Petition for Writ of Certiorari — Veneman v. Pacific Merchant Shipping Ass'n

Supreme Court brief1996

Ask Donna

What actually matters in this document.

Text

, Supreme Court, U.@,

| FIRS D

“no. BB156'S mag 2 8 1998

OFFICE OFTHE cteR $$

In The

Supreme Court of the United States

October Term, 1995

ANN M. VENEMAN, Secretary, CALIFORNIA

DEPARTMENT OF FOOD AND AGRICULTURE;

ISLAM SIDDIQUI, Assistant Director,

CALIFORNIA DIVISION OF PLANT INDUSTRY;

STATE OF CALIFORNIA,

Petitioners,

PACIFIC MERCHANT SHIPPING ASSOCIATION,

Respondent

-o-—---——--—

On Petition For Writ Of Certiorari

To The Supreme Court Of The State Of California

- ¢

PETITION FOR WRIT OF CERTIORARI

Dante. E. LUNGREN

Attorney General of the State

of California

Roperick E. WALSTON

Chief Assistant Attorney General

Cuaries W. Getz IV

(Counsel of Record)

Assistant Attorney General

Linus MASOUREDIS

Deputy Attorney General

50 Fremont Street, Suite 300

San Francisco, CA 94105-2239

Telephone: (415) 356-6348

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO, (800) 225-6964

OR CALL COLLECT (402) 62-2831

QUESTIONS PRESENTED

The State of California collects an agricultural pest

inspection fee from certain marine vessels that are

engaged in foreign commerce and that arrive in Califor-

nia from abroad. During the relevant time period, some

of these fees were given to the United States Department

of Agriculture (“USDA”) so that USDA could enforce

more thoroughly federal agricultural pest inspection and

quarantine laws against vessels and other conveyances in

foreign commerce entering California. The other portion

of the fees was spent by the California Department of

Food and Agriculture on a public information program to

educate persons arriving in California from abroad about

USDA pest inspection and quarantine laws.

California also conducts its own agricultural pest

inspections of commercial trucks at State border stations

which enforce State pest quarantines against interstate

commerce. California, however, does not charge truckers

a fee for these border inspections. The questions pre-

sented are:

1. Does California’s collection of inspection fees from

marine vessels engaged in foreign commerce but not

from trucks engaged in interstate commerce violate

the dormant Commerce Clause by facially discrimi-

nating against foreign commerce, as the California

Supreme Court held, even though the fees were used

to supplement federal pest regulation of foreign com-

merce?

2. Does California’s collection of fees from marine ves-

sels but not from trucks facially discriminate even

though the two types of inspections are completely

different in scope, cost and purpose?

PARTIES TO THE PROCEEDINGS

Petitioners herein are: Ann M. Veneman, Secretary of

the California Department of Food and Agriculture; Islam

Siddiqui, Assistant Director of the California Division of

Plant Industry; the California Department of Food and

Agriculture; the California Division of Plant Industry;

and the State of California. Petitioner Veneman succeeded

to the office of Secretary of the California Department of

Food and Agriculture, replacing Henry Voss, who was a

party-defendant in this action. All of petitioners, with the

exception of Veneman, were defendants below.

Respondent herein, who was plaintiff below, is: the

Pacific Merchant Shipping Association (“PMSA”), a Cali-

fornia unincorporated association of ocean carriers.

lll

TABLE OF CONTENTS

Page

SUPE URMEOUD UMMM EIEED pe icicenvesscsucceccecece i

PARTIES TO THE PROCEEDINGS. ............... i

iC. CPeasubucassscccsecseseaecvetes l

eas Coc rahe becc puss ce sdives ses 1

CONSTITUTIONAL AND STATUTORY PROVI-

I ane Ss hae bib paves am a0k 06h veces 1

ae es ad: SE 3

REASONS WHY THE PETITION SHOULD BE

eB Caen GaN e ROSAS Vd 0 SS5'p- 0 ce eke 14

EEC Teh one we U NOES aes 5 wc. 4 cb-wh ease eee 17

I. BECAUSE CONGRESS HAS APPROVED FEE

“DISCRIMINATION” BETWEEN FOREIGN

AND INTERSTATE COMMERCE, DORMANT

COMMERCE CLAUSE RESTRAINTS DO NOT

EE I va coe cas écnekeegnaeotss 17

Il. THERE IS NO ECONOMIC PROTECTIONISM

A Es ee 22

[il. BECAUSE THERE ARE MAJOR DIFFERENCES

BETWEEN MARINE VESSEL AND TRUCK

INSPECTIONS, THERE IS EITHER NO DIS-

CRIMINATION OR A VALID JUSTIFICATION

Fe me yo | Se 25

IV. THIS COURT’S WASTE DISPOSAL PRECE-

DENTS ARE DISTINGUISHABLE AND INAP-

GER EEGR Fe SRC eet ea ee a eR 28

CONCLUSION

TABLE OF AUTHORITIES

Page

CASES

Alaska Airlines, Inc. v. Department of Food and Agri-

culture, 33 Cal.App.4th 506 (1995)..........6e ee eee 12

Barclays Bank PLC v. Franchise Tax Board of Califor-

mia, 114 S.Ct. 2268 (1994) .........cccecccscecnenes 20

C & A Carbone, Inc. v. Town of Clarkstown, New

York, 114 S.Ct. 1677 (1994) .......cceecesscences 22, 24

Chemical Waste Management, Inc. v. Hunt, 504 US.

SOE TED as oss oes Kaci ches chekeveeheeen 13, 28, 29

Clark v. Paul Gray, Inc., 306 U.S. 583 (1939).......--. 27

Evansville Airport v. Delta Airlines, 405 U.S. 707

PROUEE vnc cannes ssdbueceeeeahasaes chee Cheenaves 25, 27

Hughes v. Alexandria Scrap Corp., 426 U.S. 794

i.) SPE oe eee T aE Cr? Tir ieite eae 23

Ite! Containers International Corp. v. Huddleston, 507

OCS. CD CURED ii vin koe cae sdves anon tis ceeds rues. 21

Kraft General Foods, Inc. v. lowa Dept. of Revenue,

SOS U.S. 72. CIGGA) « «oc vvincncenecsies cies ceews sey es 24

Maine v. Taylor, 477 U.S. 131 (1986) .....--.+-+++++-. 20

McLean v. Denver & Rio Grande Railroad Co., 203

oO Fe} Pens ree Cs Pec ei ee 27

Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982)

Fa caceeeened ccckuuak hie (60hGe a eee aera ee 18, 21, 22

New Energy Co. of Indiana v. Limbach, 486 U.S. 269

¢) | ree rrmrrote ro. sy oer tee 23

Northwest Airlines, Inc. v. County of Kent, Michigan,

114 S.Ct. 855 (1994) ......... cece ence ence neenceees 27

TABLE OF AUTHORITIES - Continued

Page

Oregon Waste Systems v. Dept. of Environmental

Quality, 114 S.Ct. 1345 (1994) ceeidvecks 13, 28, 29, 30

Pacific Merchant sits Assn. v. Voss, 12 Cal.4th

PO Me eo cs os ao ccs coceees By Serre ae

Pacific Merchant Shipping Assn. v. Voss, 36

aoe i a, .. en eee ace ae ie eS

Prudential Insurance Co. v. Benjamin, 328 U.S. 408

END Eins Sey des tb adiled- ed bo died keee oo Sa, .17

Pure Oil Co. v. State of Minnesota, 248 U.S. 158

UN oa vicd wae ut aie Ske ics vad bee vae ek eee 27

South-Central Timber Development v. Wunnicke, 467

U.S. 82 (1984) : , Ss ere

Wardair Canada, Inc. v. Florida Dept. of Revenue, 477

Sees BO eo vee enone ae kee eee 18, 21, 22

West Lynn Creamery, Inc. v. Healy, 114 S.Ct. 2205

SUE > xis eA ds ba aiee carci rs yey a pees ee © Oe 22

CONSTITUTIONAL PROVISIONS

U.S. Const., Art. I, section 8, cl. 3 (Commerce

NES = Lvk- oon bs CEt Sour. PEAY ne EP yn apr lara ca

STATUTES

1992 Agriculture, Rural Development, Food and

Drug Administration and Related Agencies

Appropriations Act, Pub. L. 102-142, 105 Stat.

Ps 8 ne ak Fes seca kal dene peaSioc ener eral we es. 18

Anti-Head Tax Act, 49 U.S.C. section 1513 .......... 12

TABLE OF AUTHORITIES —- Continued

Page

Federal Plant Pest Act, 7 U.S.C. sections 150aa et

POG. cee ecescncccseveuguesseenesneeeheseeSeeunenens 3

Plant Quarantine Act of 1912, 7 U.S.C. sections 151

2 eee Ter errrrrrerrrri eerie r ere rie rere tr 3

7 United States Code

Cy) eer rrr rer Terre rr errr fret ttt oe 4

jt: Fr PrN han reer rgy roi er ees yey: 3

tC ee rere a 4

RROD. ccc cccccauacescncsstsdcseheaes MauneeeeE™ 3

DEUEE's Sc actunreh ees Peter rer eyo ee oe 3

§150ee. . a pekeseaeeciweniek s 3

ETIUEE «wi cs cous 606006056 06060865000 CER ERA OE ORuEE 3

jh) SPP ESePeT Tere eye err Tree se Perey ee 3

BORG. occ ccascuciepeccntseteaucacmeeaee bene eee 3

| Se Pere rere rere res et 4, 20

21 United States Code

bh rr eeerer rer rer TT eee ee 18, 19, 20

ESE MATEIAS vice ccs ncheusencice cakes cee eee 2

BESEGEM EN Clad bo hcd cc cis tacuesdckesseaa beeen 19

RE SOONMIL AIEEE oaks bxn'0'404404.0 504 4.0kd eae 19

TR) errr rr ee rrr reer rete re aie ee

TABLE OF AUTHORITIES - Continued

Page

California Airport and Maritime Plant Quaran-

tine, Inspection, and Plant Protection Act, Cal.

Stats. 1990, ch. 1612, Cal. Food and Agriculture

fee, ee re 2

RS, SOE oe. See cies « bee La dt de ec ee 5

E7400 55 WPCA ORC ke NRA bee eORRAVA See eh ee) 5

SESE eee aha hye ea ye EEN 5,7

§5350(d)....... TIVLY STL ee ere ee ee 6

ee re Fee et eee eS Ce eT Pee eee hee’

8 Ae ere wes cesses meee

EE 5440 0ccu UG Vsewens chbe Citic bie caspacnas 6, 7

FIER SRD IS Rete AURA AQF By xe eee 1, 6

NY B46 GAS OTE WA UCR L ARTE COV OEE N26 bake eeak Lacks 6

EE ie 555d o hob wk nde ee ek Uekcak es be tabe es . 6

| BAPE rane oe eer See ee eee 6

Cal. Food and Agriculture Code

KK S052 OU OK Vaan eae o-84 14 RUNES e N 10

SE eee are oe on re ane nee eee ene 10

Vill

TABLE OF AUTHORITIES - Continued

Page

ODA s 15.5% 0.0 0s men easd vad kas Soules Pale ee 19

POPMEGE Ss) 00a bas akr ous nee orckl accu ete 10

Cal, State. 1099, €. 76, pp. 99-92....... oe 10

Cal. Stats. 1907, c. 436, pp. 798-799, sections

ERS Vee kK We Ad cole Ce ie Ba eee. 10

Cal. Stats. 1933, c. 25, p. 63, section 30 ............. 10

REGULATIONS

F Mgehen WUE OEP a gba ek ava desde ee 3

7 C.F.R.

DORE <5 wiv iouviwe whee dasunewrobei es cote eo. 3

OE SG ENG Sn keke oie RS eR ee ee ee Le ak eee 4

Kg | Ait iat Ayia oe ienh ile Dyan alten tC 4

BIRR OUTS oi cc eceteccalee toed} ce ee ee 4

PED ok isin pains So oa bao oe bce vues cee 4

SE tS oo is cs a ee 4

gy RN Se pn Ree MRM NW ir yet Cited errrat 4

3 Cal. Code Regs. sections 3152-59.................. 10

OTHER Au CTHORITIES

36 Fed: Rem. 2460397, 146099 (3999)... ohh hiv ee es 4

TABLE OF AUTHORITIES - Continued

Page

57 Fed. Reg. (1992)

Is Sc i a 9

I eda 8556 ca) owe ec ows Seyret tree Oe 18

pp. 14498, 14499 ........... ae SES PRL Re SU Bp 18

61 Fed Reg. 2660, 2662 (1996)....................... 18

Ribble, State and National Power Over Commerce 211

ti y Sree thane Be rer re er eT wee mee

Plant Quarantines in California, University of Cali-

fornia, Division of Agricultural Sciences (Sep-

cog ee a ee | a Ieee ne 11

California Department of Food and Agriculture,

The First 100 Years (December 1980)............. .11

PETITION FOR WRIT OF CERTIORARI

Petitioners, Ann M. Veneman, et al. respectfully peti-

tion this Court for a writ of certiorari to review the

judgment of the California Supreme Court in this case.

OPINIONS BELOW

The opinion of the California Court of Appeal, Third

Appellate District (App. 43-65) is reported at 36

Cal.App.4th 212 (1995). The opinion of the California

Supreme Court (App. 1-42) is reported at 12 Cal.4th 503

(1995)

JURISDICTION

The opinion and judgment of the California Supreme

Court was issued on December 29, 1995. The jurisdiction

of this Court is invoked under 28 U.S.C. section 1257(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Commerce Clause of the U.S. Constitution, Art. 1

section 8, cl. 3, provides, in pertinent part, that Congress

shall have power “To regulate Commerce with foreign

Nations, and among the several States”.

Cal. Food and Agriculture Code section 5353(b) -

which is the marine vessel fee provision invalidated in

this case — provides as follows:

“Each commercial marine carrier engaged in for-

eign commerce which carries animals or plants

or other materials which are or likely to be,

infected or infested with any pest shall pay a fee

of two hundred dollars ($200) to the director [of

the California Department of Food and Agricul-

ture] upon the initial arrival in this state of the

carrier on a voyage which originated outside the

United States from a country identified and lis-

ted by the director pursuant to section 5352, or

which made an intermediate stop on that voy-

age in a country identified and listed by the

director pursuant to Section 5352.”

Other relevant provisions of the California Airport and

Maritime Plant Quarantine, Inspection, and Plant Protec-

tion Act, Cal. Stats. 1990, ch. 1612, Cal. Food and Agricul-

ture Code sections 5350-5353, (hereinafter “the California

Inspection Act”) are reprinted in the Appendix.

21 U.S.C. section 136a(a)(1)(A) authorizes the United

States Department of Agriculture (“USDA”) to collect

fees for agricultural pest inspection of foreign commerce,

and provides, in pertinent part:

“The Secretary of Agriculture . . . may prescribe

and collect fees to cover the cost of providing

agricultural quarantine and inspection services

in connection with the arrival at a port in the

customs territory of the United States, or the

preclearance or preinspection at a site outside

the customs territory of the United States, of an

international passenger, commercial vessel,

commercial aircraft, commercial truck, or rail-

road car.”

Other relevant provisions of federal law which authorize

USDA to conduct agricultural pest inspections, and to

cooperate with States in controlling agricultural pests are

reprinted in the Appendix.

The Reimbursable Cooperative Agreement between

USDA and the California Departmer: of Food and Agri-

culture, under which the State transferred marine vessel

fees to USDA for USDA enforcement of federal inspection

and quarantine laws, is also reprinted in the Appendix

cs ———

STATEMENT OF THE CASE

i. The USDA implements an extensive regulatory pro-

gram to prevent the introduction into the United States of

agricultural pests from foreign countries. Pursuant to the

Plant Quarantine Act of 1912, 7 U.S.C. sections 151 et seq

and the Federal Plant Pest Act, 7 U.S.C. sections 150aa et

seq., the USDA imposes agricultural pest quarantines on

articles and conveyances in foreign commerce. 7 U.S.C.

sections 160, 150dd. These federal quarantines apply to

numerous products from specified countries or regions,

and cover thousands of agricultural pests found outside

the United States. See 7 C.F.R. Part 319 (Foreign Quaran-

tine Notices).

The USDA inspects goods and conveyances in for-

eign commerce to enforce these quarantines. 7 U.S.C

sections 150ee, 150ff, 156; 7 C.F.R. section 330.105; see also

7 U.S.C. section 147a(e); 7 U.S.C. section 149.

The USDA funds its agricultural quarantine and

inspection (“AQI”) services by collecting “user” fees from

the owners or operators of the conveyances subject to

inspection. 21 U.S.C. section 136a(a). By regulation, these

AQI user fees vary for different classes or categories of

foreign commerce. See 7 C.ER. section 354.3. The pur-

pose and effect of AQI user fees is to “shift[] the financial

support for certain AQI activities from the general tax-

payer to identifiable recipients of these services.” 56 Fed.

Reg. 14837, 14839 (1991) (Final Rule on AQI User Fees).

The USDA is authorized to cooperate with State agri-

cultural departments in controlling agricultural pests. For

example, 7 U.S.C. section 450 provides, in pertinent part,

that:

“In administration of Federal .. . laws and regu-

lations relating to . . . the control or eradication

of plant and animal diseases and pests, the Sec-

retary of Agriculture is authorized . . . to enter

into cooperative arrangements with State

departments of agriculture and other State agen-

cies charged with the administration and

enforcement of such State laws and regulations

and to provide that any such State agency which

has adequate facilities, personnel, and pro-

cedures, as determined by the Secretary, may

assist the Secretary in the administration and

enforcement of such Federal laws and regula-

tions to the extent and in the manner he deems

appropriate in the public interest.”

See also 7 U.S.C. section 147a(a); 7 U.S.C. section 148.

' Current USDA AQI user fees are $369.50 for commercial

vessels of 100 net tons or more, 7 C.F.R. section 354.3(b)(1); $2

for each commercial truck, id., section 354.3(c)(1); $7 for each

railroad car, id., section 354 3(d)(1); $61 for each commercial

aircraft, id., section 354.3(e)(1); and $1.45 for each passenger

aboard an international aircraft flight, id., section 354.3(f)(1).

