each pétition sought declaratory judgment holding
the amendatory statute unconstitutional and perma-
a .
nent injunction prohibiting the Texas Liquor Control
Board, its Administrator, agents, and employees from
enforcing or attempting to enforce the new law. Sep-
arate temporary injunctions were issued but the five
cases were formally consolidated for trial on the mer-
its. The judgment of the trial court granted to the
plaintiffs all the relief sought, declaring the statute
unconstitutional and enjoining the Texas Liquor Con-
trol Board, its Administrator, agents, and employees
from enforcing the statute or in any way interfering
with the conduct of plaintiffs’ businesses. The State of
Texas, on behalf of the defendants, immediately filed
notice of appeal. At the plaintiffs’ request the trial
court filed extensive findings of fact and conclusions
of law.
The appeal is based on ten points assigned as error,
and, in effect are that the court erred in holding that,
as a matter of law, Federal, Constitutional and Statu-
tory provisions prohibit State regulation of appellees’
businesses, that there is no evidence, or the evidence
is insufficient to support the trial court’s holding that
appellees are exporting liquor, and no evidence or the
evidence is insufficient to support the trial court’s
holding that appellees are conducting their busi-
nesses in compliance with Federal regulations; that
the court erred in failing to uphold the constitution-
ality of the Statute in question; that there is no evi-
dence, or the evidence is insufficient, to support the
trial court’s holding that it would be impossible for
appellees to conduct their businesses in compliance
with the Statute in issue, and that there is no evidence
or the evidence is insufficient to support the trial court’s
holding that the amendatory Statute in question would
create conflict with Federal Law.
ae
The Statute brought into question by this suit (Acts
1963, 58th Leg., Ch. 108, p. 196) as codified (Article
666-15 (7b) V.A.P.C.) reads:
“*(Tb) United States Bonded Liquor Export
Permit. A United States Bonded Liquor Export
Permit shall authorize the holder thereof to:
(a) Purchase liquor in bond from holders of
Texas Wholesalers’ Permits or purchase liquor
from distillers, brewers, wineries, wine bottlers,
rectifiers, and manufacturers who are holders of
Nonresident Seller’s Permits and import into the
State of Texas at a United States bonded dock
such liquor in transit for exportation purposes.
(b) Transport such liquor from the United
States bonded dock at point of entry under United
States Bond to a United States bonded warehouse
within the State of Texas.
(ec) Warehouse such liquor under United States:
bond.
(d) For the purpose of exportation only, solicit
orders for, take orders for, and accept payment
for any quantity of said liquor in unbroken orig-
inal containers.
(e) Cause such liquor to be withdrawn from a
United States bonded warehouse for exportation,
in compliance with United States Custom regula-
tions, and delivered to a public common carrier
for transportation, in compliance with such car-
rier’s established rate schedule, into the country
of export by such common carrier or by such com-
mon carrier’s affiliated common carrier in the
country of export, for delivery to the purchaser
at a designated address outside the continental
limits of the United States or for delivery to a
named qualified person at a designated address
outside the continental limits of the United States.
—43—-
~
The annual state fee for a United States Bonded
Liquor Export Permit shall be Seven Hundred
Fifty Dollars ($750).
The privileges authorized by this Section are cu-
mulative and not in lieu of requirements of Fed-
eral Law in the conduct of such operations. It is
specifically provided, however, that permits under
this Section shall not be required for the whole-
sale export of United States bonded liquor by the
holder of any other type of permit which, under
existing Statutes and the rules and regulations
of the Texas Liquor Control Board, authorizes
the wholesale exportation of liquor in compliance
with Federal Law.”’
The idea of selling tax and duty free liquor ‘‘for
export .. . without State and Federal taxes was de-
veloped by Hal G. Ward who founded Ammex Ware-
house Company, and secured from the Texas Liquor
Control Board a wholesalei’s permit provided for in
the Act, and filed bonds to operate a Class 2 and 8
bonded warehouse, and began icicle at Laredo,
Texas in June, 1961.
Shortly thereafter the Liquor Board cancelled Am-
mex’s wholesale permit; such permits authorize the
exportation of liquor but only in wholesale quantities.
The appellees generally sell in quantities of one to
three bottles.
Certain phases of this litigation were before this
Court in Texas Liquor Control Board v. Jones, 378
S.W.2d 898, and before our Supreme Court in Ammex
Warehouse Company v. Archer, 381 S.W.2d 478, and
the history of the subject matter was recited and dis-
cussed and we make reference to the cases, and will
endeavor to confine our consideration to the issues in
aay Y ae
Pe ee eee
er Oh Cet Ma oe ad
a :
the instant case and not restate issues disposed of in
the decision by the Supreme Court.
There is now pending Civil Action No. 1466 in the
United States District Court for the Western District
of Texas, Austiy Division, Ammex Warehouse Com-
pany, Ine. et al. v. Texas Liquor Control Board et al.
Appellees take the position in this present suit on
appeal that the cases of Hostetter v. Idlewild Bon-
Voyage Liquor Corporation, —- U.S. —, 84 S.Ct. 1293
(1964) and Department of Alcoholic Beverage Con-
trol for State of California v. Ammex Wareheuse Co.
of San Ysidro, Inc., — U.S. —, 84 S.Ct. 1657 (1964)
are controlling and that the 21st Amendment to the
Constitution does not permit the State to regulate
liquor passing through its territory, under the super-
vision of the United States Bureau of Customs acting
under Federal Law for sale and delivery at foreign
destinations.
Appellees contend further that the Commerce Clause,
the Export-Import Clause and the Supremacy Clause
of the Constitution of the United States preclude ap-
plication of House Bill to them and their businesses
and make such Bill unconstitutional as applied to their
businesses, and that the bill is unconstitutional and
unenforceable because it is ‘‘so vague, uncertain, am-
biguous and unclear that it does not inform with rea-
sonable certainty those persons who would be subject
to its provisions as to what it means.”’
The Board takes the position that the evidence fails
to show exportation in fact.
The appellees maintain warehouses and sales areas
in various border towns in Texas, where they take
sill.
