# Amicus Curiae Brief — Consolidation Coal Co. v. United States

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0928%3A4

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2011
- **Citation:** 564 U.S. 1004

## Text

of the Gnited

a

VYILLIAMS MULI
\ Professional Cory
mb K Stree N VY. su

>

Washington, D

202) 293-3116

LEX GRO
} 93-0001 @ cS

Promotion Cabinet a
Trade Promotion Coordinating ¢
Report to the President on the
National Export Initiative.
The Export Promotion Cabinet's |
Doubling U.S. Exports in Five }
(Sept. 2010),
http://www.white

‘files/nei report

§ 3(b)(2)(A),
http://thomas low

ell?

Foreign Inst

‘ax—Audit Techniqu

Guide,” (Jan. 18, 2011)
nttp://www.irs.gov/busine:

mall/article/0,,.1d=186963.00

Notice 2000-28.
r 22, ZUO0). http /IW~Www
irbs/irbOQ-21.pdi

ince of the United S

rade Representative, 2011
Policy Agenda and 2010 Ann
Report of the President of the
States on the Trade Agreem
Program (March 2011)

ttp

Lmporters
Manufacturers

respectfully submit this bnef amu
of the

RIEF AMICI ¢ [
i ne American cyabbion i | port
(“AAII”), the National Association

(“NAM”) and NEACO hereb

EL CUriLade LD upport

Petition for Writ of Certiorari to the U
Court of Appeals for the Federal Circuit filed t

Consolidation Coal Cempany et al

8)
A

ursuant to Rul
37.2(a), counsel of record received timely notice «
our intention to file ‘this brief. and all part
.
rovided their written consent
INTERESTS OF AMICI CURI
Founded in LYZI. LAK] nation
ociation that represent the entire spectrum ol
the international trade community acros
industry sectors. Members include

Importers

eCrvi¢

community
forwarders,
Ompanies and ports
and

mall

export to foreign markets
or exported by

O

(mone

rm

part:

cjlal

uthored

"
. th 4
mitridbutit

m1

‘
Ly

OT he rs
electronics,

manufacture!
exporter wholesalers, retailers

and
providers to the international trading
uch a customs brokers, freight
banks. insurers, transportation

Many of these enterprise
medium-sized

art
businesses seeking [
Products manufactured
member businesses

AAE]

include
chemicals

pharmaceutical
machinery. automobiles and automotive

energy, food, household consumer goods, t

iLem textile and Ap} yre] and rootwe
Ly entitv other thas ind ]
Ln DI f in whol ) in r mad moneta
rh i { i |

}

prohibits every tax on export sales, not every

that the Export Clause prohibits is a sales tax

eoods); and 48.4121-1l(c){2) (Apr. 1, 2009) (still stating that

exemptions” from the Black Lung Excise Tax exist on sale:

coal “for export”). True, seven years after U.S. Shoe, Congress
th

enacted a statutors exemption stating

laintenance Tax “shall not apply to any port use with respect

to any commercial cargo to be exported from the United
States.” 26 U.S.C.S. § 4462(d) (2011); enacted as Pub. L. Ni
109-59, 119 Stat. 1144. § 11116(a) (2005). More often, however
niv an Internal Revenue Bulletin gives notice that a court

decision has forced the Government to change its
implementation of an excise tax to comply with the Export
Clause. See, e.g., IRS Notice 2000-28, IRB 2000-21 at 1116-17
(May 22, 2000), available at http://www.irs.gov/pub/irs
irbs/irb00-21.pdf (last visited Feb. 15, 2011) (stating that the
Government would stop collecting the Black Lung Excise Tax

yn exports); IRS, “Foreign Imsurance Excise Tax—Audit

Technique Guide,” (Jan. 18, 2011) avallable
it http liwww irs POV businesses’small/article/O, id=186963 ,0¢
html (ast visited Feb. 21, 2011) (stating that the Government

al

would not apply the Excise Tax on Policies Issued by Foreign
Insurance to casualty insurance premiums paid to foreign
insurers for coverage of exported gs f
destinations)