;

2. The California Inspection Act was enacted in 1990 to

supplement USDA’s agricultural pest regulation of for-

eign commerce. App. 128-129, 412. USDA has never had

sufficient personnel to inspect every conveyance entering

California from abroad. App. 96, 49; 122, 44; 132, 46.

With the expansion of Pacific Rim trade and without a

concomitant increase in the USDA budget, the State was

worried that a smaller and smaller percentage of foreign

commerce entering California was actually being

inspected by USDA. App. 94-95, {3; 129, 412. The 1989-90

medfly infestation in California had cost $62 million to

eradicate. App. 95, ¥5. Consequently, the State Legisla-

ture wanted to intensify efforts at excluding pests from

initial entry into the State to avoid later and more costly

eradication efforts once pests had become established.

App. 95, {94-5; 113-115.

The California Inspection Act authorizes the Califor-

nia Department of Food and Agriculture (“CDFA”) to

“establish a program for the inspection of conveyances

entering California through airport and maritime facili-

ties to prevent the introduction into, or the spread within,

this state of pests.” Cal. Food and Agriculture Code sec-

tion 5350(a). The California Inspection Act also autho-

rizes CDFA to (1) maintain plant quarantine inspection

Stations at airports and marine terminals, id., section

9350(b); (2) establish an informational program at such

points of entry to provide users of the entry facilities with

information about pest control and quarantine require-

ments, id., section 5350(c); and (3) identify and establish a

list of countries which are believed to be a potential

source of exotic plant and animal pests, id., section 5352.

Section 5353(b) - which is tie provision of the Act in

dispute - authorizes CDFA to charge commercial marine

vessels an inspection fee if the vessel departed from or

made a stop in a country listed under section 5352 as a

potential source of exotic pests. The marine vessel inspec-

tion fees may be levied only “[t]o the extent permitted by

federal law.” Id., section 5352. Similar inspection fees

(which are not at issue in this case) are also authorized

for air carriers engaged in foreign commerce. See Sections

9351, 5353(a).

The inspection fees collected under the California

Inspection Act are to be used solely to implement Califor-

nia Inspection Act programs and activities. Id., section

5353(e). The inspection fees can be revised either upward

or downward, depending upon whether the revenue gen-

erated by the fees is either insufficient or in excess of the

amount needed to conduct an effective inspection pro-

gram. Id., section 5353(f). CDFA also can exempt vessels

or aircraft from inspection requirements if the vessels or

aircraft already have been inspected outside the State. Id.,

section 5350(d).

The California Inspection Act also allows CDFA to

“contract with federal . . . agencies . . . to assist the

[CDFA] in carrying out the purposes of this section and

Section 5350.” Id., section 5353(g).

3. To accommodate industry concerns about dual regu-

lation, minimize burdens on foreign commerce, and avoid

potential conflicts with federal regulation, CDFA imple-

mented the California Inspection Act in a limited manner

App. 96-97, $10; 127, $7; 128, {11; 132, 45. First, the State

has not established any separate State quarantines against

foreign commerce. App. 127, 48. The State has acknow!-

edged in this litigation that it is preempted from estab-

lishing State quarantines against foreign commerce which

conflict with federal quarantines. App. 98, 413. Second,

the list of foreign countries harboring exotic pests that

CDFA was authorized to prepare under Cal. Food and

Agriculture Code section 5352 was derived from the fed-

eral quarantine list, and drawn up in coordination with

USDA personnel. Consequently, only vessels coming

from foreign ports on the federal quarantine list are sub-

ject to the State’s inspection fee. App. 96, {7. Third, while

the State has set up and staffed its own quarantine

inspection stations at some airports and marine termi-

nals, it has not established a separate inspection program.

App. 126-127, {7. Instead, the State has implemented the

California Inspection Act by collecting agricultural pest

inspection fees from air and marine carriers engaged in

foreign commerce which enter the State, as is authorized

by Cal. Food and Agriculture Code sections 5353(a) and

(b). During the relevant time period, these fees were

spent mainly in two ways: (1) a portion of the money was

transferred to USDA to augment USDA’s federal pest

inspections and quarantine enforcement in California;

and (2) the other portion of the fees was used by CDFA

for the public information program authorized by Cal.

Food and Agriculture Code section 5350(c), and to allow

“blitzes”, i.e., intense inspections, using State and federal

inspectors.

The transfer of inspection fees from the State to

USDA was formalized in a Reimbursable Cooperative

Agreement (“RCA”) which CDFA and USDA entered into

in 1991. App. 97, 911; 106-113; 121, 2. The RCA makes

clear that the California Inspection Act fees transferred to

USDA were used to augment federal enforcement of fed-

eral inspection and quarantine laws, not state quarantine

requirements. App. 107-108, 114. As a result of receiving

these fees, USDA was able to hire seven additional

marine and forty-four additional airport inspectors. App.

4. Even with this additional staffing, USDA does not

inspect every vessel entering California. App. 96, 9; 122,

14; 132, J6. Consequently, inspectors periodically con-

duct “blitzes” whereby an intensive inspection effort is

concentrated at a particular California port of entry for a

brief period of time. App. 96, 49; 101-105; 134, 410.

The public information program funded by inspec-

tion fees seeks to inform passengers and the crew of

vessels and aircraft entering California of pest dangers

and federal quarantine requirements. App. 133-134, 49.

For example, passengers on cruise ships returning from

Mexico often bring back fresh fruit unaware of federal

quarantines against fresh produce. App. 103. Because not

every ship or conveyance can be inspected, education

programs must be utilized to encourage voluntary com-

pliance with federal quarantine laws.

In 1992-93, CDFA collected approximately $4.3 mil-

lion in fees under the California Inspection Act which

was spent as follows: 55% for inspections; 23% for the

public information program; 15.2% for administration

and operations; 3.7% for investigation, and 2.3% for

blitzes. App. 8; 133, 18. All of the monies collected as fees

were spent on pest inspection and prevention programs;

none of the money was transferred to the State’s general

fund for use in other programs. App. 99-100, 419; 134,

G1.

According to USDA, shippers who must pay both the

California Inspection Act fee and the USDA AQI user fee

are not being subjected to duplicate fees or “double-

billing”. See 57 Fed. Reg. 755, 762 (1992). When USDA

calculates its user fee, it does not include in the rate base

for its fee the costs of the additional USDA inspectors

who are funded by California’s fees. Id. Consequently, the

California and USDA fees are not duplicative but fund

different portions of the USDA inspection program.

Shippers can be exempted from California Inspection

Act fees in several ways. If a vessel has been inspected by

USDA at an earlier port of entry into the United States,

the vessel is exempt from California’s inspection fee.

App. 98-99, 4415, 16; 135, 412. Shipments from Hawaii,

Guam and Puerto Rico are also exempt from the Califor-

nia fee because USDA has inspection programs for these

areas. App. 98, 414. If a shipper can establish that the

commodities onboard a vessel pose no risk to California,

or that the commodities do not originate from a port on

the federal quarantine list, no fees are required. App. 135,

q12.

In 1994, CDFA decided that USDA funding had

improved such that the State no longer needed to transfer

inspection fees to USDA to augment USDA's inspection

program. App. 7. Consequently, the State discontinued its

funding of USDA inspections, and reduced its California

Inspection Act fee from $200 to $100 for vessels. Id. These

reduced inspection fees are now used for CDFA’s public

education and information program, and for oversight

and coordination with USDA on federal inspections and

investigations of smuggling.? Id.

4. Since the 1920s, California has conducted state border

inspections to exclude entry into the State of agricultural

pests from other States.? There are 16 state-run agri-

cultural inspection stations along California’s border

which enforce 37 state quarantines against pests found in

other parts of the United States. See 3 Cal. Code Regs.

sections 3152-59. App. 125-126, 43. These state quaran-

tines differ from USDA foreign quarantines in that the

latter exclude pests found outside the United States. The

state border inspections do not generally enforce USDA

foreign quarantines because it is assumed that any for-

eign commerce entering California from another State

* Because Respondent seeks refund of the marine vessel

fees that were collected before 1994 and transferred to USDA,

the validity of those fees is not moot. Further, California may

wish to raise the fees and increase inspections in the future as

needs dictate.

* The current authority for border inspections resides

mainly in Cal. Food and Agriculture Code sections 403

(authorizing CDFA to prevent the introduction and spread of

animal pests and plant diseases into the State), section 5322

(authorizing CDFA to establish quarantines), section 5341

(authorizing establishment of plant quarantine inspection

Stations) and section 5341.5 (requiring inspections and a

certificate of inspection for motor vehicles entering the State

with agricultural commodities). However, predecessor

legislation authorizing inspections and quarantines dates back

almost a hundred years. See Cal. Stats. 1899, c. 76, pp. 91-92; Cal.

Stats. 1907, c. 436, pp. 798-799, sections 2319b-e; Cal. Stats. 1933,

c. 25, p. 63, section 30.

was already inspected by USDA when the products first

entered the United States. Id.4

The main focus of the border inspection effort is on

commercial trucks, although inspectors have authority to

inspect any vehicle entering the State.° Approximately

280,000 commercial trucks are inspected each year. Id.

These inspections take between five to thirty minutes to

complete. App. 126, 45. CDFA does not charge truckers a

fee for routine border inspections; however, if special

services like fumigation are provided, fees are charged.

App. 8, n.6. The State currently pays for border inspec-

tions from its general fund, and has done so for decades,

long before the California Inspection Act was enacted.

The cost of the border inspections as of 1992 was approxi-

mately $8.4 million per year. App. 9.

5. Respondent PMSA filed suit shortly after the Califor-

nia Inspection Act was enacted, contending, inter alia,

that the collection of inspection fees from marine carriers

4 If, however, foreign quarantined pests are discovered at a

state border inspection station, CDFA would take steps to

exclude the pests from entry into the State. App. 125-126, {3.

5 While commercial trucks are now the main focus of

border inspections, private automobiles were a significant pest

: pathway when border stations were first established in the

1920s. At that time, alfalfa fields in neighboring Nevada were

infested with the alfalfa weevil. Automobile travellers (who

were more likely then to camp by the roadside rather than stay

3 in motels) could carry weevils in camping equipment and

bedrolls. See Plant Quarantines in California, University of

California, Division of Agricultural Sciences (September 1969)

pp. 9, 18; California Department of Food and Agriculture, The

First 100 Years (December 1980).

Se aM rn

POR MS han RARE ett git

7 nm

under the Act imposed a discriminatory and unreason-

able burden on foreign commerce in violation of the

dormant Commerce Clause. The trial court granted

PMSA summary judgment, and held that the California

Inspection Act discriminated on its face against foreign

commerce because no comparable fees were imposed for

interstate commerce inspections of trucks at California

border stations.

The California Court of Appeal reversed on the

ground that there was a triable issue of fact whether the

marine vessel and truck inspections were sufficiently sim-

ilar and could be validly compared for purposes of

assessing discrimination under the Commerce Clause. See

Pacific Merchant Shipping Assn. v. Voss, 36 Cal.App.4th 212

(1995).

The California Supreme Court, in turn, reversed, and

held that the marine vessel fee provisions of the Califor-

nia Inspection Act unjustifiably discriminated on their

face against foreign commerce. Pacific Merchant Shipping

Assn. v. Voss, 12 Cal.4th 503 (1995). The California

Supreme Court acknowledged that the alleged fee “dis-

crimination” did not benefit in-state commerce or any

other parochial California economic interest. App. 17-18.

Nonetheless, the court thought that this Court’s decisions

inspection fees imposed under the California Inspection Act.

The aircraft fees have been upheld against a challenge that they

are preempted by the Anti-Head Tax Act, 49 U.S.C. section 1513.

See Alaska Airlines, Inc. v. Department of Food and Agriculture 33

Cal.App.4th 506 (1995). That case is now final as to the parties

on that issue, but remains active on the same issue raised herein.

Viaoaatlout tet a wapeacabe taal

Sen eee ee cd

SARE Os

Nh te OLAS SL GME ILS TA EERE DEEP sa Ss ai ca Ct tess abd Luc Kichiipnde

in Chemical Waste Manayement, Inc. v. Hunt, 504 U.S. 334

(1992) and Oregon Waste Systems v. Dept. of Environmental

Quality, 114 S.Ct. 1345 (1994) “require[] us to conclude

that the provisions [of the California Inspection Act]

facially discriminate against foreign commerce.” Id. at 19.

The court reasoned that because this Court’s waste dis-

posal cases had held that imposing higher fees for the

disposal of out-of-state waste than for in-state waste con-

stituted Commerce Clause discrimination, California’s

imposition of inspection fees upon marine vessels in for-

eign commerce but not upon trucks in interstate com-

merce constituted similar proscribed discrimination. Id. at

19-23.

The California Supreme Court also rejected the Court

of Appeal’s determination that a triable issue of fact

existed as to whether vessel and truck inspections were

“substantially similar” for purposes of Commerce Clause

discrimination. Id. at 23-25. The court doubted that a

“substantially similar” requirement applied outside the

tax context, id. at 26, and thought that differences in the

time and cost of the inspections, or the type and danger

of the pests targeted, were not significant. Id. at 30-32.

The fact that USDA used a portion of the inspection fees

for its enforcement of federal law also was “without

significance,” according to the court. Id. at 24.

The California Supreme Court also held that Califor-

nia’s fee discrimination was not justified by a legitimate

local purpose. Id. at 32-37. Although excluding pests was

a legitimate local purpose, the court thought there was no

justification for imposing fees on foreign but not inter-

state commerce. The fact that vessel inspections were

more time-consuming and targeted more dangerous pests

Tey cee

might justify a different fee scale, according to the court,

but could not justify charging no fee at all for truck inspec-

tions at border stations. /d. at 35-36.

The court also thought that there were two non-

discriminatory alternatives available to the Legislature:

either (1) remove the fee for vessel inspections so that all

inspections are funded by the State, or (2) impose fees for

State border inspections like the fees imposed upon ves-

sels. Id. at 37. The State’s argument that public revenues

to fund foreign commerce inspections were not available,

id. at 37-38, and that collecting fees from each truck

passing through California’s border stations would snarl

traffic and cause excessive administrative collection bur-

dens were rejected. Id. at 39-40.

REASONS WHY THE PETITION

SHOULD BE GRANTED

1. The California Supreme Court's use of the concept of

“discrimination” under the dormant Commerce Clause

was Overly simplistic and mechanical. The California

court saw different treatment of vessels in foreign com-

merce and trucks in interstate commerce, and concluded

that the Commerce Clause had been violated. The court

failed to appreciate three key factual characteristics of

this case which ensure that any fee “discrimination”

passes muster under the dormant Commerce Clause.

First, Congressional regulation of agricultural pests

in foreign commerce is not “dormant.” Congress has not

only authorized USDA to conduct agricultural pest

inspections of foreign commerce, but it has authorized

acho,

the imposition of federal inspection fees upon foreign

commerce. Because no comparable federal inspection fees

are imposed upon interstate commerce, Congress has

approved or sanctioned the very fee “discrimination”

between foreign and interstate commerce which the Cali-

fornia Supreme Court thought violated the dormant

Commerce Clause.

Second, there is no hint in this case of economic

protectionism, or any attempt by the State to benefit in-

state economic interests at the expense of out-of-state

competitors. The shippers of foreign commerce that are

subject to the California Inspection Act fee include both

California and out-of-state businesses. Consequently, the

burden of the alleged “discriminatory” fee falls on in-

state economic interests just as much as on out-of-state

interests. The commerce that is supposedly benefited by

not having to pay the California inspection fee is not in-

state commerce but out-of-state commerce which is

inspected by the State free of charge at the State’s bor-

ders. The State’s taxpayers subsidize this benefit to out-

of-state producers. Consequently, the alleged “discrimi-

nation” in this case amounts to: (1) in-state interests, i.e.,

the State’s taxpayers, subsidizing inspections of out-of-

state commerce which seeks to enter the State, (2) which

thereby “discriminates” against shippers engaged in for-

eign commerce who pay an inspection fee but who

include both in-state and out-of-state businesses. At

worst, this “discrimination” makes access to California

markets cheaper for interstate commerce than for foreign

commerce (which improves the competitive position of

out-of-state producers vis-a-vis in-state producers). But

Congress already imposes this same type of fee “discrimi-

nation” between foreign and interstate commerce under

federal law so there is nothing “suspect” about this type

of discrimination under the dormant Commerce Clause.

Third, the conclusion that the State has discriminated

between foreign and interstate commerce is predicated on

the notion that the inspections for these two streams of

commerce are comparable. They are not. State border

inspections of trucks enforce different quarantines, target

different pests and commodities, take much less time to

conduct, and are less costly than inspections of marine

vessels. Moreover, there are valid non-protectionist rea-

sons for not charging fees for border inspections. These

include the administrative burden of collecting small fees

for the high volume of trucks being inspected, and the

potential disruption of traffic at border stations if fees are

collected. Consequently, the California Supreme Court

should have held either that:

(1) the State’s collection of inspection fees from

marine vessels was not subject to dormant Com-

merce Clause scrutiny because: (a) the State’s

fee collection is consistent with, and implicitly

authorized by, federal regulation of agricultural

pests in foreign commerce; and, (b) no economic

protectionism taints the State’s fee collection; or,

(2) if dormant Commerce Clause scrutiny

applies, the State has valid non-protectionist

reasons for collecting inspection fees from

marine vessels engaged in foreign commerce,

but not from commercial trucks engaged in

interstate commerce.

fa csi OTR Br wee pt

Bett bie x aN

2. The second main reason why this Court should grant

review is to clarify dormant Commerce Clause principles

in the context of cooperative federal-state regulation, like

that in this case. There is a long history of federal-state

cooperation in the area of agricultural pest eradication

and control. In this case, State fees were used to fund

USDA pest inspections of foreign commerce. There may

be future instances of federal-state cooperation prompted

by shortfalls in the budget of one sovereign or the other,

or for reasons of economic or bureaucratic efficiency. This

Court should clarify whether and to what extent the

dormant Commerce Clause stands in the way of such

federal-state cooperation. As the Court said in Prudential

Insurance Co. v. Benjamin, 328 U.S. 408, 439 (1946): “It

would be a shocking thing, if state and federal govern

ments acting together were prevented from achieving the

end desired by both, simply because of the division of

power between them.” quoting Ribble, State and National

Power Over Commerce 211 (1937). If left unreviewed, the

California Supreme Court's decision may cast a dormant

Commerce Clause cloud over future federal-state cooper-

ation.