“we
orders and receive payment for liquor and make de-
liveries in the towns where such businesses are located.
No sales are made in Mexico and no liquors are trans-
ported across the international boundary and appellees
had no control over the liquor after its delivery to
purchasers, who transport the liquor. Such activities,
appellants contend, do not fulfill the legal meaning of
‘“‘export”’ as given in Swan & Finch Company v. United
States, 190 U.S. 143, 23 S.Ct. 702, 47 L.Ed. 984, and
as the leading case Empresa Siderurgica, 8.A. v. Coun-
ty of Merced, 337 U.S. 154, 69 S.Ct. 995, 93 L.Ed. 1276.
Appellants say that the holding of liquor in ‘‘bond’’
does not establish exportation by appellees, and the
actions and conduct by the appellees do no more than
show an intent to export and that the receipt of liquor
for export and the ultimate exportation does not es-
tablish the business of exporting liquor and cite Joy
Oil Company v. State Tax Commission of Michigan,
337 U.S. 286, 69 S.Ct. 1075, 93 L.Ed. 1366.
Appellants assert that taxation is not involved in
this case and that the fundamental question is the
State’s right to regulate the businesses of appellees
and not to tax the liquor while in bond, and that there
is no factual or legal basis on which appellees can be
designated as exporters.
By points IV and V appellants claim that saeelince?
testimony shows violation of Customs Statutes, and
there is no evidence, or that the evidence is insufficient
to support the Court’s holding that appellees are con-
ducting their businesses in compliance with Federal
regulations.
There is no dispute as to the facts in the case. Ap-
pellees receive their liquor by the case, and except for
oe
Border Bonded, the sales are in quantities of one to
three bottles per customer. The liquor is removed from
the cases in which it was received and packagd in
paper sacks for delivery. Border Bonded sells only in
case lots.
Appellants’ VI point in that the trial court erred
in failing to uphold the constitutionality of the Amend-
atory Statute in question and by points VII, VIII, IX
and X that there is no evidence, or that the evidence
is insufficient to support the trial court’s holding, that
it would be impossible for appellees to conduct their
businesses in compliance with the Statute in question
and would create a conflict with Federal Law.
Appellants’ view of this litigation is that the law
is entitled to the presumption of validity and that the
burden of proof was on appellants as plaintiffs in the
trial court, and cite among other cases Duncan v. Gab-
ler, 147 Tex. 229, 215 S.W.2d 155, and that the Federal
government has given to. States broader regulatory
powers over alcoholic beverages than to other items of
commerce and cite Clark Distilling Company v. West-
ern Maryland Railway Company, 242 U.S. 311, 37
S.Ct. 180, 61 L.Ed. 326, and United States v. Frank-
fort Distilleries, 324 U.S. 293, 65 S.Ct. 661, 89 L.Ed.
951.
As we have stated, most of appellees’ liquor is pack-
aged in paper sacks and carted to the walkway at this
end of the bridge and lined up on the sidewalk await-
ing delivery.
Deliveries are made both to vehicles and to pedes-
trians and in most instances by cartmen on both sides
of the street by Ammex and Kings Mart on one side
and other appellees on the other side
—
The traffic, especially in evening time, is very heavy
across the bridge and there is a possibility that some
bottles might be smuggled back into Texas, but we have
not had our attention directed to any such violations
by customers who have purchased liquor for export.
It is also possible that some purchasers would take
liquor into Mexico and return with it to Texas and
avoid Federal tax and pay only the State Tax. This
would be accompanied by a legal risk.
The nature of the traffic and not its incidents, deter-
mines its character.
T. & N.O. Ry. Co. v. Sabine Tram Co., 227 U.S. 111,
33 S.Ct. 229.
Appellees maintain stocks of whisky and cigarettes
on which no Federal taxes or duties and no Texas
taxes have been paid, because such merchandise has
been brought to the warehouses and stored there in
bond, pursuant to applicable regulations of the U.S.
Customs Bureau.
The liquor is in the sole custody of the customs of-
ficers stationed at the warehouses, who, under an ar-
rangement approved by the Bureau, appellees reim-
burse the United States for the salaries paid to such
officers, who only handle the stored liquor.
The warehouses are located in buildings that are
divided into a bonded warehouse area and a store area
connected by locked doors, with one key held by cus-
toms officers and the other by employees of appellees,
the latter work only in the store area. No whisky is
kept in the store area. Customers are not permittedsin
the warehouse area.
Ordinarily .sales are in lots of.three bottles or less.
a Se
’
(The Mexican Government allows one entering Mex-
ico to bring three bottles of liquor per person, per
day.)
A purchaser of liquor orders liquor on forms. ap-
proved by the Bureau and pays appellees for such and
is given a receipt. Other forms are given to the cus-
toms officers, who withdraw the whisky called for in
the forms and make entries in the warehouse records.
The liquor is delivered to a bonded cartman, who
carries the liquor in bond to the customs station at the
end of the international bridge.
The purchaser presents his receipt and is handed
the whisky he has purchased and delivery is made un-
der the supervision of the customs officer. The ‘Whisky
is carried into Mexico and a form certifying that the
whisky has been exported is signed by the customs of-
ficer, which is placed with the other records that are
kept by the Bureau.
The above outlined procedure is similar to that set
out in the cases in which Ammex is named, hereinabove
cited. In the Hostetter case the manner of delivery is
somewhat different, in that the liquor is placed on the
aircraft and not given to the purchaser until he lands
on foreign soil.
We believe that the procedure in use by appellees is
in substantial compliance with that set out in the cases
referred to.
The trial court made extensive findings of fact and
conclusions of law which we have read and. considered
and believe are supported by the record as a whole and |
justified by law.
4 Tex.Jur.2d 333.
As may be seen,-the law in question seeks to confine
appellees’ purchases from wholesalers holding permits
from Texas and to make deliveries by common carrier.
We believe that House Bill 782 if complied with in its
entirety, would be an economic impossibility, and
would go further than to regulate, but would prohibit
appellees from carrying on their businesses.