4 See BM... 517 U.S. at 863 (finding unconstitutional, a

s |
|

applhed to casualty insurance on exported cargo, the excise tax

on imsurance policies issued by foreign insurers from 26
U.S.C.S. § 4371); Thames & Mersey, 237 U.S. at 27 (finding
unconstitutional the federal] stamp tax on policies insuring

1 +4

exports against marine risks); Hvosilef, 237 U.S. at 16-18
(finding unconstitutional the federal stamp tax on charter
parties exclusively to carry cargo from the United States to
foreign ports); Fairbank, 181 US. at 291 (finding
unconstitutional the federal stamp tax on bulls of lading fe
exported articles). Evidence that the agency uses an export
sale to trigger the tax or to calculate the amount of the tax
might be sufficient but is therefore not necessary to a
determination that the tax violates the Export Clause. Rather
the controlling (both necessary and sufficient) issue is when the

> anniies ¢t} , wolative +o vhen the ea rt hecan ’ a _
s7utations Slmlial | CNnost in Consoltaation rere:
K an export sal ra i 1O¢ t
loc f
1ial f
ystitutional a tax on Daseball Dats SO! i tor exportation
U.S tional t

See U.S. Shoe, 523 U.S. at 363 (finding unconsiitutiona
Harbor Maintenance Tax from 26 U.S.C.S. § 4462(d) as appli

exported cargo, because the fee was imposed on an a

rem basis and so did not fairly match the exporters
e | | . r —
; to Princess Cruises, 22 ©.1.1. a

> ¢

Encourage Congress _{
Repeal Existing Statutory
Exemptions or to Continu
Enacting xport-Related
Taxes without Providin

Exemption

ati, Con |
restrict or completely 1 remove exist
exemptions for export r to enact new tax
lack such exemptions Certain constituen
begging Congress to rein in the burgeoning fed
deficit. Others are asking Congress to find yet n
cash for stimulating job-creation The curr
historical moment sorely tempts the Government
ignore Export-Clause prohibit
further to dilute them

Congress has already |
temptation. A bill introduced in the U.S. Hou
Representatives on February 8, 2011 would sul
ail U.S. exports to a fee equaling “.075 percent of tl
value of the article that is subject to the tee or soVUU
whichever is less.”!7 The bil ignores the Exp
Clause, as well as this Court's holding in U.S. Sh
and other cases As explained below, the
parallels certain other prev1ou sly enacted excl
statutes that either stull lack statutory exempt

(regarding coal, crud ind poli

Se H R WA: ] ZU0l (
Nation's Trade. nfrastructure, Mobilitv, and Eth
the “ON TIME Act), avauabdl t http://th
t Injguery/Z cl 12H K t H { | [

foreign insurers) or provide exemptions but
substantially limit their application (to a period no
longer than six months after sale or a geography no
closer than 225 mules beyond the international!
border)

Existing Excise Taxes
Violating the Export Clause
Demonstrate the Likelihood
That the Government Will
Tax Exports Further If This
Court Does Not Close the
Opening Created by
Consolidation Coal.

The federal excise tax Provisions generally
contain express exemptions for export
transactions;!® Congress, however, has whittled
away at the exemptions in a vaniety of ways
Sometimes, no such statutory exemption even

|

appears.!% For example, no statutory exemption

applaes to policies issued by foreign insurers t

See, e.g., 26 U.S.C.S. §§ 4041(g)(3), 4082(f(2), 4221(a)¢:
1272(b) 4462(d), 4662(e), 4682(d)(3) 50D3(a) 9214(a)(4

5362(c)(1), 5704(b), 5854 (2011) (making not applicable to
exports the excise tax imposed, respectively, on certain: special
fuels; motor and aviation fuels; luxury passenger automobiles,
heavy trucks and trailers, gas guzzlers, tires, vaccines, sporting
goods; transportation of property by air; port use; chemical:
ozone-depleting chemicals; beer; distilled spirits; wine; tobac
products and cigarette papers and tubes; firearms)