ARGUMENT

I. BECAUSE CONGRESS HAS APPROVED FEE “DIS-

CRIMINATION” BETWEEN FOREIGN AND

INTERSTATE COMMERCE, DORMANT COM-

MERCE CLAUSE RESTRAINTS DO NOT APPLY IN

THIS CASE

The dormant Commerce Clause imposes restraints on

state action only “when Congress has not acted or

purported to act.” Merrion v. Jicarilla Apache Tribe, 455 U.S.

130, 154 (1982). “Once Congress acts, courts are not free

to review state taxes or other regulations under the dor-

mant Commerce Clause. When Congress has struck the

balance it deems appropriate, the courts are no longer

needed to prevent States from burdening commerce”. Id.

See also Wardair Canada, Inc. v. Florida Dept. of Revenue,

477 U.S. 1, 12 (1986).

Here, “we do not confront federal governmental

silence of the sort that triggers dormant Commerce

Clause analysis.” Wardair, supra, 477 U.S. at 9. Instead,

Congress has authorized both the imposition of AQI

inspection fees upon foreign commerce, and cooperation

between USDA and States in pest control efforts. Signifi-

cantly, Congress has not imposed comparable AQI

inspection fees upon interstate commerce.? Consequently,

Congress has approved the very fee “discrimination”

between interstate and foreign commerce which the Cali-

fornia Supreme Court found to be impermissible under

the dormant Commerce Clause.

21 U.S.C. section 136a, which authorizes AQI inspec-

tion fees, does not place any maximum dollar cap on the

” The 1992 Agriculture, Rural Development, Food and

Drug Administration and Related Agencies Appropriations Act,

Pub. L. 102-142, 105 Stat. 886, barred USDA from collecting AQI

user fees from “domestic” commerce between Puerto Rico and

Hawaii, and the mainland United States. Because of this

legislation, USDA withdrew proposed regulations for AQI user

fees for such domestic or interstate commerce. See 57 Fed. Reg.

14498, 14499 (1992); 57 Fed. Reg. 14475 (1992). See also 61 Fed

Reg. 2660, 2662 (1996) (“We do not have user fees for domestic

programs. User fees apply only to import and export services.”).

oe ee ee

cae

Py ee Eee es

ee a ee

amount of marine vessel fees that may be collected.* Nor

does that statute indicate that USDA’s collection of AQI

fees is intended to be exclusive. The only statutory

requirement for inspection fees is that they be reasonably

“commensurate with the costs of agricultural quarantine

and inspection services with respect to the class or per-

sons or entities paying the fees.” 21 U.S.C. section

136a(a)(1)(D). Because USDA has concluded that Califor-

nia’s inspection fee is not duplicative of USDA's inspec-

tion fee, but instead funds additional USDA AQI services,

see supra, p.9, California’s fee satisfies the “commensura-

bility” requirement of 21 U.S.C. section 136a(a)(1)(D).

In sum, the indicia of federal approval of the State’s

inspection fee includes the following:

(1) Congress had expressly authorized feder-

ally-imposed inspection fees upon shippers of

foreign commerce for AQI services under 21

U.S.C. section 136a;

(2) Congress has approved the “discrimina-

tory” imposition of inspection fees upon ship-

pers in foreign commerce shippers because

comparable AQI fees may not be imposed upon

shippers engaged in interstate commerce under

federal law;

(3) Congress has refrained from setting any

maximum cap on the amount of AQI fees that

may be imposed upon marine vessels, and has

8 There were maximum caps on the amount of inspection

fees that could be collected for airport, commercial truck, and

railroad car inspections for Fiscal Years 1992 and 1993, but no

such cap was enacted for marine vessel fees. See 21 U.S.C.

sections 136a(a)(1)(B), (C).

only required in 21 U.S.C. section 136a that fees

be commensurate with the cost of AQI services;

(4) Congress has expressly authorized USDA

to cooperate with States in agricultural pest con-

trol in several statutes, including 7 U.S.C. sec-

tion 450; and,

(5) USDA entered into a cooperative agree-

ment with California pursuant to 7 U.S.C. sec-

tion 450, whereby California transferred a

portion of its inspection fees to USDA for USDA

AQI enforcement.

This level of federal authorization or approval should

eliminate any dormant Commerce Clause scrutiny in this

case. When a State discriminates against interstate com-

merce, Congressional authorization of such discrimina-

tion and economic protectionism must be “unmistakably

clear.” South-Central Timber Development v. Wunnicke, 467

U.S. 82, 92 (1984); Maine v. Taylor, 477 U.S. 131, 139 (1986).

However, this “clear statement” rule does not apply to

State regulation of foreign commerce when the state regu-

lation is untainted by any economic protectionism. See

Barclays Bank PLC v. Franchise Tax Board of California, 114

S.Ct. 2268, 2282-2283 (1994) (“Congress may more passively

indicate that certain state practices do not ‘impair federal

uniformity in an area where federal uniformity is essen-

tial,’ Japan Line, 441 U.S. at 448, 99 S.Ct. at 1821: it need not

convey its intent with the unmistakable clarity required to

permit state regulation that discriminates against interstate

commerce”). (Emphasis added).

The reason why a lesser standard of Congressional

authorization applies in this context is because of the

different Commerce Clause principles implicated. The

ee ee _

eae Pee

core Commerce Clause concern about economic protec-

tionism applies to interstate not foreign commerce: the

Framers contemplated a domestic “free trade” regime,

but not an international one. In contrast, when a State

regulates foreign commerce without any taint of eco-

nomic protectionism, the relevant Commerce Clause con-

cern is whether state regulation impairs the United

States’ conduct of foreign relations and its ability to

“speak with one voice” in foreign affairs. See Wardair,

supra, 477 U.S. at 8; Itel Containers International Corp. v.

Huddleston, 507 U.S. 60, 74-75 (1993). The Federal Execu-

tive’s foreign affairs responsibilities place it in a position

to assist the Court in evaluating the impact of state regu-

lation upon the Nation’s foreign affairs interests. [tel Con-

tainers, supra, 507 U.S. at 75-76. Consequently, a lesser

standard of Congressional intent or approval applies to

state regulation of foreign commerce untainted by eco-

nomic protectionism because of the different Commerce

Clause principles implicated.

Here, the fact that USDA entered into a cooperative

agreement with the State, and spent a major portion of

the inspection fees collected by the State should be a clear

indication that California’s inspection fee did not impair

the federal government's foreign affairs interests. If the

State’s fee had threatened any foreign affairs interest,

USDA presumably would not have entered into the coop-

erative agreement which contemplated the imposition of

State fees upon foreign commerce. USDA’s actions are

analogous to the Secretary of the Interior’s approval of

the tribal taxing ordinance in Merrion v. Jicarilla Apache

Tribe, supra, 455 U.S. 130, 155-156, which removed the

ordinance from dormant Commerce Clause scrutiny even

though there was no express Congressional indication

that Indian taxes were immune from dormant Commerce

Clause scrutiny. Id. at 155, n. 21. Here, as in Wardair,

supra, “[i]Jt would turn dormant Commerce Clause anal-

ysis entirely upside down to apply it where the Federal

Government has acted, and to apply it in such a way as to

reverse the policy that the Federal Government has elected

to follow.” 477 U.S. at 12. (Emphasis in original).

il. THERE IS NO ECONOMIC PROTECTIONISM IN

THIS CASE

The main evil which the Commerce Clause seeks to

combat is economic protectionism, i.e., state efforts to

economically benefit in-state interests at the expense of

out-of-state competitors. See e.g., C & A Carbone, Inc. v.

Town of Clarkstown, New York, 114 S.Ct. 1677, 1682 (1994):

West Lynn Creamery, Inc. v. Healy, 114 S.Ct. 2205, 2211

(1994). There is no hint of economic protectionism in this

case. First, the State’s inspection fees falls on shippers

engaged in foreign commerce. Because those shippers

include California businesses as well as out-of-state busi-

nesses, App. 96, ¥8; 136, 913; CT 650-671 (list of class

action members), the fee burden falls on in-state interests

just as much as on out-of-state interests.

Second, the commerce that is supposedly benefited

by the State’s “discriminatory” fee is not in-state com-

merce, but out-of-state or interstate commerce which is

inspected free of charge at California border stations.

California’s taxpayers subsidize these border inspections

thereby improving the competitive position of out-of-

state producers vis-a-vis in-state producers. If a State can

legitimately subsidize in-state industry under the market

ee ee eee ae ee ine

participant doctrine, and provide in-state commercial

interests an advantage over out-of-state competitors, see

Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 806-810

(1976); New Energy Co. of Indiana v. Limbach, 486 U.S. 269,

278 (1988), then the State’s taxpayers should be able to

subsidize inspections for out-of-state commerce, which

should be, a fortiori, less suspect under the dormant Com-

merce Clause.

Third, assuming that shippers of foreign commerce

pass on the costs of the State’s inspection fee to foreign

producers, the worst effect that California’s fee has is to

make access to California markets cheaper for interstate

commerce over foreign commerce.? However, federal law

already imposes this same discrimination in favor of inter-

state over foreign commerce.

Fourth, the inspection fees collected by the State are

used entirely for the California Inspection Act program,

and are not added to the general fund for other govern-

mental programs. Consequently, the inspection fee is not

being used as a general revenue raising device.

The process-based explanation for dormant Com-

merce Clause vigilance is that courts should look care-

fully when the burden of state regulation falls entirely on

out-of-state interests that are unrepresented in the local

9 It is not clear that the products that are being shipped in

foreign commerce and that are subject to inspection fees are in

competition with the products carried by commercial truckers

which are not subject to fees. If the State subsidizes inspection

fees for certain products which are not in competition with other

products that pay an inspection fee, then any fee

“discrimination” has no relevant economic impact for

Commerce Clause purposes.

legislative process. See e.g., South-Central Timber Develop-

ment, supra, 467 U.S. at 92; C & A Carbone, Inc, supra, 114

S.Ct. at 1689 (O’Connor, a concurring). However,

because the bite of California’s fee falls on major in-state

interests, i.e, California taxpayers and California shippers

engaged in foreign commerce, any process-based con-

cerns are absent.

Discrimination against foreign commerce may still

violate the Commerce Clause even if in-state interests are

not benefitted by the discrimination. See Kraft General

Foods, Inc. v. lowa Dept. of Revenue, 505 U.S. 71, 79 (1992).

But the reason for this is not because the Commerce

Clause mandates an international free trade regime like

the national free trade regime contemplated by the

Framers, but because of the foreign affairs implications of

such state discrimination, including possible foreign

retaliation. See Kraft, supra. Here, however, there are no

adverse foreign affairs implications because the federal

government has already spoken on the issue. Congress

has decided to charge foreign commerce but not inter-

state commerce for agricultural pest inspections. The

State in this case is merely providing additional money to

USDA for foreign commerce inspections, and it is raising

this money in the way that Congress has already

approved, namely, by collecting inspection fees from

shippers of foreign commerce.

Consequently, none of the Commerce Clause discrim-

ination rationales apply in this case:

(1) there is no economic protectionism, and no

attempt to benefit in-state interests at the

expense of out-of-state competitors;

(2) there is no process-based concern about

economic burdens falling exclusively on unre-

presented out-of-state interests; and,

(3) there are no foreign affairs concerns

because Congress has already decided that ship-

pers in foreign commerce should pay the very

type of inspection fee which California has

imposed.

In sum, the combination of Congressional authorization

and the absence of any economic protectionism should

remove this case from any dormant Commerce Clause

scrutiny.

III. BECAUSE THERE ARE MAJOR DIFFERENCES

BETWEEN MARINE VESSEL AND TRUCK

INSPECTIONS, THERE IS EITHER NO DISCRIM-

INATION OR A VALID JUSTIFICATION FOR

DISCRIMINATION

Even if California’s inspection fee is subject to dor-

mant Commerce Clause scrutiny, that fee still should be

upheld. The California Supreme Court’s conclusion that

charging fees for marine vessel but not truck inspections

constitutes improper discrimination was based on the

faulty premise that these two types of inspections are

comparable. Logically, there can be no “discrimination”

in the treatment of two transactions or events unless the

events are substantially similar. Discrimination may lie

either in the different treatment of similar things, or the

same treatment of different things. See Evansville Airport

v. Delta Airlines, 405 U.S. 707, 717 (1972) (where there is

an “inherent difference between . . . two classes of flights

... the application of the same fee to both would amount

to discrimination against one or the other”). (Emphasis

added). }°

Here, there are major differences between marine

vessel and truck inspections which justify different fee

treatment. The most relevant difference is the cost, time,

and complexity of the inspections. Commercial truck

inspections at state border stations take between 5-30

minutes, enforce a smaller number of state-imposed quar-

antines, and cover a much larger number of conveyances

(roughly 280,000 commercial trucks a year). In contrast,

inspections of a vessel and its cargo take much more time,

enforce a greater number of federal quarantines, and

involve far fewer inspections. Because truck inspections

are relatively simple, the State forgoes fees for this ser-

vice but charges fees for more complicated AQI services

such as fumigation.

Collecting individual fees from each of the 280,000

trucks that are inspected could impose administrative

collection burdens that are not worth the expense. Col-

lecting fees also could disrupt traffic flow at border sta-

tions which would inconvenience the thousands of

passenger cars that pass through State border stations

daily. Consequently, there are valid “non-protectionist”

reasons why the State forgoes collection of fees from

commercial trucks. In addition, state border inspections

have been conducted for decades, long before the Califor-

nia Inspection Act program for foreign commerce was

enacted. Consequently, collecting fees under one program

10 That the California Supreme Court questioned whether a

‘substantially similar” requirement applied in Commerce

Clause cases outside the tax context, see App. 28-29 illustrates

the limitations of its Commerce Clause analysis.

‘

but not the other can be explained by the different histor-

ical circumstances and budgetary philosophies which

were current when the programs were established.

The major differences in time, cost, and scope of

commercial truck and marine vessel inspections are indis-

putable. The California Supreme Court held, however,

that while these differences might justify a lower fee for

truck inspections, they could not justify charging no fee

for truck inspections. The California Supreme Court used

an excessively exacting standard in reaching this conclu-

sion. This Court has rejected the argument that user fees

on commercial activity must be exactly tailored to the

cost of the state services to avoid invalidation under the

Commerce Clause. See Northwest Airlines, Inc. v. County of

Kent, Michigan, 114 S.Ct. 855, 859-866 (1994); Evansville

Airport, supra, 405 U.S. at 714-717 (fees need only be

based on “fair approximation of use”); Pure Oil Co. v.

State of Minnesota, 248 U.S. 158, 162-163 (1918). When

there is no economic protectionism, all that is required

under the dormant Commerce Clause is a reasonable

relationship between the fee and the cost of state services,

see Clark v. Paul Gray, Inc., 306 U.S. 583, 597-600 (1939), or

valid non-protectionist reasons for fee distinctions. See

McLean v. Denver & Rio Grande Railroad Co., 203 U.S. 38,

53-54 (1906) (inspection fee on hides shipped out of State

but not on hides within State upheld based on legitimate

law-enforcement reasons for the distinction).

Given the lesser costs of truck inspections, the

administrative and traffic consequences of collecting

trucking fees «t border stations, and the different histori-

cal circumstances of the two inspection programs, the

State could properly collect fees for marine vessel inspec-

tions without having to charge fees in its longstanding

border inspection program.

IV. THIS COURT’S WASTE DISPOSAL PRECEDENTS

ARE DISTINGUISHABLE AND INAPPLICABLE

The California Supreme Court erroneously thought that

Oregon Waste Systems v. Dept. of Environmental Quality, supra,

114 S.Ct. 1345, and Chemical Waste Management, Inc. v. Hunt,

supra, 504 U.S. 334, compelled the conclusion that Califor-

nia’s inspection fees violated the dormant Commerce Clause.

Those cases, however, are distinguishable. First, both Oregon

Waste and Chemical Waste were classic examples of economic

protectionism. In both cases, the States were trying to benefit

in-state interests at the expense of out-of-state ones by charg-

ing higher fees for the disposal of out-of-state waste than for

in-state waste. Here, there is no comparable economic pro-

tectionism at work.

Second, in Chemical Waste and Oregon Waste, the

States were discriminating by charging different disposal

fees for identical waste. See Oregon Waste, supra, 114 S.Ct.

at 1348 (noting that in Chemical Waste, higher fees were

imposed on the disposal of out-of-state waste “than on

the disposal of identical waste from Alabama.”) (emphasis

added); Chemical Waste, supra, 504 U.S. at 348 (“the record

establishes that the hazardous waste at issue in this case

is the same regardless of its point of origin”) (emphasis

added). There also was no evidence that the out-of-state

waste in those cases was more costly to dispose of or

more hazardous than in-state waste. See Chemical Waste,

supra, 504 U.S. at 343-344 (noting the trial court's finding

that “there is absolutely no evidence before this Court

that waste generated outside Alabama is more dangerous

than waste generated in Alabama.”); Oregon Waste, supra,

114 S.Ct. at 1351 (“No claim has been made that the

disposal of waste from other States imposes higher costs

on Oregon . . . than the disposal of in-state waste.”). Here,

in contrast, the inspections for vessels and trucks are

significantly different in terms of cost, time, and scope.

Consequently, the justification for different fees which

was entirely absent in Chemical Waste and Oregon Waste is

undisputed in this case. Further, the very essence of the

foreign pest inspections is to intercept pests not known to

exist in the United States, including California. A fortiori,

these foreign commodities present threats different from

and more dangerous than domestic interstate pests. App.

93-94, 42.

Finally, congressional authorization or federal

approval of the challenged state regulation was not an

issue in the waste cases. See Chemical Waste, supra, 504

U.S. at 346 n.9 (noting that the issue of congressional

authorization was pretermitted because it was not relied

on below nor was it briefed or argued by the parties). In

contrast, the challenged fees here are not only consistent

with the federal regulatory regime but were used partly

to finance such federal regulation."