The appellees are not immune from Texas law or
from the Texas Liquor Control Act, and if they should
disregard their bonded procedure, contrary to Federal
Law and regulation, and divert some of their liquor
into Texas, they would be subject to prosecution, apart
from House Bill 782.
We believe that the Statute is in the face of the
Commerce Clause and the Supremacy Clause, as set
out in the Idlewild and California Ammex eases, supra.
The judgment of the trial court is affirmed.
Roy C. Archer, Chief Justice
Affirmed
Filed: December 2, 1964.
i.
In THE Court or Crvm. Apprats, THIRD SUPREME
JupicraL District or Texas,“ar AvusTIN
No. 11,248
Texas Liquor ContTroL Boarp ET AL.,
7 _ Appellants
vs.
AMMEX WAREHOUSE CoMPANY, INCORPORATED ET AL.,
Appellees
From THE District Court or Travis County, 53RD
JupiciaL District, No. 132,400, HonoraBLe
HERMAN JONES, JUDGE.
CONCURRING OPINION
In an Amicus Curiae brief the statement is made
that, ‘‘The State of Texas is seeking to supervise and
regulate the transportation of liquor through its ter-
ritory for the purpose of guarding against a diversion
of liquor into domestic channels, and the Liquor: Con-
trol Board has both alleged and proved the diversion
of appellees’ merchandise to users within the State of
Texas. Delivery is made in Texas.’’
a
If there was in this record any evidence which shows
that any liquors, at least an¥significant quantity of
liquors, sold by appellees for export was consumed in
Texas or diverted for use in Texas, or that there was
any reasonable likelihood that such might occur, then
—51—
—_
I would sustain all of the regulations adopted by the
State which were reasonably calculated to prevent such
diversion. @learly Texas has authority to so protect
itself. Ziffrin v. Reeves, 308 U.S. 182, 60 S.Ct. 163, 84
L.Ed. 128.
The same brief states that the entire State Regu-
lated Liquor Industry along the Rio Grande Valley
is vitally interested in sustaining the statutes here at-
tacked.
If the Liquor Control Board, its agents, and all of
the interested liquor dealers along the border have not
during this controversy been able to show that one bot-
tle of liquor certified by the United States export of-
ficial as having been exported to Mexico was not in
fact exported or that it has in some manner been con-
sumed or re-sold in Texas, then it seems to me that
the patently foolproof method used by appellee to ex-
port this liquor is in fact foolproof.
I do not believe that the fact of ‘‘delivery in Texas”’
under the described circumstances is any more proof
of diversion, or danger of diversion, than in the Am-
mex-California ease where delivery was made in a strip
under the joint jurisdiction of the State and Federal
Governments.
Under the facts of this case, as presently appearing,
I am of the opinion that the requirements of the Act
before us are unreasonable as applied to appellees. I
’ eoncur in the judgment.
Robert G. Hughes, Associate Justice
Filed; December 2, 1964.
es
Consolidated Cause No. 132,400
AMMEX WAREHOUSE ) Inv tHe 58rp Distaicr
Company, Inc., ET AL.
CouRT OF
vs.
Travis County, Texas
Texas Liquor ContTROL
Boab, ET AL.
we YY YS
FINAL JUDGMENT
On the 7th day of November, 1963, came on to be
heard the above styled and numbered cause, which is
a consolidated cause (Causes No. 133,138, 133,535, 133,-
675 and 133,602 having been, prior to trial, consoli-
dated with Cause No. 132,400):
And came the following Plaintiffs in person and by
and through their officers and attorneys:
1. Ammex Warehouse Company, Inc. (No. 132,400).
2. Vicente Garza, Jr. and Jorge Garza dba Vir
Warehouse Company. (No. 133,138).
3. Albert Anzaldua dba Andy’s Custom Bonded
Warehouse, Francisco C. Gonzalez and Cesar Salinas,
partners dba G & S Bonded Warehouse, and Sam
Leland Glass, Sam Glass Pate and Olin Earl Bra- -
shear, Jr., partners dba King Mart Export Company.
(No. 133,602).
4, Alfonso Casso, Raul Casso, Raul Casso, Jr. and
Mrs. Alfredo San Martin, partners dba Border Bond-
ed Warehouse. (No. 133,535).
=
5. Halem Ayoub and Sam Wardy, partners dba
Ayoub & Wardy. (No. 133,675).
And came the Defendant Coke a Jr. in per-
son and by the Attorney General and the Defendants -
Texas Liquor Control Board by the Attorney General,
and Harry J. Feldman and Charles B. Feldman, as
Intervenors, by their attorneys, and all Plaintiffs, De-
fendants and Intervenors thereupon announced ready
for trial;
And, no jury having been demanded, said consoli-
dated cause proceeded to trial before the Court; and
the Court, after hearing all of the evidence, consider-
ing the pleadings, hearing the arguments of counsel,
and studying the briefs submitted to him by all parties,
finds and concludes as follows:
1. The Texas Liquor Control Act, as amended by
House Bill 782, Acts of the 58th Leg. (1963), Ch. 108,
p. 196, codified as Article 666-15(7b), Vernon’s An-
g / Rotated Penal Code, cannot constitutionally be applied
\to Plaintiffs so long as they are engaged in the ‘“‘in
bond’’ liquor business which is hereinafter described.