) See, e.g., 26 U.S.C.S. § 4371 (2011) (taxing certain polici
issued by foreign insurers but providing no statutory exemption
for policies insuring exported articles). The statute remains

ttect even though this tax was invalidated in /.B.M 21

protect | xported articles from casualty.”' in a few
instances, a statute expressly subjects to the excise
tax a particular type of exported article—namely,
coal and crude ou.*! And at times, a _ built-in
statutory exception taxes certain exportations within
the larger, generally exempted group.?? For
instance, the sale of a luxury automobile for export is
exempt only if the vehicle leaves the United States
within six months, and the cost of flying a person
overseas by air is exempt only for those miles that
the person flies after reaching a point 225 mil
beyond U.S. borders.*4

1.R.S. regulations further narrow the scope of
the statutory exemptions, thereby diminishing ths
Export Clause even more. For example, one I.R.S
regulation provides that the general exemptions in
26 U.S.C. § 4221(a)(2) for exported luxury passenge:

automobiles, heavy trucks and trailers, gas guzzler

! ’ yr | cq . = |) 1/h\ ") 17
4! See, e.g., 26 U.S.C.5. §§ 4221(a)(2), 4611(b) (2011) (subjectn

to an excise tax, without exe mption, exports of, respective

coal: crude oul)

22 See, e.g., 26 U.S.C.S. §§& 4221(b) and 4221(e)(2)(B) (2011

(ceasing the 26 U.S.C.S

&* oF abd oN obs y3

§ 4221(a)(2) exemptions for exported
|

luxury passenger automobiles, heavy trucks and trailers, gas

]

guzzlers, tires, vaccines and sporting goods when, despite a

demonstrated export sale, the manufacturer has not, within

months after the earler of that sale or the article's initial

shipment, received proof that the article has left the United

States); 26 C.F.R. §§ 48.4221-3(c) and 48.4221-7(c)(1) (Apr. 1

2009) (same); compare to 26 U.S.C.S. §§ 4221(b) and

1221(e)(2)(B) (2011) (authorizing the exemption’s temporal
imitation); 26 US.CS. § 4262 (2011) (providing that a

exemption from the 26 US.C. § 4261{a) excise tax
transportation of persons by air generally do t
first 225 miles of travel beyond U.S. borde1

é Lil

L5

tires, vaccines and sporting goods “apply only in
those cases where the exportation ... is to occur
before any other use.”24 Another regulation
similarly shrinks the 26 U.S.C. § 4221(a)(2)
exemptions by arbitranly restricting the number of
steps that an exempted exportation may include:
“An article may not be sold tax free under the
provisions of this section by a manufacturer to a
purchaser for resale to a second purchaser which
does not intend to export the article itself but plans
to resell it to a third purchaser for export.”25

All these laws contradict a specific finding of
this Court in A.G. Spalding: “The fact that further
acts were to be done before the goods would get to
sea does not matter so long as they were only the
regular steps to the contemplated result.” Once an
exported article is in transit and exportation has
begun, no federal tax may impose burdens that
ignore the time it can take an article to exit U.S
borders and an exportation to end

Other, similarly random regulatory
preconditions accompany specific tax exemptions.
For instance, should an export sale of motor and
aviation fuels occur as they are delivered into a
transport vessel, the excise tax exemption from 26
U.S.C. § 4082(f)(2) applies only iff among other
“4 26 C.F RR. § 48.4221-1(a)(2)(vi) (Apr. L, 2009); compare to 26
C.F.R. § 48.6416(b)(2)-2(a) (Apr. 1, 2009) (same)

25 26 C.F.R. § 48.422 1-3(a)(1) (Apr. 1, 2009).