11 The statement in Oregon Waste Systems, supra, 1145S.Ct. at

1351 n.5, that different state costs of disposing of in-state and

out-of-state waste might justify “a differential charge” does not

mean, as the California Supreme Court thought, that California

can only adopt “differential” fees for vessels and trucks but

cannot forego fees altogether for trucks. See App. 35. The

“differential charge” discussion in Oregon Waste Systems arose

in a case where there were no other non-protectionist

CONCLUSION

One out of every five jobs in California is related to

the State’s $19 billion a year agricultural industry, App. 8;

CT 2128; hence the State’s interest in wanting to augment

USDA's foreign pest control effort. The State’s inspection

fee does not conflict with Congress’ “dormant” powers

under the Commerce Clause. Instead, it augments the

very pest regulation of foreign commerce that Congress

has mandated. The anti-discrimination principle in the

Commerce Clause has been distorted in this case to fur-

ther the economic interests of a particular group of ship-

pers rather than serve any of the rationales or purposes

of the Commerce Clause.

The petition for a writ of certiorari should be

granted

March 1996

Respectfully submitted,

Danis. E. LUNGREN

Attorney General of the State

of California

Roperick E. WaALsTon

Chief Assistant Attorney

General

CHarLes W. Gertz IV

(Counsel of Record)

Assistant Attorney General

Linus MASOuREDIS

Deputy Attorney General

reasons for not imposing fees. Because there are valid non-

protectionist reasons for not imposing fees on trucks in this

case, the “differential charge” discussion in Oregon Waste

Systems is inapplicable.

In The

Supreme Court of the United States

Octroser Term, 1995

ANN M. VENEMAN, Secretary, CALIFORNIA

DEPARTMENT OF FOOD AND AGRICULTURE;

ISLAM SIDDIQUI, Assistant Director, CALIFORNIA

DIVISION OF PLANT INDUSTRY; STATE OF

CALIFORNIA,

Petitioners,

PACIFIC MERCHANT SHIPPING ASSOCIATION,

Respondent.

On Petition For Writ Of Certiorari To The

Supreme Court Of The State Of California

APPENDIX TO PETITION

FOR WRIT OF CERTIORARI

¥ Se . 2 Pee a ee ae Petri. pha Pa

; i eg see’ pee ciate kn EE SORTS, lt tities os igs ONE Foy

Aras e “, a ha ae a aR ‘ : PEASE Se Ra es

;* wi "2 ee SK vara iS 7 Se 4 . 4 3 Loe aN wee 3 2 ~

> * * - Daag ZR, Cs. Ss 2 ve + nf he Sac ty Ss,

. ; i i cee Se es So PUTS. Ee Ne ee eee

s alte Bas Ay Ke cee Se ‘ . . ~

* bal ooh a wi’ 7 t

o A - 2 as be Cae aes Se as

App. 1

[No. S044869. Dec. 29, 1995.]

California Supreme Court

PACIFIC MERCHANT SHIPPING ASSN., Plaintiff and

Respondent, v.

Henry VOSS, as Director, etc., et al., Defendants and

Appellants.

COUNSEL

Daniel E. Lungren, Attorney General, Roderick E. Wal-

ston, Chief Assistant Attorney General, Walter Wun-

derlich, Assistant Attorney General, Charles W. Getz IV

and Marc N. Melnick, Deputy Attorneys General, for

Defendants and Appellants.

Lillick & Charles, Sher & Blackwell, R. Frederic Fisher,

Lawrence N. Minch, David F. Smith, Jeffrey F. Lawrence,

Cindy Buys, Minder & Muro and Thomas G. Minder for

Plaintiff and Respondent.

OPINION

MOSK, J. — In this appeal we consider whether two statutes

and a regulation authorizing the California Department of

Food and Agriculture to levy an inspection fee on ships

carrying agricultural goods into California from foreign

countries (Food & Agr. Code, §§ 5352 & 5353, subd. (b); Cal.

Code Regs., tit. 3, § 3560, subd. (b)), when no such fee is

levied on carriers bringing such goods into California from

other states, unjustifiably discriminate on their face against

foreign commerce in violation of the negative aspect of the

foreign commerce clause of the United States Constitution.

(U.S. Const., art. I, § 8, cl. 3.)

App. 2

We shall conclude, as the trial court ruled, that the

cited provisions are facially discriminatory and that the

discrimination cannot be justified under the controlling

“strictest scrutiny” standard. We therefore reverse the

judgment of the Court of Appeal holding the provisions

to be nondiscriminatory.

Background

The United States Department of Agriculture (USDA)

has long maintained a comprehensive program for

inspecting potentially contaminated or otherwise harmful

agricultural products brought into the United States from

foreign countries. (See, e.g., 7 U.S.C. § 151 et seq. [Plant

Quarantine Act of 1912]; 7 U.S.C. § 150ee [“The Secretary

lof the USDA] may promulgate such regulations requir-

ing inspections of products and articles of any character

whatsoever and means of conveyance . . . as a condition

of their movement into or through the United States, or

interstate, and imposing other conditions upon such

movement, as he deems necessary to prevent the dissem-

ination into the United States, or interstate, of plant

pests,... "]; 7 C.F.R. § 330.100 et seq. (1995).) The USDA

currently enforces federal quarantines against virtually

every country in the world, and these quarantines cover

literally thousands of agricultural pests found only out-

side the United States. (See 7 C.F.R. § 319 (1995).) As part

of this comprehensive program, all ships traveling from

the specified foreign countries are subject to inspection

by federal authorities at their first port of call in the

United States. (Id., § 330.105(a) (1995).) As payment for its

services, the USDA currently levies a “user fee” of

App. 3

$369.50 per inspection on all owners of nonexempt ves-

sels. (7 C.E.R. §§ 330.107, 354.3(b) (1995).)

In 1990 our Legislature enacted the California Air-

port and Maritime Plant Quarantine, Inspection, and

Plant Protection Act (hereafter the Act) as part of a state-

sponsored effort to supplement the USDA’s agricultural

pest control efforts in California. (Stats. 1990, ch. 1612,

§ 1, p. 7753.) The Legislature adopted the Act as an

urgency statute effective September 30, 1990, because in

its view “It is necessary to enact programs that are alter-

natives to the repeated application of pesticides in order

to eradicate pests, including the Mediterranean fruit fly

in Los Angeles County. This act would enact one such

alternative and, in order to protect the people and the

environment from the repeated application of pesticides

and to protect California’s agriculture from pests as soon

as possible, it is necessary that this act take effect imme-

diately.” (Stats.1990, ch. 1612, § 8, p. 7755.)

The Act added sections 5350-5353 to the Food and

Agricultural Code,! which direct the California Depart-

ment of Food and Agriculture (the Department) to “estab-

lish a program for the inspection of conveyances entering

California through airport and maritime facilities to pre-

vent the introduction into, or the spread within, this state

of pests.” (§ 5350, subd. (a).) The Act specifically requires

that the Department maintain plant quarantine inspection

stations at California’s airports and marine terminals (id.,

subd. (b)) and establish a program for disseminating

1 Unless otherwise indicated, all further statutory

references are to this code.

re : ;

App. 4

information regarding the state’s agricultural pest control

and quarantine requirements at such points of entry (id.,

subd. (c)). However, the Act does not expressly require

the Department to establish and operate its own state-run

inspection sites at airports and marine terminals, but

instead broadly authorizes the Department to “contract

with federal and state agencies . . . to assist [it] in carry-

ing out the purposes of [the Act].” (§ 5353, subd. (g).)

On June 24, 1991, the Department entered into a

reimbursable cooperative agreement (RCA) with the

USDA. The RCA provided that the Department would

pay the USDA to intensify its existing regulatory efforts

by hiring additional federal agents to inspect ships and

airplanes carrying agricultural goods into California from

outside the United States. As a result of the RCA, the

USDA was able to hire seven additional marine inspec-

tors and forty-four additional airport inspectors. The

RCA expressly provided, however, that it was to have no

effect on the nature of the federal inspections; rather, it

was intended only to make it possible for the USDA to

increase its staff and perform more inspections. This

arrangement with the USDA is the sole means by which

the Department has implemented its duty to provide

airport and marine inspections under section 5350, subdi-

vision (a); the Department has never established a state-

run commercial inspection program at airports or marine

terminals. The original RCA expired on September 30,

1991, but was renewed through September 30, 1992, with

minor revisions. There is no indication in the record

whether the RCA was renewed thereafter.

For many years the Department has also inspected

agricultural goods entering California by truck from

App. 5

other states. (See §§ 5341 & 5341.5.)? Rather than contract-

ing with a federal agency for this service, however, the

Department itself maintains 16 state-run inspection sites

on California’s borders, staffed by some 126 state inspec-

tors. Unless there are extraordinary circumstances, these

inspectors enforce only California’s agricultural quaran-

tines; they do not regularly enforce federal quarantines or

inspect commerce originating in foreign countries

because the Department assumes that federal authorities

inspected these goods when they first entered the United

States and there is no reason to perform a second inspec-

tion.

The focus of this case is not on the legitimacy of

California’s overall agricultural inspection program or

the propriety of the particular means that the Department

has chosen to implement its regulatory obligations.

Rather, we are here concerned with only one narrow

issue: whether the mechanism that the Legislature has

created to fund the Department’s implementation of its

statutory obligation under section 5350, subdivision (b),

to provide for the inspection of ships carrying agri-

cultural goods into California from foreign countries

passes muster under the federal Constitution. We turn to

that funding mechanism.

Section 5352 of the Act requires the Department to

derive the funding needed to satisfy its obligations by

“levy[ing] a fee on commercial marine carriers, based on

2 The Department does not maintain truck inspection

stations at the Mexican border. Instead, the USDA provides such

inspections at federal inspection sites. (See 7 C.F.R.

§§ 320.1-320.9 (1995).)

5; i ai a i

App. 6

the schedule established pursuant to Section 5353, for the

use of marine terminal facilities for plant and animal pest

inspection, quarantine, and eradication.”3 Section 5352

also requires the Department to “identify and establish a

list of countries which [it] has reason to believe are poten-

tial sources of exotic plant and animal pests.” Section

5353, subdivision (b), then provides that “Each commer-

cial marine carrier engaged in foreign commerce which

carries animals or plants or other materials which are, or

are likely to be, infected or infested with any pest shall

pay a fee of two hundred dollars ($200) to the [Depart-

ment] upon the initial arrival in this state of the carrier on

a voyage which originated outside the United States from

a country identified and listed by the [Department] .. . ,

or which made an intermediate stop on that voyage in a

country identified and listed by the [Department]... . “4

* The Legislature has enacted a similar provision relating to

airport inspections: “The [Department] shall levy a service

charge . . . based on the schedule established pursuant to Section

5353, on each air carrier or foreign air carrier engaged in foreign

air commerce . . . for the use of airport facilities for plant and

animal pest inspection, quarantine, and eradication.” (§ 5351,

subd. (a).)

* Again the Legislature has enacted a virtually identical

provision regarding airport inspections: “Each air carrier or

foreign air carrier engaged in foreign air commerce which

carries animals or plants or other materials which are, or are

likely to be, infected or infested with any pest shall pay a charge

of eighty-five dollars ($85) to the [Department] upon the initial

landing in this state of each flight of the carrier which originates

outside the United States.” (§ 5353, subd. (a).) The Department

initially adopted a regulation setting the fee at $85 effective

April 1, 1991; it later reduced the fee to $43 effective January 1,

1995. (Cal. Code Regs., tit. 3, § 3560, subd. (a).)

App. 7

The Act further authorizes the Department “by regu-

lation, [to] increase or decrease any of the charges or fees

prescribed in [section 5353, subdivision (b)] upon deter-

mining that the revenue received is inadequate or in

excess of the amount needed to conduct an effective

inspection program. The maximum adjusted charge or fee

shall not exceed [$600].” (§ 5353, subd. (f).) The Depart-

ment initially adopted a regulation setting the marine

inspection fee at $200 effective April 1, 1991; it later

amended the regulation by reducing the fee to $100 effec-

tive January 1, 1995. (Cal. Code Regs., tit. 3, § 3560, subd.

(b).)

The Department gave the following explanation for

the 1995 fee reduction in the informative digest section of

the public notice of amendment: “Since this inspection

program was established in 1991, the Department has

contracted with the United States Department of Agricul-

ture (USDA) to perform the authorized inspections. The

Secretary [of the Department] has determined that an

effective inspection program van now be conducted with

revenues from the lower servi.e charge and user fee rates

because the USDA is starting to provide inspections of

international carriers at an adequate level. The USDA is

now committed to supporting federal inspectors who pre-

viously had been funded by state contract.

“The revenue generated by the lowered service

charges and user fees will be used for a program which

will focus on oversight and coordination with the USDA

on inspections of international carriers, investigations of

smuggling, and intensification of public awareness and

education efforts. Significant increases in the number of

international travelers, levels of foreign trade and

App. 8

repeated exotic pest infestations in California have cre-

ated a need for an improved inspection program to pro-

tect California’s $19.9 billion agricultural industry.”5

In the 1992-1993 fiscal year, the Department collected

inspection fees under this program totaling approxi-

mately $4.3 million, levied at the higher, pre-1995 rate. Of

this $4.3 million, approximately one-fifth was collected as

foreign marine inspection fees and approximately four-

fifths as foreign airplane inspection fees. However, the

Department used only $2.4 million of this aggregate

amount to satisfy its obligations to the USDA for both

airport and marine inspections. Approximately $1.6 mil-

lion of the remaining $1.9 million was allocated to admin-

istrative costs and educational activities.

The Department's own state-run program for inspect-

ing agricultural goods entering California from other

states - as opposed to agricultural goods entering Califor-

nia from foreign countries - is funded very differently.

Carriers of such domestic goods pay no fee at all for

routine inspections.® The state currently pays for routine

domestic inspections from the general fund, and has done

so for many years. As of 1992, the state-run inspection

program for out-of-state domestic agricultural goods cost

> Plaintiff's request that we take judicial notice of the

Department's public Notice of Amendment of California Code

of Regulations, title 3, section 3560, subdivision (b), is granted.

(Evid. Code, §§ 452, subd. (b), 459, subd. (a).)

® They are charged only for special services such as

fumigation, destruction of contaminated goods, or special

delivery arrangements.

App. 9

California taxpayers an average of approximately $8.4

million each year.

In December 1991 plaintiff Pacific Merchant Shipping

Association (hereafter Pacific Merchant), an unincorpo-

rated association of marine carriers, brought this action

on behalf of a class of carriers that had paid the foreign

marine inspection fee. Pacific Merchant's operative plead-

ing names Henry Voss, the director of the Department,

and Islam Siddiqui, the assistant director of the Depart-

ment and the head of its Plant Pest and Quarantine

Division, as defendants in their official capacities,” and

alleged that the Department’s overall mechanism for

funding its agricultural inspection program is unconstitu-

tional inter alia because it imposes a discriminatory and

unreasonable burden on carriers in foreign commerce

that is not imposed on carriers in domestic interstate

commerce, in violation of the federal commerce clause.®

The trial court granted summary judgment in favor

of Pacific Merchant on the ground that the marine inspec-

tion fee unjustifiably discriminates on its face against

foreign commerce in violation of the commerce clause of

the United States Constitution. The court reasoned that

” For ease of reference, defendants Voss and Siddiqui will

hereafter be referred to collectively as the Department.

* Throughout this opinion, the terms “foreign commerce”

and “foreign marine commerce” will be used to refer to

agricultural goods brought into California from outside the

United States. The term “domestic interstate commerce” will

refer to agricultural goods brought into California from other

states. The term “intrastate commerce” will denote agricultural

goods transported exclusively within California.

App. 10

“The evidence submitted by the [Department] in its sup-

plemental papers is sufficient to support the imposition

of a higher fee on foreign ship inspections as opposed to

interstate trucking. However, the [Department] has pre-

sented no evidence which explains why no fee is col-

lected on interstate inspections. The facts are undisputed

that overall the state incurs greater costs in performing

the interstate inspections. Therefore it is the burden of the

state to justify its fee system. The statute is facially dis-

criminatory against foreign commerce and as such must

be examined with the strictest scrutiny. The [Depart-

ment’s] justification does not pass that test.” The court

entered a judgment that declared the challenged provi-

sions unconstitutional, enjoined the Department from col-

lecting foreign marine inspection fees, and ordered a

refund. The Department appealed.

The Court of Appeal reversed the judgment on the

ground that there was a triable issue of fact as to whether

the particular types of foreign commerce and domestic

interstate commerce involved in this case are sufficiently

“similarly situated” that they can be compared for the

purpose of determining whether the challenged funding

mechanism is discriminatory.®

* The Court of Appeal also concluded there were triable

issues of fact regarding Pacific Merchant's other contentions,

namely, that the foreign marine inspection fee violates the

tonnage duty clause (U.S. Const., art. I, § 10, cl. 3) and export-

import clause (id., art. I, § 10, cl. 2) of the federal Constitution,

that it conflicts with the General Agreement on Tariffs and

Trade, and that it is preempted by federal law. These claims

were not properly before the Court of Appeal because the trial

court expressly declined to address them in the first instance

and limited its judgment to the commerce clause claim.

App. 11

We granted review limited to the issue whether the

foreign marine inspection fee in question violates the

commerce clause of the United States Constitution.

1. The Negative Commerce Clause

The commerce clause of the federal Constitution

empowers Congress to enact laws “To regulate commerce

with foreign nations, and among the several states, and

with the Indian tribes.” (U.S. Const., art. I, § 8, cl. 3.) The

actual language of the clause, however, places no express

limits on the authority of the states to regulate such

commerce. This rather striking omission has been charac-

terized as one of the “great silences of the Constitution.”

(Hood & Sons v. Du Mond (1949) 336 U.S. 525, 535 [93 L.Ed.

865, 872, 69 S.Ct. 657].) Nevertheless, the United States

Supreme Court has repeatedly held for over a century

that the commerce clause also limits the states’ power to

regulate both domestic interstate and foreign commerce,

whether or not Congress has acted. (See, e.g., Barclays

Bank v. Franchise Tax Bd. of California (1994) 512 U.S. __

[129 L.Ed.2d 244, 257, 114 S.Ct. 2268, 2276] (Barclays Bank)

[the commerce clause “has long been understood . . . to

provide ‘protection from state legislation inimical to the

national commerce [even] where Congress has not

acted... . ’”]; Oregon Waste Systems v. Dept. of Env.