2. The law and the facts are with Plaintiffs.
ACCORDINGLY, IT IS HEREBY ORDERED,
ADJUDGED AND DECREED by the Court as fol-
lows:
1. Plaintiffs are hereby granted a permanent in-
junction against the Texas Liquor Control Board and
Coke R. Stevenson, Jr., Administrator of said Board,
jointly and severally, and their agents, employees, rep-
resentatives and successors in office; and said persons
i
are hereby permanently enjoined from in anywise,
directly or indirectly, interfering with, controlling or
regulating any or all of the plaintiffs (namely Am-
mex Warehouse Company, Inc.; Vicente Garza, Jr.
and Jorge Garza, partners dba Vir Warehouse Com-
pany; Albert Anzaldua dba Andy’s Custom Bonded
Warehouse; Francisco C. Gonzalez and Cesar Salinas,
partners dba G & S Bonded Warehouse; Sam Leland
Glass, Sam Glass Pate and Olin Earl Brashear, Jr.,
partners dba King Mart Export Company; Alfonso
Casso, Raul Casso, Raul Casso, Jr. and Mrs. Alfredo
San Martin, partners Border Bonded Warehouse; and
Halem Ayoub and Sam Wardy, partners dba Ayoub
& Wardy) :in the operation of their respective busi-
nesses anywhere in the State of Texas, as such business
is defined herein. The injunction here granted extends
to and enjoins said persons from enforcing or in any-
wise attempting to enforce the Texas Liquor Control
Act, as amended by House Bill 782, Acts of the 58th
Leg. (1963), Ch. 108, p. 196, codified as Article 666-15
(7b), Vernon’s Annotated Penal Code, against per-
sons, firms or corporations when they are supplying
liquor in bond to plaintiffs or transporting it in bond
to Plaintiffs’ warehouses or storing it in bond (the
bonds referred to being bonds to the United States or
its agencies pursuant to procedures set forth in the
_ laws of the United States), and from in anywise in-
directly doing that which they, and each of them, are
directly enjoined from doing herewith. The business
of the Plaintiffs, as referred to herein, is that of im-
porting liquor into the State of Texas for exportation
only, on which liquor no federal or State taxes, or
United States customs duties have been paid because
such liquor has been bought imported, stored, trans-
— we
ported, handled, sold and exported while under bond
to the United States or its agencies. In the event Plain-
tiffs should ever withdraw from bond any liquor while
within the State of Texas under circumstances where-
by they would make a delivery or use of the liquor.so
imported’ by them within the State of Texas, then
Plaintiffs will be engaging in a business which will not
be protected by this judgment or by the injunction
granted herein.
2. All costs of suit are adjudged against Defendants
and Intervenors, jointly and severally, for which ex-
ecution may issue. ,
SIGNED AND FILED this the -___ day of March,
1964, at _.__ o’clock __ m.
R. Dean Moofthead
An Attorney for Plaintiffs
Waggoner Carr
Attorney General of Texas
Brady Coleman
Assistant Attorney General
Attorneys for Defendants
Clark, Thomas, Harris,
Denius & Winters
Mary Joe Carroll
Attorneys for Intervenors
—
shale wie Sabb sets
FEDERAL STATUTES AND REGULATIONS.
UNDER WHICH RESPONDENTS ASSERT
THEIR WAREHOUSE OPERATIONS —
ARE CONDUCTED
19 U.S.C.A. 1555
Buildings or parts of buildings and other inclosures
may be designated by the Secretary of the Treasury
as bonded warehouses for the storage of imported mer-
chandise efftered for warehousing, or taken possession
of by the collector, or under seizure, or for the manu-
facture of merchandise in bond, or for the repacking,
sorting, or cleaning of imported merchandise. Such
warehouses may be bonded for the storing of such
merchandise only as shall belong or be consigned to
the owners or proprietors thereof and be known as
private bonded warehouses, or for the storage of im-
ported merchandise generally and be known as public
bonded warehouses. Before any imported merchandise
not finally released from customs custody shall be
stored in any such premises, the owner or lessee there-
of shall give a bond in such sum and with such sureties
as may be approved by the Secretary of the Treasury
-to secure the Government against any_loss or expense
connected with or arising from the deposit, storage,
or manipulation of merchandise in such warehouse.
Except as otherwise provided in this chapter, bonded
warehouses shall be ‘used solely for the storage of im-
ported merchandise and shall be placed in charge of
a proper officer of the customs, who, together with the
proprietor thereof, shall have joint custody of all mer-
chandise stored in the warehouse; and all labor on the
merchandise so stored shall be performed by the own- |
<n... >
er or proprietor of the warehouse, under supervision
of the officer of the customs in charge of the same, at
the expense of the owner or proprietor. The compen-
sation of such officer of the customs and other customs
employees appointed to supervise the receipt of mer-
chandise into ary such warehouse and deliveries there-
from shall be reimbursed to the Government by the
proprietor of such warehouse.
19 U.S.C.A. 1562
Unless by special authority of the Secretary of the
Treasury, no merchandise shall be withdrawn from
bonded warehouse in less quantity than an entire bale,
eask, box, or other package ; ; or, if in bulk, in the en-
tire quantity imported or in a quantity not less than
one ton weight. All merchandise so withdrawn shall
be withdrawn in the original packages in which im-
ported unless, upon the application of the importer,
it appears to the collector that it is necessary to the
safety or preservation of the merchandise to repack
or transfer the same: Provided, That upon permission
therefore being granted by the Secretary of the Treas-
ury, and under customs supervision, at the expense
of the proprietor, merchandise may be cleaned, sorted,
repacked, or otherwise changed in condition, but not
manufactured, in bonded warehouses established for
that purpose and be withdrawn therefrom for expor-
tation to a foreign country or for shipment to the
Virgin Islands, American Samoa, Wake Island, Mid-
way Islands, Kingman Reef, Johnston Island, or the
island of Guam, without payment of the duties, or for
consumption, upon payment of the duties accruing
thereon, in its condition and quantity, and at its weight,
- =
BT. A reer Dis bb het CN Ae alte A BEALE AHO Ate tes ae
built
at the time of withdrawal from warehouse, with sueh
additions to or deductions from the final appraised
value as may be necessary by reason of change in con-
dition. The basis for the assessment of duties on such
merchandise so withdrawn for consumption shall be
the adjusted final appraised value, and if the rate of
duty is based upon or regulated in any manner by the
value of the merchandise, such rate shall be based up-
on or regulated by such adjusted final appraised value.
The scouring or carbonizing of wool shall not be con-
sidered a process of manufacture within the provisions
of this section. Under such regulations-as the Secre-
tary of the Treasury shall prescribe, imported mer-
chandise which has been entered and which has re-
mained in continuous customs custody may be ma-
nipulated in accordance with the provisions of this
section under customs supervision and at the risk and
expense of the consignee, but elsewhere than in a bond-
ed warehouse, in cases where neither the protection of
the revenue gor the proper conduct.of customs busi-
ness requires that such manipulation be done in a
bonded warehouse.