26 Id., 262 U.S. at 69-70; compare to Gosho, 23 F.2d at 676
(stating, “The temporary stoppage at Galveston for sorting and
compression was reasonable and necessary for transshipmen
in order to enable the cotton to reach its destination, and

cannot be considered as interrupting the export movement”)

things, “[t]he vessel has a capacity of at least 20,000
barrels of fuel.”*, Should an exporter sell vaccine to
the U.S. Government for use abroad, the 26 U.S.C
§ 4221(a)(2) exemption applies only if, among other
things, the Government gives notice that it intends
to use the vaccine other than to vaccinate U.S.
citizens serving the U.S. Government outside the
UJnited States.28 Moreover, even when an exemption
from excise taxes does apply, the exporter who has
paid the tax and then sought a refund must, by
regulation, forego any interest on the refund that

results.29

In the shadow of these regulations lurk many
onerous related evidentiary requirements, whereby
the [.R.S. has further shrunk statutory exemptions
and eroded the Export Clause.“° These regulatory

27 26 C.F.R. § 48.4081-3()(2)(i) (Apr. 1, 2009).

28 See 26 C.F.R. §§ 48.4221-1(a)(2)(v), 48.4221-3(c)(2) and
48.6416(b)(2)-2(b)(2) (Apr. Lt, 2009) (providing for a “cessation of
exemption” in certain circumstances)

29 See 26 C.F.R. §§ 48.6416(b)(2)-1 and 48.6416(e)-l({a) (Apr. 1,
2009) (regarding “overpayments of tax” on certain
exportations).

” See, e.g., 26 C.F.R. §§ 48.4041-16(b); 48.4221-1(c)(1) and
48.4222(a)-1; 48.4221-L(c)(2), 48.4221-3(b), and 48.4222(b) 1(b);
48.4221-1(b)(4)(ii); —-48.4221-3(d); —-48.6416(b)(2)-3. sand
48.6416(b)(2)-4 (Apr. 1, 2009) (requiring, respectively: a
retailer selling special fuels for export to obtain documentary
proof from carriers, foreign customs officers or foreign
consignees; certain U.S. purchasers to register and to furnish
sellers with timely written notice of purchasers’ registration
numbers and their intentions with regard to exportation;
certain foreign purchasers to provide sellers with timely
written evidence that articles will be transported to a foreign
destination before further use; manufacturers to inform
purchasers that exportation triggers a tax exemption and

purchasers’ to inform manufacturers if articles are diverted

L7

requirements undercut Export Clause prohibitions
and foster more unconstitutional regulatory activity,
which the Government can now expand using

misyudements from Consolidation Coal.

B. ECONOMIC RECOVERY NECESSITATES
VIGILANCE AGAINST GOVERNMENTAL
ACTIONS THAT WOULD IMPOSE ANY
BURDEN ON EXPORTS.

The current economic environment amplifies
the injury that will be suffered if Consolidation Coal
is permitted to stand and to limit the protections of
the Export Clause. In his 2010 State of the Union
address, President Obama committed the
Government to work with U.S. companies and help
American-made goods and services succeed in global
markets with the aim of doubling U.S. exports in five
years. According to a September 2010 report. to the
President from the Export Promotion Cabinet and
the Trade Promotion Coordinating Committee (the
“Report’), the National Export Initiative (“NEI”) is a
key component of the President's plan to help the
“United States transition from the legacy of the most
severe financial and economic crisis 1n generations to
a sustained recovery.”®! This importance was

from the export stream; U.S. and foreign purchasers to furnish
sellers with timely, acceptable proof of actual exportation;
refund claimants to make certified statements regarding the
articles involved, to submit and retain supporting evidence, and
to obtain certifications from ultimate purchasers and vendors).

st Export) )=Promotion Cabinet and ‘Trade Promotion

Coordinating Committee, Report to the President on
the National Export Initiative: The Export Promotion Cabinet's
Plan for Doubling U.S Exports In
Five Years at I (Sept 2010), available at

18

reiterated in the March 2011 Trade Policy Agenda
issued by the United States Trade Representative.”
As the Report explains, export growth is needed for

various reasons, Including:

“ The size of and potential growth in the
consumer market outside the United
States. According to the Report, “95
percent of the world’s customers lhe
outside the United States.”3 The
International Monetary Fund predicts
that “nearly 87 percent of world
economic growth over the next five
years will take place outside of the
United States.”54 U.S. businesses’
ability to tap into this growth abroad
will be critical to the stabilty and
prosperity of the U.S. economy going
forward.?5 Thus, exports will play a
vital role in creating strong, sustainable

econom ic pre wre h 36

* The current tmportance of exports to the
U.S. economy. Exports have

represented over ten percent. of Gross

hitp://www whitehouse.gov/sites/default/files/nei_report_9-16-
10_full pdf (last visited Mar. 1, 2011) (“NEI Report”).