Quality (1994) 511 U.S. ___ [128 L.Ed. 2d 13, 20, 114 S.Ct.

1345, 1349] (Oregon Waste) [“Though phrased as a grant of

regulatory power to Congress, the Clause has long been

understood to have a ‘negative’ aspect that denies the

States the power unjustifiably to discriminate against or

burden the interstate flow of articles of commerce.”];

mamma ia a ae

App. 12

accord, Associated Industries of Missouri v. Lohman (1994)

511 U.S. __, ___ [128 L.Ed.2d 639, 645-646, 114 S.Ct. 1815,

1820]; Wyoming v. Oklahoma (1992) 502 U.S. 437, 454 [117

L.Ed.2d 1, 22-23, 112 S.Ct. 789]; Lewis v. BT Investment

Managers, Inc. (1980) 447 U.S. 27, 35 [64 L.Ed.2d 702, 711,

100 S.Ct. 2009]; Welton v. State of Missouri (1876) 91 U.S. (1

Otto.) 275 [23 L.Ed. 347].) Thus, any state statute or

regulation that impacts domestic interstate or foreign

commerce is subject to judicial scrutiny under the com-

merce clause unless the statute or regulation has been

preempted, or expressly authorized, by an act of Con-

gress. (See, e.g., Atlantic Coast Demo. v. Bd. of Chosen

Freeholders (3d Cir. 1995) 48 F.3d 701, 710.) The commerce

clause’s implicit, self-executing restriction on the states’

power to regulate domestic interstate and foreign com-

merce is commonly referred to as the “negative” or “dor-

mant” commerce clause. (Barclays Bank, supra, 512 U.S.

__ __, fn. 9 [129 L.Ed.2d 244, 257, 114 S.Ct. 2268, 2276].)

Although the negative commerce clause was derived

essentially by implication from the clause’s express “posi-

tive” grant of legislative authority to Congress, it is by no

means simply an incidental emanation or penumbra of

that clause. To the contrary, “The ‘negative’ aspect of the

Commerce Clause was considered the more important by

the ‘father of the Constitution,’ James Madison. In one of

his letters, Madison wrote that the Commerce Clause

‘grew out of the abuse of the power by the importing

States in taxing the nonimporting, and was intended as a

negative and preventive provision against injustice

among the States themselves, rather than as a power to be

used for the positive purposes of the General Govern-

ment.’ 3 M. Farrand, Records of the Federal Convention

App. 13

of 1787, p. 478 (1911).” (West Lynn Creamery, Inc. v. Healy

(1994) 512 U.S. __, ___ fn. 9 [129 L.Ed.2d 157, 166, 114

S.Ct. 2205, 2211]; see also Hughes v. Oklahoma (1979) 441

U.S. 322, 325-326 [60 L.Ed.2d 250, 255, 99 S.Ct. 1727]

[commerce clause reflected the concern of the framers “to

avoid the tendencies toward economic Balkanization that

had plagued relations among the Colonies and later

among the States under the Articles of Confederation” ];

Baldwin v. G.A.F. Seelig (1935) 294 U.S. 511, 522 [79 L.Ed.

1032, 1038, 55 S.Ct. 497, 101 A.L.R. 55] [“a chief occasion

of the commerce clauses was ‘the mutual jealousies and

aggressions of the States, taking form in customs barriers

and other economic retaliation’ ”]; see generally, The Fed-

eralist Nos. 41, 42 [Madison]; 2 Bailyn, The Debates on

the Federal Constitution (1993) p. 662 [Madison’s speech

at the Virginia Ratifying Convention, June 11, 1788]; 3

Farrand, Records of the Federal Convention of 1787 (rev.

ed. 1966) p. 547 [Madison’s Preface to Debates in the

Convention of 1787, stating inter alia that under the Arti-

cles of Confederation the “want of a general power over

Commerce led to an exercise of this power separately, by

the States, [which] not only proved abortive, but engen-

dered rival, conflicting and angry regulations.”].)

James Madison was not alone in his views. Another

important contemporary figure, Alexander Hamilton,

wrote that the federal government should be authorized

to regulate domestic interstate and foreign commerce and

that the states’ legislative power on this topic should be

limited, lest “The interfering and unneighbourly regula-

tions of some States contrary to the true spirit of the

Union . . . be multiplied and extended till they became

not less serious sources of animosity and discord, than

pet :

App. 14

injurious impediments to the intercourse between the

different parts of the confederacy.” (The Federalist No. 22

(Cooke ed. 1961) p. 137.) According to Hamilton, the

absence of such uniform national control might gradually

lead to what we would now call the balkanization of the

several states, undermine Congress’s ability to enter into

agreements with foreign nations on behalf of the United

States as a whole, restrict foreign commerce to the point

that our national resources would lie fallow, and eventu-

ally cause citizens of each state to treat the citizens of

other states like foreigners rather than fellow citizens of

the United States. (Id. at pp. 135-137; see also The Feder-

alist No. 11 [Hamilton].) Indeed, there is evidence to

suggest that Hamilton’s prophecy could well have come

true had the states not consented to give up the power to

regulate commerce by ratifying the Constitution. (See

Brown v. Maryland (1827) 25 U.S. (12 Wheat.) 419, 445-446

[6 L.Ed. 678, 688] [“The oppressed and degraded state of

commerce, previous to the adoption of the constitution,

can scarcely be forgotten. It was regulated by foreign

nations, with a single view to their own interests; and our

disunited efforts to counteract their restrictions, were

rendered impotent, by want of combination.”]; Gibbons v.

Ogden (1824) 22 U.S. (9 Wheat.) 1, 226 [6 L.Ed. 23, 77]

(conc. opn. of Johnson, J.) [Prior to the adoption of the

Constitution “There was not a state in the Union, in

which there did not . . . exist a variety of commercial

regulations; . . . ”].)

Thus, despite the fact that there is no express textual

basis in the commerce clause to justify a limitation on the

states’ authority to regulate domestic interstate and for-

eign commerce, there can be no doubt whatever that such

App. 15

a limitation was intended by the framers and that the

matter was of paramount concern to many or all of the

delegates to the Constitutional Convention of 1787.

Indeed, Chief Justice John Marshall later wrote that “It

may be doubted, whether any of the evils proceeding

from the feebleness of the federal government [under the

Articles of Confederation], contributed more to that great

revolution which introduced the present system, than the

deep and general conviction, that commerce ought to be

regulated by congress.” (Brown v. Maryland, supra, 25 U.S.

(12 Wheat.) 419, 446 [6 L.Ed. 678, 688].)

2. The Issue of Facial Discrimination

Having placed the matter in perspective, we focus on

the narrow issue before us: whether the inspection fee

levied on vessels in foreign commerce by authority of the

challenged provisions (§§ 5352 & 5353, subd. (b); Cal.

Code Regs., tit. 3, § 3560, subd. (b)) violates the negative

commerce clause of the United States Constitution.

"(T]he first step in analyzing any law subject to judi-

cial scrutiny under the negative Commerce Clause is to

determine whether it ‘regulates evenhandedly with only

“incidental” effects on interstate [or foreign] commerce,

or discriminates against interstate [or foreign] com-

merce.’ .. . If a restriction on commerce is discriminatory,

it is virtually per se invalid. [Citations.] By contrast, non-

discriminatory regulations that have only incidental

effects on interstate [or foreign] commerce are valid

unless ‘the burden imposed on such commerce is clearly

excessive in relation to the putative local benefits.’ ” (Ore-

gon Waste, supra, 511 U.S. ___, __, [128 L.Ed.2d 13, 21, 114

App. 16

S.Ct. 1345, 1350].) The party challenging the statute’s

validity bears the burden of showing discrimination.

(Hughes v. Oklahoma, supra, 441 U.S. 322, 336 [60 L.Ed.2d

250, 261-262].)

In this context “ ‘discrimination’ simply means differ-

ential treatment of in-state and out-of-state economic

interests that benefits the former and burdens the latter.”

(Oregon Waste, supra, 511 U.S. __, ___ [128 L.Ed.2d 13, 21,

114 S.Ct. 1345, 1350].) Such discrimination may take any

of three forms: first, the state statute may facially discrim-

inate against interstate or foreign commerce; second, it

may be facially neutral but have a discriminatory pur-

pose; third, it may be facially neutral but have a discrimi-

natory effect. (Chemical Waste Management, Inc. v. Hunt

(1992) 504 U.S. 334, 344, fn. 6 [119 L.Ed.2d 121, 133, 112

S.Ct. 2009] (Chemical Waste) [statute may be discrimina-

tory either in purpose or effect]; Hughes v. Oklahoma,

supra, 441 U.S. 322, 336 [60 L.Ed.2d 250, 261] [state statute

may discriminate “either on its face or in practical

effect”]; SDDS, Inc. v. State of S.D. (8th Cir. 1995) 47 F.3d

263, 267 [listing the three types of discrimination and

citing cases illustrating each].)

In determining whether a state statute is facially dis-

criminatory, the following matters are irrelevant: the jus-

tification that the state offers for the discrimination, the

legitimacy of the state interests that the statute is

designed to protect, the degree and scope of the discrimi-

nation, and the volume of commerce affected. (Oregon

Waste, supra, 511 U.S. __, __ [128 L.Ed.2d 13, 22, 114

S.Ct. 1345, 1350] [“the purpose of, or justification for, a

law has no bearing on whether it is facially discrimina-

tory”]; Kraft General Foods, Inc. v. lowa Dept. of Revenue and

App. 17

Finance (1992) 505.U.S. 71, 81 [120 L.Ed.2d 59, 69, 112

S.Ct. 2365] (Kraft General Foods) [“a State may not advance

its legitimate goals by means that facially discriminate

against foreign commerce”]; Chemical Waste, supra, 504

U.S. 334, 341-342 [119 L.Ed.2d 121, 131-132] [listing high

court decisions invalidating state statutes attempting to

further a “ ‘presumably legitimate goal’ ” through illegiti-

mate discriminatory means]; Wyoming v. Oklahoma, supra,

502 U.S. 437, 455 [117 L.Ed.2d 1, 23] [“The volume of

commerce affected measures only the extent of the dis-

crimination; it is of no relevance to the determination

whether a State has discriminated... . ”]; SDDS, Inc. v.

State of S.D., supra, 47 F.3d 263, 271, fn. 12 [degree and

scope of discrimination irrelevant].)

Pacific Merchant contends that the statutes and regu-

lation here at issue facially discriminate against foreign

commerce because they impose inspection fees only on

vessels “engaged in foreign commerce . . . on a voyage

which originated outside the United States from a coun-

try identified and listed by the [Department] .. . , or

which made an intermediate stop on that voyage in a

country identified and listed by the [Department]”

(§ 5353, subd. (b)), while no state statute or regulation

authorizes the Department to levy such an inspection fee

on carriers of domestic interstate commerce, whether

transported by truck, ship, or any other means; instead,

the Legislature has allowed the Department to provide

routine inspections to such domestic carriers free of

charge at California taxpayer expense.

We recognize that this case is somewhat atypical in

that Pacific Merchant contends the cited provisions are

discriminatory because they favor domestic interstate

. if , .

App. 18

commerce over foreign commerce, but does not contend

the provisions also favor California intrastate commerce.

It is perhaps more common for a party challenging a state

statute on commerce clause grounds to contend the stat-

ute constitutes local protectionism because it discrimi-

nates against out-of-state commercial interests in favor of

in-state interests. (See, e.g., Baldwin v. G.A.F. Seelig, supra,

294 U.S. 511, 527 [79 L.Ed. 1032, 1040] [key principle

underlying negative commerce clause is that “one state in

its dealings with another may not place itself in a position

of economic isolation”].) But this is a distinction without

a difference: as the United States Supreme Court recently

held, “a State’s preference for domestic commerce over

foreign commerce is inconsistent with the Commerce

Clause even if the State’s own economy is not a direct

beneficiary of the discrimination. As the absence of local

benefit does not eliminate the international implications

of the discrimination, it cannot exempt such discrimina-

tion from Commerce Clause prohibitions.” (Kraft General

Foods, supra, 505 U.S. 71, 79 [120 L.Ed.2d 59, 68].) Nor

does this distinction render distinguishable the many

high court precedents addressing commerce clause chal-

lenges to state statutes that assertedly discriminate

between intrastate and domestic interstate commerce. As

the parties rightly concede, the fundamental issue is the

same both when the challenging party asserts that a state

statute discriminates between intrastate and domestic

interstate commerce and when the party asserts that the

statute discriminates between domestic interstate com-

merce and foreign commerce: in each case the issue is

whether the statute treats the federally protected class of

commerce less favorably than other classes of commerce.

App. 19

(Compare, for example, Oregon Waste, supra, 511 U.S. ___,

___ [128 L.Ed.2d 13, 21-22, 114 S.Ct. 1345, 1350] [discrimi-

nation between intrastate and interstate commerce], and

Kraft General Foods, supra, 505 U.S. 71, 75 [120 L.Ed.2d 59,

65-66] [discrimination between domestic and foreign

commerce].)

Turning therefore to the merits of this appeal, we

believe that the high court’s reasoning in two recent cases

— Oregon Waste, supra, 511 U.S. __ [128 L.Ed.2d 13, 114

S.Ct. 1345], and Chemical Waste, supra, 504 U.S. 334 -

requires us to conclude that the provisions in issue here

facially discriminate against foreign commerce. In Chemi-

cal Waste the high court reviewed the constitutionality of

an Alabama statute imposing a base fee of $26.50 per ton

on all hazardous waste disposed of at commercial facili-

ties in Alabama and an “additional fee” of $72.00 per ton

if the hazardous waste was generated out of state. In

upholding the statute the Alabama Supreme Court identi-

fied several purposes that it served, including protection

of the health and safety of the local citizenry, environ-

mental conservation, and compensation for the costs and

burdens that out-of-state waste generators impose on

Alabama by dumping their hazardous waste in that state.

The United States Supreme Court acknowledged that

“These may all be legitimate local interests” (504 U.S. at

p- 343 [119 L.Ed.2d at p. 133]), but held them irrelevant to

the question whether the statute facially discriminated

against interstate commerce: “ ’ “[T]he evil of protection-

ism can reside in legislative means as well as legislative

ends. . . . [WJhatever [the state’s] ultimate purpose, it

may not be [accomplished] by discriminating against arti-

cles of commerce coming from outside the State unless

App. 20

there is some reason, apart from their origin, to treat

them differently.” ’ ” (Id. at pp. 340-341 [119 L.Ed.2d at p.

131].)!° The high court stressed (504 U.S. at pp. 340-341

[119 L.Ed.2d at p. 131].) that it had “ ’ “consistently found

parochial legislation of this kind to be constitutionally

invalid,” ’” citing a number of cases in which “ ‘a pre-

sumably legitimate goal was sought to be achieved by the

illegitimate means of isolating the State from the national

economy.’ ” (Id. at pp. 341-342 [119 L.Ed.2d at pp.

131-132].) The court concluded that the Alabama statute

was facially discriminatory because it imposed a higher

fee on waste coming from outside the state than on waste

generated in state, reasoning that “ ‘[A] State may not tax

a transaction or incident more heavily when it crosses

state lines than when it occurs entirely within the State.’

[Citations.]” (Id. at p. 342. [119 L.Ed.2d at p. 132].)

Two years later, in Oregon Waste, supra, 511 U.S. __

[128 L.Ed.2d 13, 114 S.Ct. 1345], the high court considered

a constitutional attack on Oregon statutes imposing a

total fee of disposal of $3.10 per ton on disposal of waste

originating out of state but only $0.85 per ton on disposal

of waste originating in state. The court reasoned that “In

Chemical Waste, we easily found Alabama’s surcharge on

hazardous waste from other States to be facially discrimi-

natory because it imposed a higher fee on the disposal of

out-of-state waste than on the disposal of identical in-

state waste. 504 U.S. at ___ [119 L.Ed.2d at 131-133], 112

S.Ct. at 2013-2014. We deem it equally obvious here that

10 The qualifying clause refers to the state’s burden to

justify any discrimination found to be present, a separate step

that we discuss below. (Pt. 3, post.)

App. 21

Oregon’s $2.25 per ton surcharge is discriminatory on its

face. The surcharge subjects waste from other States to a

fee almost three times greater than the $0.85 per ton

charge imposed on solid in-state waste. The statutory

determinant for which fee applies to any particular ship-

ment of solid waste to an Oregon landfill is whether or

not the waste was ‘generated out-of-state.’ [Citation.] It is

well-established, however, that a law is discriminatory if

it ‘ “tax[es] a transaction or incident more heavily when it

crosses state lines than when it occurs entirely within the

State.” ’ Chemical Waste, supra, at __, [119 L.Ed.2d at

132-133] 112 S.Ct. at 2014 [citations].

“Respondents argue, and the Oregon Supreme Court

held, that the statutory nexus between the surcharge and

‘the [otherwise uncompensated] costs to the State of Ore-

gon and its political subdivisions of disposing of solid

waste generated out-of-state,’ [citation] necessarily pre-

cludes a finding that the surcharge is discriminatory. We

find respondents’ narrow focus on Oregon’s compensa-

tory aim to be foreclosed by our precedents. As we reiter-

ated in Chemical Waste, the purpose of, or justification for,

a law has no bearing on whether it is facially discrimina-

tory. See 504 U.S. at __, [119 L.Ed.2d at 131-132], 112

S.Ct. at 2013. [Citation.] Consequently, even if the sur-

charge merely recoups the costs of disposing of out-of-

state waste in Oregon, the fact remains that the differen-

tial charge favors shippers of Oregon waste over their

counterparts handling waste generated in other States. In

making that geographic distinction, the surcharge pat-

ently discriminates against interstate commerce.” (511

U.S. at p. __ [128 L.Ed.2d at pp. 21-22, [114 S.Ct. at p.

1350], fn. omitted.)