DEFINITIONS OF CLASS 2 AND
CLASS 8 WAREHOUSES FROM TITLE 19,
CODE OF FEDERAL REGULATIONS
CUSTOMS REGULATIONS 19.1, CR 380-381
Class 2.—Importers’ private bonded warehouses
used exclusively for the storage of merchandise be-
longing or consigned to the proprietor thereof. A ware-
house of class 4 or 5 may be bonded exclusively for the
storage of‘ goods imported by the proprietor thereof,
in which case it shall be known as a private bonded
warehouse.
ae, Ta
Class 8.—Bonded warehouses established for the pur-
pose of cleaning, sorting, repacking, or otherwise
_ changing in condition, but not manufacturing, im-
ported merchandise, under customs supervision and
at the expense of the proprietor.
— >
MANIPULATION IN BONDED WAREHOUSES
TITLE 19, CODE OF FEDERAL REGULATIONS,
CUSTOMS REGULATIONS, 19.11 CR 386-387
19.11 Manipulation in bonded warehouses and else-
where.—(a) So far as applicable, the general provi-
sions of the regulatiqns governing warehouses bonded
for the storage of imported merchandise shall apply
to bonded manipulation warehouses and to other des-
ignaied places of manipulation.
(b) Merchandise to be manipulated under section
062, Tariff Act of 1930, as amended, may be entered
on customs Form 7502 and sent directly to a storage-
manipulation warehouse. °
(¢) Merchandise entered. for warehouse may be
transferred to a storage-manipulation warehouse; or
merchandise entered for storage-manipulation ware-
houses may be transferred after manipulation to the
storage portion of the same warehouse, to another stor-
age warehouse, or to a manufacturing warehouse of
Class 6. °
(d) The application to manipulate, which shall be
filed on customs Form 3499 with the collector having
jurisdiction of the warehouse or other designated place
of manipulation, shall describe the contemplated ma-
nipulation in sufficient detail to enable the collector to
determine whether the imported merchandise is to be
cleaned, sorted, repacked, or otherwise changed in con-
dition, but not manufactured, within the meaning of
section 562, Tariff Act of 1930, as amended. If the
collector is satisfied that the merchandise is to be 80
manipulated, he may issue a permit on customs Form
3499, making any necessary modification in such form.
Manipulation resulting in a change in condition of the
~~ =
merchandise which will make it subject to a lower rate
of duty or free of duty upon withdrawal for consump-
tion, is not precluded ved the provisions of such section
562.
(e) No merchandise shall be manipulated elsewhere
than in a bonded warehouse unless the merchandise
has been regularly entered for consumption or ware-
house and is of a class entitled to the warehousing
privilege under Section 557, Tariff Act of 1990, as
cf) — OH pTiAneS WHER the proviaiona ef Para:
) of Tate eeetion, MARI pTIAted merehanidine
Wy he Avedon maatpitated he@lire Wellidina weal (Gian
where the callectar ta aatiafied that thie will net en
danger the vevenne ar interfere with the efficient eon
duct of customa business, The merchandise remaining
in the warehouse shall be properly repacked after each
manipulation,
(g) Manipulated merchandise may be withdrawn
under any form of withdrawal, but no withdrawal,
shall be accepted for less than an entire repacked
package. Each type of withdrawal filed shall contain
a summary statement indicating the quantity in the
Aner WHEAMEAWR fae @ the weit diaweal what
ippn my ao 1 be Henidated fh
AdcOANeS With section 16.0(e), (Sees. 562, 46
Stat. 743, 745, as amended; 19 UVS.0.A. 1556, 1562.)
—~+62——
BELO: \ PME ES AMN
FEDERAL STATUTE AND REGULATION
UNDER WHICH NEW YORK AND
CALIFORNIA EXPORT LIQUOR SELLERS’
WAREHOUSES ARE CONDUCTED
19 U.S.C.A. 1311
nal-reventie tax, and intended for exportation without
belt changed with duty, and without ha ah ite
Teralreweniie atiainy) afficad Hhereta, alall, under aah
Wrilatione aa the Beoretary of the Tyaaauew aay
wonhe, tn onder to he ao MAnUMACtUREd and
hyo and nares tT) — Wareliieen aid:
thowe Kaown (leaiga ‘Treasury Regu
lations as bonded warehouses, class aix; Provided, That
the manufacture Of such articles shall first give satis-
factory bonds for the faithful observance of all the
provisions of law and of such regulations as shall be
prescribed by the Secretary of the Treasury: Provided
further, That the manufacture of distilled spirits from
grain, starch, molagses, or sugar, including all dilu-
tions or mixtures of them or either of them, shall not
» be permitted in such manufacturing warehouses.
whall be Bhovatran,
we wall be fatten fay HAW AMA Fe:
hate Ran Wate He AE ERE PRApON
vith hall be tet far Prat
requirements relating to revente stampa. 8
No flour, manufactured in a bonded manufacturing
—_,.
warehouse from wheat imported after ninety days aft-
er June 17, 1930, shall be withdrawn from such ware-
house for exportation without payment of a duty on
such imported wheat equal to any reduction in duty
which by treaty will apply in respect of such flour in
the country to which it is to be exported.
Any materials used in the manufacture of such
warehouse; but this privilege shall not be held to ap-
ply to implements, machinery, or apparatus to be used
in the construction or repair of any bonded manufac-
turing warehouse or for the prosecution of the busi-
ness carried on therein.