2 Office of the United States Trade Representative, 20/1 Trade
Policy Agenda and 2010 Annual Report of the President of the
United States on the Trade Agreements Program at 1 (March
2011), available at http://www.ustr.gov/webfm_send/2597 (last
visited Mar. 4, 2011)

83 NEE Report at 1

4 fd. at 11

33 See id
1% See rd. at 8

7 See id.

8 Jd. at 10

39 See ta ut AS
40 See 1d.
41 See jd

» o
: SCE 1

l

’
|
a

at Zz

1

Domestic Product (“GDP”) annually
since 1994 (averaged over the period),
rising to a high of nearly 13 percent in
2008.*7 While exports fell during the
recession, they have been instrumental
in the recovery, contributing “more
than one percentage point to GDP
growth (at an annual rate)” in each of
the quarters of recovery and “over 1.)
percentage points to growth in the last
year (more than either consumption or
fixed investment).°8 Moreover, since
1994, exports have supported over
seven million jobs each year, with their
most significant impact in 2008, when
they supported over 10 million jobs.89
Manufacturing relies particularly
heavily on exports, with exports
supporting “over a third” of the jobs in
that sector.4° Exporting also improves
productivity and increases wages.4! As
the United States increases exports
successful compamies grow and = are
better equipped to focus U.S. production
in areas where American workers excel

and can earn higher wages.4

, The mumerous obstacles companies
currently must overcome to export.
[Information about exporting and
market research is not readily
available. 4% Companies also frequently

face financial hurdles. First, they
struggle to obtain export financing.
Then, they face strong financial
competition from both foreign

companies and foreign governments. *4

* The unportance of small and medium-
sized enterprises (“SMEs”) to the U.S.
economy. SMEs “account for about half
of all employment and economic activity
in the United States."45 They comprise
97% of all identified exporters and
account for 31% of total export value.*6
The obstacles highlighted above are
magnified for SMEs. whose resources
are already limited.4? The costs of
exporting, particularly the substantial
initial costs, tend to have a
disproportionate effect on SMEs.*8
SMEs are therefore a key part of the
Adminuistration’s export plans.49

If permitted, taxation of exports will serve as yet

another obstacle for U.S. exporters to overcome. The

fragile national economic recovery necessitates
heightened vigilance against decisions, such as
Consolidation Coal, that undermine Export Clause
protections. Consolidation Coal gives. the
government the latitude to tax goods, as long as the
tax 1s not imposed on the sale itself or based on the
sales price. Such attempts to dilute the protections
of the Export Clause must not be permitted

In [.B.M., this Court firmly rejected the
governments attempt to narrow the sweeping
protections of the Export Clause. Summarizing the
history of the Export Clause, the /.B.M. Court
emphasized the depth and breadth of the Clause’s
prohibitions

As a purely historical matter, the
Export Clause was originally proposed
by delegates to the Federal Convention
from the Southern States, who feared
that the Northern States would control
Congress and would use taxes and
duties on exports to raise a
disproportionate share of federal
revenues from the South . The
Government argues that this “narrow
historical purpose” justifies a narrow
interpretation of the text and that
application of § 4371 to policies insuring
exports does not conflict with the
policies embodied in the
Clause. ... While the original impetus
may have had a_narrow focus, the

remedial provision that ultimately

became the Export Clause does not, and
there 1s substantial evidence from the
Debates that proponents of the Clause
fully intended the breadth of scope that
is evident in the language. See, e.g., 2
Farrand, Records of the Federal
Convention, at 220 (Mr. King: “In two
great points the hands of the
Legislature were absolutely tied. The
importation of slaves could not be
prohibited—exports could not be
taxed”): id., at 305 (“Mr. Mason urged
the necessity of connecting with the
power of levying taxes .. . that no tax
should be laid on exports’); id., at 360
(Mr. Elseworth /stc/: “There are solid
reasons agst. Congs taxing exports’);

ibid. (“Mr. Butler was strenuously
opposed to a power over exports’) id., at
361 (Mr. Sherman: “It is best to

prohibit the National legslature in all
cases’); 1d., at 362 (‘Mr. Gerry was
strenuously opposed to the power over
exports ).*!