App. 22

The high court’s reasoning on the issue of facial

discrimination is equally applicable to the statutes and

regulation before us. Here, as in Oregon Waste and Chemi-

cal Waste, the challenged provisions expressly burden a

federally protected class of commerce - in this case for-

eign commerce - by exacting a fee for all routine inspec-

tions, while leaving all other classes of commerce — most

notably domestic interstate commerce - entirely unbur-

dened by such a fee. The sole “statutory determinant” for

whether the fee applies to any particular shipment into

California is whether it is carried in a vessel “engaged in

foreign commerce . . . on a voyage which originated

outside the United States from a country identified and

listed by the [Department] .. . , or which made an

intermediate stop on that voyage in a country identified

and listed by the [Department]” (§ 5353, subd. (b)). The

determinant is thus exclusively a matter of geography,

and “In making that geographic distinction, the [inspec-

tion fee] patently discriminates against [foreign] com-

merce.” (Oregon Waste, supra, 511 U.S. _ __. {128

L.Ed.2d 13, 22, 114 S.Ct. 1345, 1350].)

Indeed, the discrimination is even more patent in the

matter before us than in Chemical Waste or Oregon Waste.

In both of those cases the in-state beneficiaries of the

statutory scheme paid at least some fee; here, carriers in

domestic interstate commerce pay no fee whatever. The

consequence is dramatic. In Oregon Waste, out-of-state

waste was subjected to a total fee 3.6 times greater than

in-state waste ($3.10 + $0.85); similarly, in Chemical Waste

the disparity was 3.7 ($98.50 + 26.50). By contrast, if for

example the domestic interstate commerce in the case at

bar had been charged an inspection fee of even one dollar

— FS

App. 23

per shipment, foreign commerce would have been sub-

jected to a fee one hundred times greater ($100 + $1). But

the reality is still worse: the charge against domestic

interstate commerce is zero. Because the disparity

between any number and zero is infinite, foreign com-

merce is thus subjected to a fee infinitely greater than

domestic interstate commerce.

The decision of the Court of Appeal to the contrary is

predicated on an erroneous line of reasoning. The Court

of Appeal in effect acknowledged the force of the United

States Supreme Court decisions discussed above: “Pacific

Merchant purports to lump all inspections performed by

the Department into what it views as a single pest-pre-

vention program, a view which allows it to posit facial

discrimination in the statute at issue because it imposes

fees only on certain inspections. Were we to accept this

characterization, Pacific Merchant would need to do little

other than point to the waste disposal fee cases cited

above (or cases in which taxes are imposed on one type of

commerce and not another) and demand that the Depart-

ment produce evidence demonstrating a compelling rea-

son for charging fees for one and not the other. This

would be a Sisyphean task for the Department, because

fees imposed in discriminatory manner by a single pro-

gram (or discriminatory fees and taxes unrelated to a

substantive regulatory program) are inevitably stricken

down.” (Fn. omitted.)

The Court of Appeal declined to so hold, however,

because it believed that “Unlike the waste-disposal cases

in which the high court was presented with a single

regulatory program charging disparate fees (or cases

where there are no regulatory programs at all), we here

mt :

7 ’

App. 24

have an inspection program for ships (and planes) admin-

istratively and financially segregated from either the general

fund or even the remainder of the Department's budget;

in point of fact, the inspections themselves are even per-

formed almost entirely by a different sovereign [USDA]

subsidized by California.” (Italics added.)

This effort to distinguish Oregon Waste and Chemical

Waste is unavailing. The “financial segregation” stressed

by the Court of Appeal is the very disparity in the

Department's funding scheme - i.e., foreign commerce is

charged an inspection fee but domestic interstate com-

merce inspections are paid for out of the general fund -

that renders the scheme facially discriminatory under

Oregon Waste and Chemical Waste. And the fact that the

Department has contracted out the administration of the

foreign commerce inspection program to the USDA is

without significance: the discrimination is not in who

administers the program, but in who pays for it. The

funding scheme would be no less discriminatory if the

Department were to abrogate its arrangement with the

USDA and undertake to inspect foreign commerce

itself.)

1! Although the Court of Appeal did not identify other

differences in the way the Department administers foreign

commerce and domestic interstate commerce inspection

programs, any such differences would be equally immaterial:

the federal constitutional validity of the funding scheme cannot

be made to depend on the Department's administrative

convenience. (See, e.g., Kraft General Foods, supra, 505 U.S. 71, 81

{120 L.Ed.2d 59, 69].)

App. 25

From this premise, nevertheless, the Court of Appeal

concluded that “Since we have discrete regulatory pro-

grams under consideration, only one of which assesses

the fees at is*~ \ Pacific Merchant must thus initially

demonstrate that the inspections of its ships are suffi-

ciently similar to the other inspections taking place under

the Department’s other programs.” (Italics added.) The

court then held that Pacific Merchant did not prove such

“similarity” as a matter of law, and hence was not enti-

tled to summary judgment on the issue of discrimination.

The Court of Appeal cited no authority for its

requirement that in order to show that the challenged fee

structure is facially discriminatory Pacific Merchant must

prove that the burdened class of foreign commerce and

the unburdened class of domestic interstate commerce are

“similarly situated.” The Department now contends that

requirement is supported by Halliburton Oil Well Cement-

ing Co. v. Reily (1963) 373 U.S. 64 [10 L.Ed.2d 202, 83 S.Ct.

1201] (Halliburton), and its progeny. Thus in Halliburton

the high court declared that “equal treatment for in-state

and out-of-state taxpayers similarly situated is the condi-

tion precedent for a valid use tax on goods imported from

out-of-state.” (Id. at p. 70 [10 L.Ed.2d at p. 207], italics

~ added.) More recently, in Kraft General Foods, supra, 505

U.S. 71, 80, footnote 23 [120 L.Ed.2d 59, 68], the high

court reiterated that “In considering claims of discrimina-

tory taxation under the Commerce Clause .. . it is neces-

sary to compare the taxpayers who are ‘most similarly

situated,’ ” citing Halliburton.

It is unclear from the Supreme Court jurisprudence,

however, whether the “similarly situated” requirement

App. 26

applies outside the context in which it arose, i.e., chal-

lenges to state taxes - particularly “compensatory” taxes -

that assertedly discriminate against federally protected

commerce. Halliburton is such a case, involving a state's

use tax calculated on a higher basis for out-of-state manu-

facturer-users than for in-state manufacturer-users. Kraft

General Foods is also such a case, involving a state’s busi-

ness tax on corporate income that taxed dividends

received from foreign subsidiaries but not dividends

received from domestic subsidiaries. And the same is true

of the other progeny of Halliburton cited by the Depart-

ment. !?

This pattern does not appear to be a coincidence. Our

research shows that the United States Supreme Court has

never even cited, much less relied on, Halliburton, supra,

373 U.S. 64, in any case that did not involve a challenge to

a state tax on foreign or domestic interstate commerce.

Indeed, the Department cites no precedent of any kind

that applies the “similarly situated” requirement outside

the tax context. In particular, none of the high court cases

reviewing a commerce clause challenge to a state regula-

tory statute - whether involving discriminatory fees as in

12 Bacchus Imports, Ltd. v. Dias (1984) 468 U.S. 263 [82

L.Ed.2d 200, 104 S.Ct. 3049], involved a state’s excise tax on

wholesale liquor sales that exempted the two locally made

spirits. Armco Inc. v. Hardesty (1984) 467 U.S. 638 [81 L.Ed.2d

540, 104 S.Ct. 2620], dealt with a state’s gross receipts tax on

businesses selling tangible property at wholesale that exempted

local manufacturers. And National Meat Ass’n. v. Deukmejian (9th

Cir. 1984) 743 F.2d 656, affd. per curiam (1985) 469 U.S. 1100 [83

L.Ed.2d 766, 105 S.Ct. 768], involved a per-pound tax that

California imposed only on out-of-state processed beef.

App. 27

Oregon Waste and Chemical Waste or outright prohibitions

on imports or exports as in Wyoming v. Oklahoma, supra,

502 U.S. 437, and Hughes v. Oklahoma, supra, 441 U.S. 322 -

even mentioned, much less applied, the “substantially

similar” requirement in their discussion of the issue of

discrimination.

It seems most appropriate that the requirement be

imposed, moreover, in determining the validity of a com-

pensatory tax. As the high court recently reiterated, a use

tax that applies only to goods purchased out of state

“may be saved from constitutional infirmity if it is a valid

‘compensatory tax’ designed simply to make interstate

commerce bear a burden already borne by intrastate com-

merce. . . . To ensure that the State is indeed merely

imposing countervailing burdens on comparable transac-

tions, we have required that the taxes on interstate and

intrastate commerce be imposed on ‘substantially equiva-

lent event(s].’” (Associated Industries of Missouri v. Loh-

man, supra, 511 U.S. __, __, [128 L.Ed. 2d 639, 647, 114

S.Ct. 1815, 1821].)

The point is underscored by one of the two recent

regulatory fee cases we find controlling here, Oregon

Waste. It is true, as the Department quotes in its brief, that

in Oregon Waste the high court said that “the events on

which the interstate and intrastate taxes are imposed

must be ‘substantially equivalent’; that is, they must be

sufficiently similar in substance to serve as mutually

exclusive ‘prox[ies]’ for each other.” (511 US. | __

[128 L.Ed.2d 13, 24, 114 S.Ct. 1345, 1352].) What the

Department overlooks, however, is that the quoted state-

ment had nothing to do with the high court’s determina-

tion whether the fee in question was discriminatory; its

App. 28

discussion of that issue (part II of its opinion) ended

several pages earlier. Instead, the quotation is from part

III of its opinion, devoted to the wholly distinct issue of

whether the fee, although discriminatory, was neverthe-

less justified on a legal basis. Oregon had sought to justify

its higher fee on out-of-state waste primarily on the basis

that it was a compensatory tax, and the high court simply

listed the “substantially equivalent” requirement as one

of the three elements of that doctrine. The court

explained that the compensatory tax doctrine itself is

“merely a specific way of justifying a facially discrimina-

tory tax as achieving a legitimate local purpose that can-

not be achieved through nondiscriminatory means. See

Chemical Waste, supra, 504 U.S. at __, n. 9, [119 L.Ed.2d at

134-135] 112 S.Ct. at 2016, n. 9 (referring to the compensa-

tory tax doctrine as a ‘justiffication]’ for a facially dis-

criminatory tax). Under that doctrine, a facially

discriminatory tax that imposes on interstate commerce

the rough equivalent of an identifiable and ‘substantially

similar’ tax on intrastate commerce does not offend the

negative Commerce Clause.” (511 U.S. at p. __ [128

L.Ed.2d at p. 23, 114 S.Ct. at p. 1352], italics added.)

Reviewing Oregon’s contentions in that light, the court

concluded that the fee could not be justified as a compen-

satory tax. (Id. at p. __ [128 L.Ed.2d at pp. 23-25, 114

S.Ct. at pp. 1352-1353].) As will appear (pt. 3, post), in the

case at bar the Department does not contend that its

facially discriminatory inspection fee can be justified as a

compensatory tax.

In the absence of further guidance from the high

court, we are reluctant to extend the “substantially simi-

lar” requirement beyond the tax context where it is most

‘

App. 29

appropriate and to which the court has thus far limited it,

or to depart from the high court’s often reiterated test of

commerce clause discrimination by reading the require-

ment into that test. Under this view of the federal prece-

dents, the Department's contention is without merit.

In any event, even if we assume arguendo that the

“substantially similar” requirement does apply to regula-

tory fee cases, when that requirement is properly under-

stood it appears satisfied on the undisputed facts before

us. Although the high court has not articulated a test for

determining when events are “substantially similar” for

commerce clause comparison, we may fairly infer from its

tax decisions that the court deems such events are not

“substantially similar” when they differ not just in degree

but in kind. Thus in Halliburton, supra, 373 U.S. 64, 71 [10

L.Ed.2d 202, 207-208], the court held that an out-of-state

manufacturer-user and an in-state retailer are not “sim-

ilarly situated.” In Maryland v. Louisiana (1981) 451 U.S.

725, 758-759 [68 L.Ed.2d 576, 602-603, 101 S.Ct. 2114], the

court held that the “first use” inside a state of natural gas

piped in from outside the state and the “severance” of

natural gas produced from wells in the state are not

“ “substantially equivalent events.” In Armco Inc. v. Hard-

esty, supra, 467 U.S. 638, 642-643 [81 L.Ed.2d 540, 545], the

court held that manufacturing and wholesaling - even,

presumably, of the same products - are not “ ‘substan-

tially equivalent events.’ ” (Accord, Tyler Pipe Industries v.

Dept. of Revenue (1987) 483 U.S. 232, 242-244 [97 L.Ed.2d

199, 210-212, 107 S.Ct. 2810] [same].) In Oregon Waste,

supra, 511 U.S. ___, ___ [128 L.Ed.2d 13, 24-25, 114 S.Ct.

1345, 1353], the court held that the earning of income

subject to general taxation and the disposal of waste

App. 30

subject to a special regulatory surcharge are not “substan-

tially equivalent events.”

In the case at bar we are called on to compare inspec-

tions of agricultural produce entering California (1) by

ship from foreign countries, and (2) by truck from other

states. The Department contends these inspections are

substantially dissimilar in three respects, but none is

persuasive.

First, the Department states “The inspections seek

different pests,” but fails to explain the relevance of the

point. Even if the pest species are different, it does not

follow that the inspections to find them are substantially

dissimilar - or at least any more dissimilar than inspec-

tions to find two different domestic pests (e.g., a fungus

and a fly). More important, even if the different nature of

foreign pests also means they are more difficult to find,

that difference would be simply a matter of degree. It is

true that such a difference could result in higher inspec-

tion costs; as will appear, however, higher costs are not

relevant to the issue of facial discrimination but to the

issue of justification.

Second, the Department states “Foreign pests are

much more dangerous than domestic pests,” but again

fails to explain the relevance of the point. While the

added danger of foreign pests may mean it is more

important to find them, it does not follow that it is more

difficult to do so. And even if it did, the difference would

again be simply a matter of degree and at most result in

higher inspection costs irrelevant to the issue of discrimi-

nation. The Department notes that in Chemical Waste,

supra, 504 U.S. 334, 343-344 [119 L.Ed.2d 121, 133-134], the

ore

™

App. 31

“ed

high court emphasized a finding to the effect that “ ‘there

is absolutely no evidence before this Court that waste

generated outside Alabama is more dangerous than waste

generated in Alabama.’” The reliance is misplaced: the

high court quoted this finding in its discussion of the

issue of justification, not the issue of discrimination. (See

also Oregon Waste, supra, 511 U.S. __, ___ [128 L.Ed.2d 13,

22-23, 114 S.Ct. 1345, 1351] [noting the absence of “any

safety or health reason unique to nonhazardous waste

from other States” in its discussion of justification]; Maine

v. Taylor (1986) 477 U.S. 131, 140-152 [91 L.Ed.2d 110,

122-130, 106 S.Ct. 2440] [holding that facially discrimina-

tory ban on importing out-of-state baitfish was justified

by danger to state’s native fisheries].)

Third, the Department states that “Truck inspections

take significantly less time, effort and expenditure to

complete.” Here the relevance of the point is plain but

insufficient. On its face such a difference in inspection

costs is a matter of degree; and like the higher costs that

could flow from the first two distinctions proposed by the

Department, such a differential would bear on justifica-

tion rather than on discrimination. For example, in Ore-

gon Waste the high court observed that Oregon could

have claimed as a ground of justification - although it did

not — that “the disposal of waste from other States

imposes higher costs on Oregon and its political subdivi-

sions than the disposal of in-state waste.” (511 U.S. __,

__ [128 L.Ed.2d 13, 22, 114 S.Ct. 1345, 1351], fn. omitted.)

In a footnote at this point the high court explained that

“if out-of-state waste did impose higher costs on Oregon

than in-state waste, Oregon could recover the increased

cost through a differential charge on out-of-state

App. 32

waste....” (Id. at p. __, fn. 5 [128 L.Ed.2d at p- 22, 114

S.Ct. at p. 1351].) Thus the court said only that higher

costs could have justified the discrimination it had previ-

ously found on the face of the statutes; it pointedly did

not say that higher costs would have meant there was no

discrimination in the first place because the burdened

events were not “substantially similar.”

In the case at bar the Department's programs to

inspect ships in foreign commerce and trucks in domestic

interstate commerce are programs that may differ in

detail or degree but do not differ in kind or purpose: both

are inspections of agricultural produce in search of harm-

ful pests as that produce arrives at California’s borders,

and both are designed to prevent such pests from enter-

ing this state and damaging its agricultural industry.

They may therefore be seen as “substantially equivalent

events” for commerce clause purposes, and we may com-

pare them in determining whether the fee structure

imposed on such inspections by the challenged statutes

and regulation is discriminatory. After making that com-

parison we hold, under the controlling decisions of the

United States Supreme Court discussed above, that the

provisions facially discriminate against foreign commerce

in violation of the negative aspect of the foreign clause of

the United States Constitution.

3. The Issue of Justification

A state statute that discriminates against a federally

protected class of commerce “is virtually per se invalid.”

(Oregon Waste, supra, 511 U.S. __, ___ [128 L.Ed.2d 13, 21,

114 S.Ct. 1345, 1350].) Such a statute must be declared

App. 33

unconstitutional unless the state can justify the discrimi-

nation by showing that it “ ‘advances a legitimate local

purpose that cannot be adequately served by reasonable

nondiscriminatory alternatives.’ ” (Id. at p. __ [128 L.Ed.

2d at p. 22, 114 S.Ct. at p. 1351].) The high court has

repeatedly emphasized just how exacting this burden is:

“Our cases require that justifications for discriminatory

restrictions on commerce pass the ‘strictest scrutiny.’

[Citation.] The State’s burden of justification is so heavy

that ‘facial discrimination by itself may be a fatal defect.’

[Citations.]” (Ibid.; accord, Chemical Waste, supra, 504 U.S.

334, 342 [119 L.Ed.2d 121, 132] [statutes discriminating

against protected commerce are “typically struck down

without further inquiry”]; Associated Industries of Missouri

v. Lohman, supra, 511 U.S. __, __ [128 L.Ed.2d 639,

645-647, 114 S.Ct. 1815, 1820]; Hughes v. Oklahoma, supra,

441 U.S. 322, 337 [60 L.Ed.2d 250, 262-263]; Philadelphia v.

New Jersey (1978) 437 U.S. 617, 624 [57 L.Ed.2d 475,

481-482, 98 S.Ct. 2531].)}5

The Department contends that the challenged provi-

sions advance a legitimate local purpose, to wit, that they

support a program of inspecting foreign marine com-

merce in order to prevent harmful pests from entering

'3 Contrary to the Department's assertion, the “virtually

per se rule of invalidity” does not “hold only rhetorical value.”