Articles or materials received into such bonded man-
waste derived from cleaning rice in bonded warehouses
under the Act of March 24, 1874, ch: 65, 18 Stat. 24,
in said bonded warehouses may be withdrawn for do-
mestic consumption on the payment of duty equal to
the duty which would be assessed and collected by law
if such waste or by-products were imported from a
foreign country: Provided, That all waste material
may be destroyed under Government supervision. All
labor performed and services rendered under
provisions ehall be wader the supervision of & duly
denignated offfeer of the custome and at the eepense
WE The HAH Raetren,
A oareful account ahall be Kept by the callectar af
all merehandiae delivered hy him to bonded avai
facturing warehouse, and a aworn return, ver
ified by the customa officers in charge, shall be made’
by the manufacturer containing a detailed statement
of all imported merchandise used by him in the manu-
facture of exported articles.
Before commencing business the proprietor of any
manufacturing warehouse shall file with the Secretary
of the Treasury a list of all the articles intended to be
manufactured in such warehouse, and state the for-
mula of manufacture and the names and quantities of
the ingredients to be used therein,
elieeey FARO AWE
for Ure wale putpose of fmediate theretim -
Provided, That cigats manufactured in whole of to-
baeeo imported from any one country, made and man-
ufactured in such bonded manufacturing warehouses,
— 5...
0
may be withdrawn for home consumption upon the
payment of the duties on such tobacco in its condition
as imported under such regulations as the Secretary
of the Treasury may prescribe, and the payment of
the internal-revenue tax accruing on such cigars in
their condition as withdrawn, and the boxes or pack-
ages containing such cigars shall be stamped to indi-
cate their character, origin of tobacco from which
made, and place of manufacture.
The provisions of section 3433 of the Revised Stat-
“utes shall, so far as may be practicable, apply to any
bonded manufacturing warehouse established under
this chapter and to the merchandise conveyed therein.
Distilled spirits and wines which are rectified in
bonded manufacturing warehouses, class six, and dis-
tilled spirits which are reduced in proof and bottled
in such warehouses, shall be deemed to have been man-
ufactured within the meaning of this section, and may
be withdrawn as hereinbefore provided, and likewise
for shipment in bond to Puerto Rico, subject to the
provisions of this section, and under such regulations
as the Secretary of the Treasury may prescribe, there
to be withdrawn for consumption or be rewarehoused
and subsequently withdrawn for consumption: Provid-
ed, That upon withdrawal in Puerto Rico for eonsump-
tion, the duties imposed by the customs laws of the
United States shall be collected on all imported mer-
chandise (in its condition as imported) and imported
_ containers used in the manufacture and putting up of
such spirits and wines in such warehouses: Provided
further, That no internal-revenue tax shall be imposed
on distilled spirits and wines rectified in class six ware-
houses if such distilled spirits and wines are exported
—66—
.
or shipped in accordance with the provisions of this
section, and that no person rectifying distilled spirits
or wines in such warehouses shall be subject by rea-
son of such rectification to the payment of special tax
as a rectifier.
-MANUFACUTURING WAREHOUSES
TITLE 19, CODE OF FEDERAL REGULATIONS,
CUSTOMS REGULATIONS, 19.13 CR 387-388
19.13 Requirements for establishment of warehouse.
—(a) Buildings or parts of buildings and other en-
closures may be designated as bonded manufacturing
warehouses if the Bureau is satisfied that their loca-
tion, construction, and arrangement afford adéquate
protection to the revenue. Such warehouses shall be
used solely and exclusively for the purpose for which
they are bonded. The general provisions pertaining to
warehouses for the storage of bonded merchandise
shall, so far as relevant, apply to bonded manufactur-
ing warehouses.
(b) Application for the establishment of such a
warehouse shall be made to the collector of customs
for the port where the premises are situated, setting
forth the size, construction, and location of the prem-
ises, the manufacture proposed to be carried on, and
the kinds of materials intended to be stored and used
therein.
(ce) The procedure outlined in section 19.2 with re«
spect to the application to bond the premises and the
execution of the bond shall be followed.
(d) A list of all articles intended to be manufac-
__§71—
a ataalany: aie, Foe OS A al ORE eye re rx AEE eee ee ’ Sern eee oe
tured in the warehouse shall be filed in duplicate with
the collector of customs, who shall transmit one copy
to the Bureau. Such list shall set forth the specific
names under which the articles are to be exported and
under which they will be known to the trade, and shall
show the names of all the ingredients entering into
the manufacture of such articles, with the quantities
of such ingredients or materials as may be dutiable
or taxable.
(e) Proprietors of such warehouses are required to
conform strictly to the formulas filed with the bond,
subsequently, and in no instance shall an article be
permitted to be manufactured in or withdrawn from
the warehouse which does not contain all the ingre-
dients and in the quantities specified in the formula
for the manufacture of such article, or which contains
any ingredient not specified in the formula.
.(f) Manufactured articles shall be marked with the
trade name of the goods and may be marked, in addi-
tion, with the formulas and with such insignia or name
as may be indicated or desired by the purchaser, if
such additional.marking will in no manner conflict
with the requirements of the formula or present or
créate a false or misleading statement or impression.
’ (g) Each bonded manufacturing warehouse shall
- have a portion ated from the remainder of the
premises and 2d by customs locks to be used ex-
clusively for the “ol of all imported merchandise,
domestic spirits, or Other materials subject to internal-
revenue tax transfe into such warehouse for man-
ufacture. A like compartment shall be provided to be
used exclusively for the storage of products manufac-
tured in the warehouse. The premises shall be so se-
in
cured as to prevent any person from having access
thereto in the absence of the customs warehouse officer
in charge, and the goods stored therein shall be so
arranged as to give all practicable convenience to such
officer in making the required examination or taking
samples for analysis. (sec. 311, 46 Stat. 691, as amend-
ed; 19 U.S.C. 1311.)
DEFINITION OF “COMMON CARRIER”
AND REGULATIONS RELATING THERETO
TITLE 19, CODE OF FEDERAL REGULATIONS,
. 18.1, CR 363-364 ©
18.1 Carriers; application to bond.—(a) Merchan-
dise to be transported from one port to another in the
United States in bond, except as provided for in para-
graph (b), shall be delivered to a common carrier
bonded for that purpose, but such merchandise may
be transported with the use of the facilities of other
bonded or nonbonded carriers. For the purposes of this
section, the term ‘‘common carrier’’ means a common
carrier of merchandise owning or operating a rail-
road, steamship, or other transportation line or route
or a freight forwarder as defined in section 402 of part
IV of the Interstate Commerce Act, as amended (49
U.S.C. 1002(a) (5) ).