As the Framers recognized, only an absolute
prohibition against taxes on exported articles will be
sufficient to protect them. If any burden is imposed
on such goods, the damage is done. Thus, the Export
Clause cannot permit exceptions for taxes that are
not sales taxes or that are imposed on a umt
measurement of the goods rather than their sales
price.

51 Jd., 317 U.S. at 859-60 (certain citations omitted, emphasis

a d d S d }

WwW

. CONSOLIDATION COAL CREATES
BUSINESS UNCERTAINTY BY
THREATENING TO TAX EXPORTS.

The Consolidation Coal decision creates
confusion in how excise tax statues wul be
interpreted, leading to uncertainty for businesses.
Following Consolidation Coal, Congress may rework
existing excise tax statutes in an effort to evade the
Export Clause prohibition. Congress could change
references from “sale of X” or “X sold” to “X
produced,” the language used in Consolidation Coal.
As discussed earlier, however, Consolidation Coal
blurs the distinction between “sale” of articles,
articles “sold” and articles “produced,” leaving open
the possibility that a court could find a tax in any of
the three categories to be a pre-exportation event.

Further complicating the situation for
businesses, Congress's past actions indicate it has
not espoused the same interpretation as the court in
Consolidation Coal. Congress has previously
inserted export exemptions into excise tax statutes
even when they target “A produced” or “X
manufactured.”52 To whatever extent adherence to
the Constitution’s prohibition against taxation of
exports may have motivated Congress, such
exemptions imply that, in Congress's view, the

2 Compare 26 U:S.C.S. §§ 5001(a)(1), 5041(a), 5051(a)(1), 5701
(2011) (Qmposing an excise tax on, respectively, certain:
distilled spirits; wines; beer; tobacco products and cigarette
papers and tubes) and 26 U.S.C.S. §§ 5053(a), 5214(a)(4),
5362(c)(1), 5704(b) (2011) (making not applicable to exports the
excise tax umposed, respectively, on certain: beer; distilled
spirits; wine; tobacco products and cigarette papers and tubes)

24

corresponding excise taxes would likely violate th

Export Clause without them
\ CONCLUSION

Whichever strategy the Government adopts
after Consolidation Coal, the Government will in
fact be taxing export sales by pretending that the
Government is merely “collecting” at time of sale
certain taxes “incurred” at time of manufacture
Consolidation Coal therefore not only ignores the
Export Clause but also sets off an immediate peril
that further unconstitutional action by the
Government will burgeon. Even before
Consolidation Coal, periodic Governmental
overreaching has tested the Export Clause in the
context of federal excise taxes. In every instance,
only court action has halted the Government's
attempts to weaken Constitutional limits.

[he deral Cuircw Consolida
lecision:
* Merits review because the de Ccis10n0

violates the Export Clause and
contravenes the Court's previous cases
interpreting the Export Clause;

4 Eincourages both the Executive and the
Legislative Branches, desperately

seeking revenues that might combat
massive deficits, to create loopholes in

laws and regulations that contravene
the Constitutional prohibition against
taxing exports; and

nreaten injure exporter
specially small and medium-sized
nes, at a time when the U.S. economy

il] afford anv additional harm

srefore, this Court should grant the Petition
. 5 , , =
Consolidation Coal | orporation ef al. for rl]
Certiorari to the U.S. Court of Appeals for tl

de ral Circ

elyn M. Suart

Counsel of Record
WILLLAMS MULLEN
\ Professional Corporatio:
1666 K Street, N.W., Suite 1
Washington, DC 20006
(202) 293-8116

- -
suareA@Vwi lian nu

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0928%3A4. Public record. Not legal advice.