Indeed, one federal district court recently stated that Maine v.

Taylor, supra, 477 U.S. 131, is “the only case to date that this

Court has found where the Supreme Court upheld a facially

discriminatory regulation under the negative Commerce

Clause.” (Clajon Production Corp. v. Petera (D.Wyo. 1994) 854

F.Supp. 843, 859, fn. 30, italics added.) Our own research leads

us to the same remarkable conclusion.

App. 34

California from other countries and damaging the state’s

agricultural iridustry. We do not doubt this is a legitimate

local purpose.

This conclusion, however, is only the beginning of

our inquiry. Pacific Merchant does not contend, nor has it

ever contended, that California’s overall agricultural

inspection program unduly burdens foreign marine com-

merce, or any other class of commerce for that matter.

Instead, Pacific Merchant contends only that the Legisla-

ture’s decision to impose an inspection fee on foreign

marine commerce but to provide free inspections for

domestic interstate commerce at state taxpayer expense

unconstitutionally discriminates against foreign com-

merce. It is solely the constitutionality of that fee struc-

ture that we consider here. As will appear, we shall

conclude that the Department’s proffered justifications

for its discriminatory fee structure cannot withstand the

exacting demands of “strictest scrutiny.”

The weakness of the Department’s position is fore-

shadowed by its preliminary contention that charging a

fee for inspecting foreign commerce serves what it

describes as “the ‘pay-as-you-play’ principle,” i.e., that

“those who are subject to a regulation should pay for it to

be implemented.” We agree with the well-established

notion that every class of commerce is obliged to “ ‘pay

its own way’ ” (Complete Auto Transit, Inc. v. Brady (1977)

430 U.S. 274, 281 [51 L.Ed.2d 326, 332, 97 S.Ct. 1076]), and

that “It was not the purpose of the commerce clause to

relieve those engaged in interstate [or foreign] commerce

from their just share of the state tax [or regulatory] bur-

den.” (Western Live Stock v. Bureau of Revenue (1938) 303

U.S. 250, 254 [82 L.Ed. 823, 827, 58 S.Ct. 546, 115 A.L.R.

ee pig trie GRO ete

ain ea ule Pri Lip

App. 35

944].) However, the Department’s funding mechanism

itself violates this principle. Carriers in foreign commerce

pay at least their fair share of the expense that the

Department incurs for the inspection of that commerce:

for example, during the 1992-1993 fiscal year carriers in

foreign marine and air commerce paid an aggregate of

$4.3 million in inspection fees, yet the Department used

only $2.4 million of the amount to support those inspec-

tions. In stark contrast, carriers in domestic interstate

commerce pay no such fees at all, even though Depart-

ment incurs substantial costs to inspect them. In the

words of the Department’s own figure of speech, both

foreign and domestic interstate commerce “play” but

only foreign commerce “pays.”

The Department next reiterates its point that inspec-

tions of foreign marine commerce seek different and more

dangerous pests and are more time-consuming than

inspections of domestic interstate commerce by truck. As

we observed in discussing the same point earlier, these

distinctions could well result in higher inspection costs

for foreign commerce, and the United States Supreme

Court has acknowledged that a state could justifiably

“recover the increased cost through a differential charge”

on the disfavored class of commerce. (Oregon Waste,

supra, 511 U.S. __, __, fm. 5 [128 L.Ed. 13, 22, 114 S.Ct.

1345, 1351].) But the high court’s reasoning presumes that

the favored class of commerce will at least pay its own

share of the costs, so that the disfavored class will be

burdened only by the “differential,” i.e., the amount by

which the latter exceeds the former. Here the Department

App. 36

does not claim that the cost of domestic interstate com-

merce inspections is zero: on the contrary, it is undis-

puted that the Department has established 16 state-run

border checkpoints and hired some 126 state inspectors to

staff them, at an annual cost in 1992 of approximately

$8.4 million. It is also undisputed, however, that domestic

interstate commerce pays no part of that cost - the entire

burden is borne by California taxpayers through the gen-

eral fund.

We are thus not faced with a legislative decision to

charge a lower fee for less expensive domestic interstate

inspections and a higher fee for more expensive foreign

marine inspections. Rather, the Legislature has selected a

particular class of commerce - domestic interstate com-

merce —- and provided routine inspections of that com-

merce free of charge, despite the fact that each such

inspection costs California taxpayers money, but has

determined that carriers engaged in another class of com-

merce — foreign marine commerce — should themselves

bear the full state expense of such inspections. In short,

the Legislature has not merely fixed agricultural inspec-

tion fees according to the average cost of each particular

type of inspection; it has decreed that one class of com-

merce should receive free inspections and another should

not. In these circumstances the difference in costs

between the two types of inspections cannot justify the

discrimination against the disfavored class.

For the same reason, the discriminatory fee on for-

eign marine commerce cannot be justified as a compensa-

tory tax. To prevail on a claim that a facially

discriminatory fee is justified on that basis the state must

first prove that the favored commerce is subject to a

App. 37

specific, identifiable state tax burden to which the unfa-

vored commerce is not subjected and for which the dis-

criminatory fee is designed to compensate. (Oregon Waste,

supra, 511 U.S. __, ___ [128 L.Ed.2d 13, 23-24, 114 S.Ct.

1345, 1352].) Here the Department does not and cannot

contend there is any California tax that carriers of agri-

cultural goods in domestic interstate commerce pay but

that carriers of such goods in foreign commerce do not

pay and for which the inspection fee on foreign com-

merce is designed to compensate.

Finally, the Department contends that two potential

alternatives to its discriminatory fee structure would not

be adequate to serve its purpose — or at least that there is

a triable issue of fact as to whether such alternatives

would be adequate or not. The proposed alternatives are

(1) to remove the inspection fee on foreign commerce, or

(2) to impose such a fee on domestic interstate commerce.

The Department's contention is not persuasive.

With respect to the first alternative, the Department

asserts only — quoting from a 1992 affidavit by one of its

officials — that without the fees it collects from carriers in

foreign commerce the state “has no funding available” to

pay for such inspections. Viewed under the exacting stan-

dard of “strictest scrutiny,” this evidence does not raise a

triable issue of fact as to whether the Department's for-

eign marine inspection program could not be funded

without the revenues generated by such fees. It is as true

today as in 1992 that the State of California faces chal-

lenging economic times. But it would be unreasonable to

conclude that if the Legislature could not levy foreign

marine inspection fees it would decline to fund the pro-

gram in another, constitutionally legitimate way.

App. 38

The Legislature manifestly views the threat posed by

nonnative agricultural pests as serious: as we have seen,

in response to this threat the Legislature has for many

years funded the Department's multimillion-dollar inter-

state border inspection program out of the general fund.

In addition, as noted at the outset, the Legislature

adopted the Act now before us as urgency legislation

because it believed that “It is necessary to enact programs

that are alternatives to the repeated application of

pesticides in order to eradicate pests,” and that the Act

would produce “one such alternative” to help in its effort

to “protect the people and the environment from the

repeated application of pesticides” and “protect Califor-

nia’s agriculture from pests.” (Stats.1990, ch. 1612, § 8, p.

7755.) If, as the Department urges, the Act has indeed

furthered these legislative goals, it is reasonable to con-

clude the Legislature will devise an alternate, constitu-

tionally permissible funding mechanism to support the

continued inspection of foreign marine commerce.'4

‘4 The fact that the Department has recently reduced its

marine terminal and airport inspection fees by half further

undermines its position. As noted above, the Department

explained in its public notice of amendment that “The Secretary

[of the Department] has determined that an effective inspection

program can now be conducted with revenues from the lower

charge and user fee rates because the USDA is starting to

provide inspections of international carriers at an adequate

level. The USDA is now committed to supporting federal

inspectors who previously had been funded by state contract.”

The Department's own explanation suggests that the USDA, in

apparent recognition of the concerns of the Department and

others regarding the adequacy of its existing foreign inspection

program, has obtained additional funding to increase the

number of federal inspectors it employs and has used this

App. 39

The Department advances four arguments against the

alternative of imposing an inspection fee on domestic

interstate commerce entering California by truck, but

none is meritorious. First, the Department asserts that it

would be difficult to calculate the proper amount of such

a fee. It fails to explain, however, why the Legislature and

the Department would have any more difficulty in setting

the amount of an inspection fee on domestic interstate

commerce than they had in setting the amount of the fee

on foreign marine commerce now before us. Second, the

Department contends that to collect such a fee for each

truck would complicate the operation of its border

inspection stations and might slow the flow of traffic. But

the Department fails to explain why it could not palliate

any such effects by administrative means, and in any

event we must decline to place administrative conve-

nience before constitutional legitimacy. Third, the Depart-

ment claims “there is a chance” that imposing such a fee

might cause an increase in the number of trucks that

evade inspection. Speculation about a possible illegal

response, of course, cannot justify an actual unconstitu-

tional discrimination. Lastly, the Department asserts

additional funding to improve the overall quality of its

program. Although the Department will continue to engage in

“oversight and coordination with the USDA on inspections of

international carriers, investigations of smuggling, and

intensification of public awareness and education efforts,” by its

own admission the modified program will cost much less to

operate. Because the amount of funding needed has thus been

substantially reduced, it is reasonable to infer that the

Legislature will be even more likely to fund the program from

another, constitutionally legitimate source.

App. 40

“there is a possibility” that imposing such a fee on car-

riers in domestic interstate commerce might cause them

to complain that no fee is imposed on carriers in intra-

state commerce. Again this is mere speculation, and

hypothesizes a funding mechanism that the Department

may or may not be able to justify under federal constitu-

tional law if such a challenge ever materializes.

It follows that the Department has failed to bear its

heavy burden, under the controlling decisions of the

United States Supreme Court discussed above, of justify-

ing its discriminatory fee structure by showing that its

purpose “ ‘cannot be adequately served by reasonable

nondiscriminatory alternatives.” (Oregon Waste, supra,

511 U.S. __, __ [128 L.Ed.2d 13, 22, 114 S.Ct. 1345,

1351].)

We do not retreat from the rule that a motion for

summary judgment should not be granted if there is a

triable issue of material fact. (Code Civ.Proc., § 437c,

subd. (c).) But as we have seen, in the case at bar none of

the Department's proffered justifications raises such an

issue; rather, each is insufficient on its face. Nor is this

unusual: in the vast majority of reported decisions

reviewing state statutes held to discriminate against for-

eign or domestic interstate commerce, the federal courts

have rejected the state's proffered justifications as a mat-

ter of law. (See, e.g., Oregon Waste, supra, 511 So OTe

[128 L.Ed.2d 13, 22-26, 114 S.Ct. 1345, 1351-1354]; Chemi-

cal Waste, supra, 504 U.S. 334, 342-348 [119 L.Ed.2d 121,

132-133]; New Energy Co. of Indiana v. Limbach (1988) 486

U.S. 269, 278-280 [100 L.Ed.2d 302, 311-312, 108 S.Ct.

1803]; Bacchus Imports, Ltd. v. Dias, supra, 468 U.S. 263,

270-273 [82 L.Ed.2d 200, 208-211]; Hughes v. Oklahoma,

ee |

App. 41

supra, 441 U.S. 322, 337-338 [60 L.Ed.2d 250, 262-263];

National Meat Ass'n v. Deukmejian, supra, 743 F.2d 656,

661-663; Cranberry Hill Corp. v. Shaffer (N.D.N.Y. 1986) 629

F.Supp. 628, 634-635.)!5

The Department has had ample and repeated oppor-

tunities - in the trial court, the Court of Appeal, and this

court — to propose justifications that cannot be held insuf-

ficient as a matter of law, but it has been unable to do so;

we see no reason to believe that on a further hearing it

would succeed where it has heretofore consistently failed.

The trial court correctly granted summary judgment to

Pacific Merchant on the ground that the challenged provi-

sions unjustifiably discriminate on their face against for-

eign commerce.’ It is time to end this litigation and

allow the Legislature to address the matter if it be so

advised.

5 Indeed, the United States Supreme Court has itself

granted a motion for summary judgment in such a case.

(Wyoming v. Oklahoma, supra, 502 U.S. 437.) There Wyoming, a

major coal-producing state, challenged as a violation of the

commerce clause an Oklahoma statute requiring that at least 10

percent of the coal used by Oklahoma electric utilities be mined

in Oklahoma. The high court held that the statute was

discriminatory on its face (id. at pp. 455-456 [117 L.Ed.2d at pp.

16-17]) and that Oklahoma's proffered justifications were

insufficient as a matter of law (id. at pp. 456-459 [117 L.Ed.2d at

pp. 23-26]). Exercising its original jurisdiction, the high court

then decreed summary relief: “We deny Oklahoma’s motion for

summary judgment and grant that of Wyoming.” (Id. at p. 461.

(117 L.Ed.2d at p. 27].)

16 In light of this conclusion we need not reach the

additional issue whether the amount of the challenged

inspection fee is excessive.

App. 42

The judgment of the Court of Appeal is reversed.

LUCAS, C.J., KENNARD, J., ARABIAN, J., BAXTER,

J., GEORGE, J., and WERDEGAR, J., concurred.

App. 43

[No. C015630. Third Dist. Jan. 4, 1995.]

California Court of Appeal

[As modified Feb. 3, 1995.]

PACIFIC MERCHANT SHIPPING ASSOCIATION, Plain-

tiff and Respondert, v.

Henry VOSS, As Director etc., et al., Defendants and

Appellants.

COUNSEL

Daniel E. Lungren, Attorney General, Roderick E. Wal-

ston, Chief Assistant Attorney General, Walter Wun-

derlich, Assistant Attorney General, and Charles W. Getz

IV, Deputy Attorney General, for Defendants and Appel-

lants.

Lillick & Charles, R. Frederic Fisher and Lawrence N.

Minch for Plaintiff and Respondent.

OPINION

DAVIS, J. — Plaintiff Pacific Merchant Shipping Associa-

tion (Pacific Merchant), an unincorporated association of

ocean carriers, filed this class action on behalf of its

members to obtain a declaration that inspection fees col-

lected by defendant Department of Food and Agriculture

(Department)! violate the United States Constitution, to

enjoin collection of the fees, and to recover damages

‘ The named defendants are Henry Voss and Islam

Siddiqui, sued in their respective official capacities as director

and assistant director of the Department. For ease of reference,

we will simply refer to the Department as defendant.

;

App. 44

resulting from the collection of the fees. The Department

appeals from the judgment entered by the trial court in

favor of Pacific Merchant. Finding the summary adjudica-

tion of facts on which the trial court rested its judgment

to have been granted in error, we shall reverse the judg-

ment and remand for ficther proceedings.

BACKGROUND

As an urgency statute, the Legislature enacted the

“California Airport and Maritime Plant Quarantine,

Inspection, and Plant Protection Act” (the Act) in 1990

(Stats. 1990, ch. 1612, § 1), adding sections 5350-5353 to

the Food and Agriculture Code (undesignated section

references will be to this code). Under these statutes, the

Department “shall establish a program for the inspection

of conveyances entering California through airport and

maritime facilities to prevent the introduction into, or

spread within, this state of pests.” (§ 5350, subd. (a).) To

this end, the Act required the Department to “maintain

plant quarantine inspection stations at point of entry at

airports and marine terminals. ...” and to “establish a

program for the dissemination of information at airports

and marine terminals in order to provide the users of the

facilities information regarding the pest control and quar-

antine requirements of this state.” (Id., subds. (b), (c).)

The Act mandated the Department to collect fees (to

the extent authorized by federal law) from air and marine

carriers for the use of airport or marine terminal facilities

“for plant and animal pest inspection, quarantine, and

eradication.” (§§ 5351, subd. (a); 5352.) The Act also

required the Department to establish a list of countries

which it had reason to believe were potential sources of

App. 45

exotic plant and animal pests. (§ 5352.) The Legislature

prescribed a fee schedule of $85 per air carrier and $200

per marine carrier making their initial stop in California

on a journey initiating outside the United States. (§ 5353,

subds. (a), (b).) The fees collected pursuant to the Act

were to be deposited in a special fund for the Department

for use for the purposes of the Act. (Id., subd. (e).) The

Legislature ceded discretion to the Department to

increase or decrease these fees by regulation “upon deter-

mining that the revenue received is inadequate or in

excess of the amount needed to conduct an effective

inspection program” with a maximum charge limited to

three times the statutory fees. (Id., subd. (f).)?

Pacific Merchant brought this action shortly after the

program began in July 1991. To outline briefly the pro-

cedural course, the Department demurred to Pacific Mer-

chant’s First Amended Complaint, challenging Pacific

Merchant's standing. The Court denied the demurrer and

subsequently certified the class. Eventually, Pacific Mer-

chant moved for summary judgment or adjudication of

issues. The trial court issued a tentative ruling granting

summary judgment on the ground the inspection fee

discriminated against foreign commerce; after taking the

matter under submission, the court accorded the Depart-

ment the opportunity of presenting additional evidence

justifying the discrimination. The trial court thereafter

2 The Department has promulgated a regulation setting the

inspection fees equal to those prescribed in section 5353 and

providing for exemptions for particular flights or voyages

where sufficient evidence is provided of adequate compliance

with the Act. (3 Cal.Code Regs. § 3560.)

App. 46

affirmed its tentative ruling. Reserving its right to chal-

lenge the trial court’s ruling on appeal, the Department

stipulated to a judgment declaring the inspection fees to

be in violation of the Commerce Clause (U.S. Const., art.

I, § 8), and to a trial on stipulated facts with respect to

remaining damages issues. The trial court entered judg-

ment in April 1993.

THe SUMMARY ADJUDICATION MOTION

At the outset of its brief in the trial court, Pacific

Merchant stated, “This motion is based solely on issues of

law. Plaintiff[’s] fundamental position is that the statu-

tory fees on their face violate the Commerce Clause (U.S.