(b) Pursuant to Public Resolution 198, of June 19,
1936, and subject to compliance with all other appli-
cable provisions of this part, the collector of customs
at New York, upon the request of the party in interest,
may permit merchandise entered and examined for
customs purposes to be transported in bond between
the ports named in the resolution by bonded cartmen
or lightermen duly qualified in accordance with the
provisions of part 21, if the collector is satisfied that
the transportation of such merchandise in this manner
will not endanger the revenue.
(ce) A common carrier desiring to receive merchan-
dise for transportation in bond shall file with the col-
lector of customs a bond on customs Form 3587 in a
sum to be recommended by the collector, accompanied
—I0—
» by the fee of $45 prescribed by section 24.12, a certified
extract of its charter showing that it is authorized to
engage in common carriage, and a statement that it
is operating or intends to operate as a common carrier
and that it undertakes to carry for such as choose to
employ it.and does not limit its carriage to specific
individuals or firms. In addition to the foregoing a“
freight forwarder shall submit a certificate issued by
the Interstate Commerce Commission showing that it
is operating as a freight forwarder as defined in sec-
tion 402 of part IV of the Interstate Commerce Act.
The extract and statement need not be submitted in
the case of railroad or steamship companies gener-
ally mee be engaged in common carxiage.
(d) In the case of motor carrier bonds submitted
for oe the following shall be filed in addi-
tion to the requirements mentioned above:
(1) A detailed description of the equipment to be
used, showing whether the trucks are open or closed
and whether they can be secured with customs seals,
the number of trucks operated, and whether such
trucks are owned or leased by the proposed bonded
motor ier, and, if leased, whether the trucks are
operated by employees of the fessee or lessor.
(2) A list of the lines or routes over which the prin-
cipal operates or will operate, setting out the cities or
towns at which the trucks stop or lay over en route
and where and in whose custody the trucks remain
‘during such stops or lay-overs.
a (8) A definite statement as to whether the principal
transports merchandise accérding to schedule over each
of the lines or routes named or performs carriage only
when a shipment is secured for transportation.
TI
(4) A detailed description of the terminal facilities
employed by the principal at the points of origin and
destination shown on the list of lines or routes.
(5) A statement showing that facilities are andl
able for the segregation and safeguarding of the pack-
ages designated by the collector for examination from
a particular shipment until such packages are called
for by the public store cartman and removed to the
public stores for examination.
(e) Canadian and Mexican common carriers by mo-
tor vehicles may be bonded for the transportation of
merchandise between two ports in Canada or Mezico
through the United States. (See section 5.11.)
(f) Common carrier bonds may be discontinued at
any time by the Bureau or the collector of customs at
the headquarters port where the bond is filed. Bonded
carriers desiring to discontinue such bonds shall make
application therefor to such collector. (Sec. 551, 46
Stat. 742, as amended; 49 Stat. 1538, 19 U.S.C. 1551,
1551a.)
49 US.C.A. 1002, SECTION (a),
SUBSECTION (5) |
INCORPORATED BY REFERENCE IN
CUSTOMS DEFINITION OF “COMMON CARRIER”
The term ‘“‘freight forwarder’? means any person
which (otherwise than as a carrier subject to chapter
1, 8, or 12 of this title) holds itself out to the general
public as a common carrier to transport or provide °
transportation of property, or any class or classes of
—
9
property, for compensation, in interstate commerce,
and which, in the ordinary and usual course of its un-
dertaking, (A) assembles and consolidates or provides
for assembling and consolidating shipments of such
property, and performs or provides for the perform-
ance of break-bulk and distributing operations with
respect to such consolidated shipments, and (B) as-
sumes responsibility for the transportation of such
property from point of receipt to point of destination,
and (C) utilizes, for the whole or any part of the trans-
portation of such shipments, the services of a carrier
or carriers subject to chapters 1, 8, or 12 of this title.
Y
DEFINITION OF EXPORTATION
TITLE 26, CODE OF FEDERAL REGULATIONS,
EXPORTATION OF LIQUORS,
SUBPART B, § 252,11
Keportation, A severance of goods from the mass
of things he ta the United Mates with the ine
eh oo of aniting them ta the mass of things helong:
ing to some for if country, The — charander of
any shipment shall he determined hy the intention with
whieh it ‘a Hide, and ib asMiined an exporh Character
otily when destined for vse in a foreign eourtitey, Hor
the purpose of this part, shipmerts to Puerto Rico,
the Virgin Islands, American Samoa, Guam, and the
Panama Canal Zone shall be treated as exportations.
Shipments to Kingman’s Reef, the Midway Islands,
or Wake Island are not exportations within the mean-
ing of this part.
(48 Stat. 998-1003, as amended; 19 U.S.C. 81a-81u)
EVIDENCE OF EXPORTATION
TITLE 26, CODE OF FEDERAL REGULATIONS,
EXPORTATION OF LIQUORS,
SUBPART B, 6 252,40
§ 29240 Vvidence of exportation,
‘The exportation of any shipment may he evidenced
iy
(4) A copy of the export Will of lading (4 868,850) ; ov
(i) A sopy of the railway expreas reowipt (4 959,
B51) 5 oF
(6) A copy of the air express receipt (§ 259.252) ; or
| (d) A copy of the through bill of lading where ex-
portation is to a contiguous foreign country (§ 252.
250) ; or
(e) A certificate by the export carrier, as provided
for in § 252.253.