Const., Art. I, § 8). The alternative constitutional grounds

also urge facial invalidity of the statutory fees and issues

of law. To the extent that the alternative grounds also

address Defendant{[’s] actual administration of the stat-

ute, Plaintiffs rely only on facts that have been stated

under oath by Defendant.” (Original emphasis.) Laying

out its legal theory, Pacific Merchant asserted as its pri-

mary ground a violation of the Commerce Clause because

the Act “on its face discriminated against foreign com-

merce by imposing fees on vessel inspection only in

foreign commerce while providing free inspections in

domestic commerce.” As alternative grounds, “this

motion urges that the statutory fees as a matter of law

violate the Tonnage Duty, Commerce, and Export/Import

Clauses of the Federal Constitution [Art. I, § 10, cl. 3; § 8,

App. 47

cl. 3; and § 10, cls. 2] and the GATT Treaty? because the

fees imposed do not even purport to reflect any allocation

of Defendant's cost burden to both foreign and domestic

commerce, convey no benefit on vessels[,] and . . . exceed

Defendant(s] actual costs of inspecting vessels.” Finally,

Pacific Merchant claimed the fees “violate the Supremacy

Clause of the Federal Constitution because they conflict

with a federal statute restricting concurrent State jurisdic-

tion over border quarantine/inspection of transport con-

veyances like vessels to domestic commerce. (7 U.S.C.

§ 161 (First Proviso)).” (Italics original.)

Pacific Merchant adduced the following facts with

respect to the Department's inspection programs which

are not disputed. The Department has established a list of

pests with origins in the United States and its territories

which are the basis for enforcement of intrastate and

interstate quarantines; however, for pests originating out-

side the United States, the Department relies on federal

quarantines. The introduction of any of these pests would

have a significant economic impact on the state’s agri-

cultural industry. According to excerpts of the deposi-

tions of Department officials, the Department conducts

inspections of various instrumentalities of domestic inter-

state commerce, imposing a fee only for the destruction

of infected goods (collecting no more than $20,000 in a

3 “GATT” is the acronym for the General Agreement on

Tariffs and Trade. While the GATT treaty is presently a focus of

attention in current events, it plays no part in the resolution of

this case. Hence, there is no need to expand our explanation

beyond identifying the acronym.

App. 48

typical year). The Department will inspect aircraft (but

not their contents, which are subject to inspection by

county departments) to check for Japanese beetles. Rail

carriers are inspected if there is reason to believe there is

a suspect cargo (although the frequency or nature of

these inspections is not specified). Ships are subject to

inspection, and have been inspected (although again the

frequency is not specified). This brings us to trucks,

which are also inspected and are the instrumentality on

which Pacific Merchant most directly focused. These

inspections are performed at 16 border stations owned,

operated, and staffed by the state of California. In con-

trast, the Department does not maintain any state inspec-

tion facilities at marine and air terminals, or at the

Mexican border. Instead, the federal Department of Agri-

culture (USDA) is responsible for pest inspections of

international arrivals. Inspections are performed almost

entirely by USDA inspectors.

In order to defray the costs of the inspection program

created by the Act, inspection fees are payable by all

planes and vessels originating outside the United States

from a listed quarantine area which are making their first

* The Department officials stated the Department

participated in inspections of intrastate commerce along with

county agricultural departments. These applied to trucks,

railroads, aircraft, and cars (the latter only if a special

quarantine were in effect). While the Department does not

impose fees for these inspections, apparently the counties

impose fees if they take place outside normal work hours or for

destruction of contaminated goods (although the Department

was unfamiliar with the manner or amount of fees charged by

the various counties).

App. 49

United States port of call in California. With respect to

ships, passengers and crew are inspected on board; the

cargo is generally inspected at warehouses in the pri-

vately-owned marine terminals. Pursuant to a memoran-

dum of understanding between the Department and the

USDA, the state subsidizes the costs of additional federal

inspectors (and their overhead) at both sea and air facili-

ties. In the particular year for which Pacific Merchant

requested information, the cost of the additional inspec-

tors pursuant to the agreement with the USDA was $2.4

million. This resulted in the hire of 7 additional marine

inspectors and forty-four additional air inspectors.

Pacific Merchant also adduced a number of financial

facts relating to the inspection programs which are gener-

ally undisputed. In the particular fiscal year for which

Pacific Merchant obtained information, the total amount

of inspection fees collected from vessels and planes under

the Act amounted to $4.3 million. In addition to the 51

inspectors hired pursuant to the $2.4 million agreement

with the USDA, the inspection fees also funded a $1

million public information program, $660,000 in overhead

(charged as a percentage by the state of California against

all state programs), $164,000 for investigations, and

$100,000 for “blitzes” (periods of intense inspection of

every incoming vessel).5 In comparison, the total costs for

the Department's pest-exclusion division (exclusive - of

5 Although the parties elsewhere dispute the total costs of

the air and marine inspection program, this is the result of

Pacific Merchant relying on data from one fiscal year while the

Department relies on data from a different fiscal year. However,

Pacific Merchant in fact relies on the Department’s data as

support for these financial facts.

App. 50

foreign pests) were $10.8 million, with $8.4 million®

devoted to the inspections of domestic interstate com-

merce.

In the opposition to the motion, the Department

adduced evidence from its officials attesting to purported

significant differences between the risks addressed by the

domestic border inspections and the air and maritime

inspections. They stated (in contradiction of Pacific Mer-

chant’s position) that foreign commerce presented a sig-

nificantly greater danger than domestic commerce with

respect to the risk of infestation, since there were 199

different countries with thousands of pests subject to

federal quarantines, while there are only 37 domestic

quarantines established by the Department. While trucks

can be inspected at the border stations in 5 to 30 minutes,

inspection of a ship and its cargo can take several days.

The Department represented that the Act was passed

not as a means of raising revenue but for the purpose of

protecting California agriculture from infestation. As

found in an August 1991 blitz of all ships in a two-week

period entering Los Angeles, 27 percent carried pests of

some type. There had been a big increase in air and

marine commerce, but the number of federal inspectors

® There is also a discrepancy with respect to this figure,

with an answer to an interrogatory stating that “inspection

activities, other than airport and maritime inspections, are

performed . . . at a cost of $9.92 million” and a deposition

response stating that “I would say about $8.4 million of the State

of California general fund is being used in this effort

of . . . domestic pest containment or prevention.” The parties

seem to have adopted the latter figure on appeal, however.

App. 51

had not been commensurately increased. All fees col-

lected support the air and marine inspection program and

not the general fund; in fact, the program has a separate

fund and line item in the budget from the rest of the

Department. With the increase in staffing, inspectors

were able to increase interceptions, but even with the

augmentation they are able to inspect only 62 percent of

ships. It was in part at the behest of the plaintiff that the

Department structured the program as it did (making use

of additional federal inspectors), since there were objec-

tions to a separate layer of state inspections.

Supplementing Pacific Merchant's description of the

program in its motion, the Department noted marine

carriers could obtain exemptions from inspections based

on the nature of their cargo or their foreign ports-of-call.

In the 16 months ending November 1992, 330 ships quali-

fied for exemptions.” A significant amount of staff time is

devoted to processing the requests for these exemptions.

The Department has also established incentives for car-

riers willing to assist in education programs, with a 10

percent discount on fees in the first year and 20 percent

in each following year in which the carrier continues to

participate. While the Department has authority to

reduce or increase the statutory inspection fee, there are

no current plans to do so.

In connection with the costs of the program, the

Department offered testimony that the public information

materials were an important part of pest eradication

” Putting this number in perspective, there were 774 ships

paying inspection fees during a three-month period.

App. 52

because they reduced the number of passengers and crew

bringing pests into the country and thus hopefully would

expedite future inspections. Even though there were not a

high percentage of pests found among the passengers

and crew of ships, any one pest could pose a significant

risk to California agriculture. The Department was

unable to separate the costs of the public information

program for air carriers from marine carriers. The

Department noted that while the per-vessel charge was

higher than the per-aircraft charge, the vastly larger

number of aircraft meant the ships provided only 21

percent of the total fees recovered.

DiscCuUSSION

1. The Negative Commerce Clause

Remembering it is the summary adjudication of facts

under review, we first set out the governing substantive

law to be applied to Pacific Merchant's showing and the

Department's opposition. Although our resolution of the

matter terminates at an early point of the negative com-

merce clause analytic paradigm, we include its entirety

for the guidance of the trial court on remand.

A. Substantive Legal Principles

While the Commerce Clause of the United States

Constitution is a subject of endless fascination to consti-

tutional scholars (as many a weary law student can

attest), we do not intend to recapitulate the extensive

App. 53

commentary that has developed on this subject, partic-

ularly that which has been penned saluting its purposes.

Rather, we will stick to the pertinent cases.

“The Commerce Clause expressly gives Congress

power ‘[t]o regulate Commerce with foreign Nations, and

among the several States.’ U.S. Const., Art I, § 8, cl. 3. It

has long been understood, as well, to provide ‘protection

from state legislation inimical to the national commerce

[even] where [the] Congress has not acted... . '” (Bar-

clays Bank v. Franchise Tax Bd. (1994) 512 U.S. __ [129

L.Ed. 2d 244, 257, 114 S.Ct. 2268].) This latter aspect is

termed the “dormant” or “negative” Commerce Clause.

(Oregon Waste Sys. v. Dept. of Env. (1994) 511 U.S. ___ [128

L.Ed.2d 13, 20, 114 S.Ct. 1345].) Far from being an inci-

dental emanation of the Commerce Clause, there is evi-

dence the Framers considered the negative aspect to be

the more significant. (West Lynn Creamery v. Healy (1994)

512 U.S. __ __, fn. 9, [129 L.Ed.2d 157, 166, 114 S.Ct.

2205].)

“[T]he first step in analyzing any law subject to judi-

cial scrutiny under the negative Commerce Clause is to

determine whether it ‘regulates evenhandedly with only

incidental effects on interstate commerce, or discrimi-

nates against interstate commerce.’ . . . If [the latter], it is

virtually per se invalid. By contrast, nondiscriminatory

regulations that have only incidental effect on interstate

commerce are valid unless ‘the burden imposed on such

commerce is clearly excessive in relation to the putative

local benefits.’ ” (Oregon Waste Sys. v. Dept. of Env., supra,

511 U.S. at p. ___ [128 L.Ed.2d. at p. 21.) A court may find

discrimination either on the face of legislation or in its

effects (Bacchus Imports, Ltd. v. Dias (1984) 468 U.S. 263,

App. 54

270 [82 L.Ed.2d 200, 208-209, 104 S.Ct. 3049]); moreover,

even a lack of legislative intent to discriminate does not

insulate a statute from challenge because “the evil of

protectionism can reside in legislative means as well as

legislative ends.” (Philadelphia v. New Jersey (1978) 437

US. 617, 626 [57 L.Ed.2d 475, 483, 98 S.Ct. 2531].) It is

immaterial as well that a statute discriminates only

against a segment of interstate commerce rather than its

entire spectrum. (Fort Gratiot Landfill v. Mich. Dept. (1992)

504 US. __, __ fn. 4 [119 L.Ed.2d 139, 148-149, 112 S.Ct.

2019].)

The challenger bears the initial burden of demon-

strating the existence of discrimination. Of necessity, this

includes the demonstration that the commerce with

which the challenger seeks to compare itself is similarly

situated. (Cf. National Meat Assn. v. Deukmejian (9th Cir.

1984) 743 F.2d 656, 660, aff'd. mem. (1985) 469 U.S. 1100

[83 L.Ed.2d 766, 105 S.Ct. 768] [must demonstrate tax

discriminates between similarly situated participants in

commerce].) Otherwise, the challenger could simply pick

any other type of commerce not subjected to the same

regulation and argue discrimination. Requiring the dem-

onstration of similar situations avoids the proverbial

apple-and-orange comparisons which cram facts into pro-

crustean analyses ill-suiting them.

Once a court finds the existence of discrimination,

the burden switches to the state to demonstrate a legiti-

mate local purpose for the distinction in treatment which

cannot be served by alternative nondiscriminatory

means. (Oregon Waste Sys. v. Dept. of Env., supra, 511 US.

at p. __ [128 L.Ed.2d at p. 22]; Chemical Waste Manage-

ment v. Hunt (1992) 504 U.S. ___ [119 L.Ed.2d 121, 132-133,

«ate ay eae e?

App. 55

112 S.Ct. 2009]; Hughes v. Oklahoma (1979) 441 U.S. 322,

336-337 [60 L.Ed.2d 250, 261-263, 99 S.Ct. 1727].) A statute

patently discriminating in its treatment of interstate com-

merce is subjected to the strictest scrutiny, requiring a

compelling justification. (Oregon Waste Sys., supra, 511 U.S.

at p. __ [128 L.Ed.2d at p. 22]; Kraft Foods v. Iowa (1992)

505 U.S. __ [120 L.Ed.2d 59, 69, 112 S.Ct. 2365]; Hughes,

supra, 441 U.S. at p. 337 [60 L.Ed.2d at pp. 262-263].)

Discriminatory treatment is not, however, automat-

ically fatal; it will be allowed if there is some reason other

than the point of origin of the articles of commerce which

affects either the health and safety of a state’s citizenry or

the integrity of its natural resources and there is no

nondiscriminatory alternative. (Maine v. Taylor (1986) 477

U.S. 131, 148 n. 19, 151 [91 L.Ed.2d 110, 127, 129, 106 S.Ct.

2440]; see Oregon Waste Sys. v. Dept. of Env., supra, 511

U.S. at p. __ [128 L.Ed.2d at p. 23]; Chemical Waste

Management v. Hunt, supra, 504 U.S. at p. __ [119 L.Ed.2d

at p. 135]; Philadelphia v. New Jersey, supra, 437 U.S. at pp.

626-627, [57 L.Ed.2d at pp. 483-484].) This exception

reflects the Supreme Court's long-standing recognition of

a state’s right to legislate in the interest of local health

and safety, even if burdensome regulation is imposed on

interstate commerce as a result. (Maine, supra, 477 U.S. at

pp. 148 fn. 19, 151 [91 L.Ed.2d at pp. 127, 129]; Hood &

Sons v. DuMond (1949) 336 U.S. 525, 533, 535 [93 L.Ed. 865,

871-872, 872-873, 69 S.Ct. 657].) In furtherance of this

inherent police power, the state can both inspect the

articles of interstate commerce and exact an inspection

fee, which will be upheld so long as it reasonably relates

to the costs of the inspection program. (Texas Co. v. Brown

(1921) 258 U.S. 466, 474-475 [66 L.Ed. 721, 725-726, 42

App. 56

S.Ct. 375]; Pure Oil Co. v. Minnesota (1918) 248 U.S. 158,

161-162 [63 L.Ed. 180, 187-189, 39 S.Ct. 35]; cf. Great

Northern R. Co. v. Washington (1937) 300 U.S. 154, 160 &

fns. 7, 9 [81 L.Ed. 573, 578, 57 S.Ct. 397] [fees to cover

costs of regulating interstate public utilities]; see South

Carolina State H. Dept. v. Barnwell Bros. (1938) 303 U.S. 177,

188 & fn. 5 [82 L.Ed. 734, 740-741, 58 S.Ct. 510]; compare

Hale v. Bimco Trading (1939) 306 U.S. 375, 380 [83 L.Ed.

771, 776, 59 S.Ct. 526] [no rational basis for subjecting

only out-of-state commodities to inspection and fees; fees

exorbitant as well].) It is the burden of the challenger to

demonstrate a fee is “manifestly disproportionate” to the

service rendered. (Clark v. Paul Gray (1939) 306 U.S. 583,

599-600 [83 L.Ed. 1001, 1013-1014, 59 S.Ct. 744].)§

Because it engages in foreign interstate commerce,

Pacific Merchant also attempts to invoke (as part of the

pertinent substantive law) the oft-repeated cliche from

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

[60 L.Ed.2d 336, 99 S.Ct. 1813], in which the Supreme

Court set out the analysis for taxation of foreign com-

merce: “[A]n inquiry more elaborate than that mandated

8 We reject as nonexistent the distinction Pacific Merchant

attempts to draw in Commerce Clause jurisprudence between

“substantive regulatory program” cases and “fee/tax” cases.

First, in attempting to draw this distinction, Pacific Merchant

ignores the inspection-fee cases we have cited. Moreover, the

“distinction” relates merely to the factual happenstances of the

cases from which Pacific Merchant purports to draw this

distinction and not any aspect of the legal reasoning

fundamental to the cases. Pacific Merchant thus loses sight of

the principle that the ratio decidendi of a case must be related to

the facts before the court. (In re Randy J. (1994) 22 Cal.App.4th

1497, 1503 [28 Cal.Rptr.2d 152].)

App. 57

by Complete Auto Transit[, Inc, v. Brady (1977) 430 U.S. 274

51 L.Ed.2d 326, 97 S.Ct. 1076)] is necessary when a State

seeks to tax the instrumentalities of foreign, rather than

interstate, commerce. In addition to answering the nexus,

apportionment, and nondiscrimination questions ... , a

court must also inquire, first, whether the tax . . . creates a

substantial risk of international multiple taxation, and,

second, whether the tax prevents the Federal Government

from ‘speaking with one voice when regulating commer-

cial relations with foreign governments.’ ” (Id. at p. 451

(60 L.Ed.2d at p. 349] [italics supplied]; accord Barclays

Bank v. Franchise Tax Bd., supra, 512 U.S. at p. __, [129

L.Ed.2d at p. 264].) As refined in Barclays Bank, the “one

voice” element must be demonstrated by specific indica-

tions of congressional intent to bar the challenged state

regulation. (512 U.S. at p. __ [129 L.Ed.2d at p. 266].)

Although we question whether this element from a taxa-

tion case is even relevant to inspection fee cases, Pacific

Merchant has not pointed to any such specific Congres-

sional intent to preclude states from collecting regulatory

fees from foreign commerce. This factor therefore forms

no part of our analysis.

B. Analysis

We begin by casting aside the Department's efforts to

establish the bona fides of the Legislature in enacting the

challenged inspection scheme (part of which is the irrele-

vant argument that Californians engaging in foreign

interstate commerce are not favored), or to point out that

only a portion of foreign interstate commerce is encum-

bered. Under the authority cited above, both propositions

are irrelevant: even the best-intentio

This text is long and has been trimmed here. Open the source document for the complete record.

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.