(72 Stat, 1334, 1335, 1336, 1362, 1380; 26 U.8,0, 5058,
WD, HL, 5214, WH62)/
EXCERPT FROM BRIEF SUBMITTED BY
PETITIONERS IN COURT OF CIVIL APPEALS
FOR THE THIRD SUPREME JUDICIAL DISTRICT
OF TEXAS AT AUSTIN,
RAISING FEDERAL QUESTIONS
(4) The federal gove has given to the
broader regulatory powers aver ale
lie heverages than over any other em of
He, |
Presumably because of his mistaken beliefa that
Appellees are exporters’ and that they are operat:
ing under procedures provided by federal law and
customs regulations (both shown above to be errone-
ous), the trial court refused to consider the applicabil-
ity of the Twenty-First Amendment to the statute in
. question. Even, however, if Appellees’ procedure were
in accordance with Customs regulations and even if
Appellees could properly be considered to be exporters «
(neither proposition is admitted; both are specifically
denied), the single fact that Appellees are dealing in
aleoholie beverages might alone and in itself be suf:
fieient to give the Mate of Texas the right ta regulate
and control their Wusinewmes, Beotion 2 of the Twenty:
Hire Amendinent read:
“The transportation or importation inte any
Mate, Territory, or ponmemmion of the United Mates
for delivery or ie Therein of intoxicating liquors,
im wemyen of the laws thereof, is hereby pro-
State laws dealing with aleoholic beverages are,
therefore, in effect incorporated by reference into the
Constitution of the United States. States may regulate
—i6—
and control alcoholic beverages where they could not
regulate or control any other item of commerce.
The Webb-Kenyon Act (97 U.8.0.A. 122), was it-
tended to be and is even broader than the Wilson Act.
Originally passed on March 1, 1931 (37 Stat. 699),
the Webb-Kenyon Act was re-enacted without change
on August 27, 1935 (49 Stat. 877). ‘
A leading case construing the two congressional en-
actments is Clark Distilling Company v. Western
Maryland Railway Company, 242 U.S. 311, 37 8.0t,
180, 61 L.Ed, 926 (1916), where the Court anid:
“Reading the Webb-Kenyon Law in the fi
' tne vi the Wile ad te
y (ire Pe rpg r4
“ +i we y w iis
i extend w the
te | mney ti
; fear, te Wine
‘
of the West Virginia law against shipment, re-
ceipt, and possession to be applicable and control-
ling irrespective of whether the state law did or
did not prohibit the individual use of liquor. That
such also was the embodied spirit of the Webb-
Kenyon Act plainly appears, since, if that be not
true, the coming into being of the act is wholly
inexplicable.”
At another point in its opinion the Court further
explained :
... the Webb-Kenyon Act ... did not simply
forbid the introduction of liquor into a state for
a prohibited use, but took the protection of inter-
state commerce away from all receipt and posses-
sion of liquor prohibited by state law.
‘“‘The movement of liquor in interstate commerce
and the receipt and possession and right to sell
prohibited by the state law having been in express
terms divested by the Webb-Kenyon Act of their
interstate commerce character, it follows that if
that act was within the power of Congress to adopt,
there is no possible reason for holding that to en-
force the prohibitions of the state law would con-
fuct with the commerce clause of the Constitu-
tion; ...”’
(5) The Twenty-first Amendment subordinated
rights under the Commerce Clause to the pow-
er of a state to control and regulate liquor
traffic within: its borders.
In State Board of Equalization of California v.
Youngs Market Company, 299 U.S. 59, 57 S. Ct. 77,
81 L. Ed. 38 (1936), the Supreme Court placed upon
the Twenty-first Amendment much the same construc-
tion which had been given to the Webb-Kenyon Act.
The Court said:
=
‘‘The amendment which ‘prohibited’ the ‘trans-
portation or importation’ of intoxicating liquors
into any state ‘in violation of the laws thereof,’
abrogated the right to import free, so far as con-
cerns intoxicating liquors. The words used are apt
to confer upon the state the power to forbid all
importations which do not comply with the con-
ditions which it prescribes. The plaintiffs ask us
to limit this broad command. They request us to
construe the amendment as saying, in effect: The
state may prohibit the importation of intoxicating
liquors provided it prohibits the manufacture and
sale within its borders; but if it permits such man-
ufacture and sale, it must let, imported liquors
compete with the domestic on equal terms. To say
that, would involve nota construction of jhe
amendment, but a re-writing of it.’’
Similarly Mr. Justice Frankfurter, in a concurring
opinion in United States v. Frankfurt Distilleries, 324
. US. 293, 65 S.Ct. 661, 89 L.Ed. 951 (1945), pointed
out:
‘“‘The Twenty-First amendment made a funda-
mental change, as-to control of the liquor traffic,
in the constitutional relations between the States
and national authority. Before that Amendment
—disregarding the interlude of the Eighteenth
Amendment—aleohol was for constitutional pur-
poses treated in the abstract as an article of com-
merce just like peanuts and potatoes. As a result,
the power of the States to control the liquor traf-
fie was subordinated to the right of free trade
across state lines as embodied in the Commerce
Clause. The Twenty-first Amendment reversed this
legal situation by subordinating rights under the
Commerce Clause to the power of a State to con-
trol, and to control effectively, the traffic in liquor
within its borders.”’
—9—
At another point in the same opinion it is further
explained that:
‘*As a matter of constitutional law, the result of
¢ the Twenty-first Amendment is that a State may
erect any barrier it pleases to the entry of intoxi-
cating liquors. Its barrier may be low, high, or in-
surmountable. Of course, if a State chooses not to
exercise the power given it by the Twenty-first
Amendment and to continue to treat intoxicating
liquors like other articles, the operation of the
Commerce Clause continues . . . the ,Commerce
Clause is subordinate to the exercise of state pow-
er under the Twenty-first Amendment, .. .”’
To the same effect see Ziffrin v. Reeves, 308 U.S.
123, 60 S.Ct. 163, 84 L.Ed. 128 (1939) ; Carter v. Com-
monwealth of Virginia, 321 U.S. 131, 64 S.Ct. 464, 88
L.Ed. 605 (1944); State of Georgia v. Wenger, 94
F.Supp. 976 (D.C. Ill, 1951), affirmed 187 F.2d 285,
certiorari denied 342 U.S. 822, 72 S.Ct. 41, 96 L.Ed.
621, rehearing denied 342 U.S. 874, 72 S.Ct. 105, 96
L.Ed. 657.
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.