UNITED STATES v. UNITED STATES SHOE CORP.
The Harbor Maintenance Tax (HMT) obligates exporters, importers, and domestic shippers to pay 0.125 percent of the value of the commercial cargo they ship through the Nation's ports. From April to June 1994, United States Shoe Corporation paid the HMT for articles it exported. U.S. Shoe then filed a protest with the Customs Service alleging that, to the extent the toll applies to exports, the HMT violates the Export Clause of the Constitution, which provides that "No Tax or Duty shall be laid on Articles exported from any State." The Customs Service refuted the accusation, stating that the HMT is a statutorily mandated user fee. U.S. Shoe then sued for a refund in the Court of International Trade (CIT). Granting U.S. Shoe summary judgment, the CIT held that the HMT qualifies as a tax, reasoning that the tax is assessed ad valorem directly upon the value of the cargo itself, not upon any services rendered for the cargo. The Court of Appeals for the Federal Circuit affirmed.
Does the Harbor Maintenance Tax, as applied to goods loaded at U.S. ports for export, violate the Export Clause?
Legal provision: 26 U.S.C. 4461
Yes. In a unanimous opinion delivered by Justice Ruth Bader Ginsburg, the Court held that "the [Harbor Maintenance Tax], which is imposed on an ad valorem basis, is not a fair approximation of services, facilities, or benefits furnished to the exporters, and therefore does not qualify as a permissible user fee." The Court noted that the Export Clause does not categorically bar Congress from imposing any tax on exports and that a charge designed as compensation for government-supplied services, facilities, or benefits would pass scrutiny.
ORAL ARGUMENT OF LAWRENCE G. WALLACE ON BEHALF OF THE PETITIONER
Chief Justice Rehnquist: We'll hear argument next in Number 97-372, United States v. United States Shoe Corporation.
Mr. Wallace, you may proceed whenever you're ready.
Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:
In this test case for thousands of cases being held in abeyance, a five-judge panel of the Federal Circuit held, with Judge Mayer dissenting, that, as applied to exports, the harbor maintenance tax enacted by Congress in 1986 is an invalid tax in violation of the Constitution's export clause rather than, as we contend, a permissible user fee.
The provision at issue was enacted as part of the Water Resources Development Act of 1986, the first legislation in more than a decade to authorize development of new facilities in the Nation's harbors.
There was concern during this period that port development projects in the United States had lagged behind those of other developed countries and that this was contributing to our severe trade imbalance.
At the same time, this was a period in which there were large budget deficits and objections to using Federal funding to address this problem, and it was one that, as Judge Mayer pointed out in his dissenting opinion, engaged the attention of Congress over an extended period involving three Congresses and more than 4 years of numerous hearings and other activities, and one of the solutions to the funding problem was to craft a system of user fees that would avoid the need for funding out of general revenues.
Unidentified Justice: Sort of similar to the last case, isn't it, trying... finding someone else to pay.
Mr. Wallace: Well, in this instance there was a practical problem to be addressed.
Improvements were needed and the beneficiaries of these facilities could, under court precedent, be charged user fees to defray the costs of providing these--
Unidentified Justice: Can you tell us--
Mr. Wallace: --facilities for their commercial benefit.
Unidentified Justice: --Does the record show, or are there statistics that we can examine to determine how much of this tax is paid by people who are exporting in contrast to those who are just shipping from point to point in the United States?
Mr. Wallace: I don't... off-hand, I'm not able to point to a breakdown in the statistics in the record, not... certainly not in what we've reproduced in the joint appendix.
Perhaps my colleagues will be able to find something on that.
I do want to say that the... one of the most difficult problems that was faced in this massive legislative consideration was how to craft an equitable and workable system of user fees in the context of the multitude of difficulties that were brought to Congress' attention by various industry and port representatives as well as members of the executive branch.
Unidentified Justice: Mr. Wallace, one would have thought that if all this attention was devoted to user fees the enactment wouldn't have been called a tax.
Mr. Wallace: Well, it perhaps was unfortunate choice of nomenclature--
--but as the Court's decisions do make it clear that nomenclature is not in itself controlling.
Unidentified Justice: Well, and also this thing is based on the value of the goods exported, isn't it?
Mr. Wallace: --That is correct.
Unidentified Justice: So that you have a little package of computer chips this big that takes no space in the ship at all, and it's going to result in a huge tax, but a big quantity of wheat, that actually does require a large ship to convey it and so forth, might pay substantially less.
Mr. Wallace: That is--
Unidentified Justice: The value might be less.
It's kind of an odd sort of a user fee, isn't it?
Mr. Wallace: --That is exactly correct, and if I may I would like to elaborate on this with reference to the legislative consideration of this very issue, but first I just want to interject in response to Justice Kennedy's previous question that on page 63 of the joint appendix there are some statistics that will shed some light on the question that he asked.
Now, we have in our references isolated from the massive record of legislative consideration portions which are themselves quite hefty that dealt quite specifically with the user fee problem and, with the Court's permission, I would like to turn briefly to some brief excerpts from a statement that Senator Hatfield made which encapsulates the difficulties and the reasons for the crafting of it.
Unidentified Justice: How would a statement like that bear on whether or not this is a violation of the Export Clause?
Mr. Wallace: --Well, I think it bears on the reasons why the particular kinds of objections that are being raised to the way the fee was crafted may be not aspects of the fee that actually disadvantage exports but to some extent may be aspects that were designed to be advantageous to exports, and also shows the sum of the serious economic dislocations that were sought to be avoided in trying to find an equitable manner of putting this fee together, and I--
Unidentified Justice: I think if you'd had 20 wizards sitting down and coming up with the best possible solution in their view to these sort of... if it violated the Export Clause it's still bad, isn't it?
Mr. Wallace: --Of course, we do not contend that the difficulties and the magnitude of the effort that Congress put in would excuse a constitutional violation, but we do contend that it is too facile for others to contend that a court should ignore these aspects of the legislative consideration and merely hypothesize whether theoretically it could think of a system that might seem more appropriate to the court, which is insulated from the legislative concerns that were before the Congress.
Unidentified Justice: No, but you're talking about a user fee of harbors.
You'd think that would have something to do with the ships and the tonnage that's required and how deep the harbor needs to be and how big the dock has to be, and that turns on how large the ship needs to be, and this doesn't bear any relation to that.
Mr. Wallace: Well, that is part of the reason that it took that many years for the Congress to craft a solution, because they started off with some of those same assumptions, but found that they couldn't work it out that way for very serious reasons.
Unidentified Justice: Mr. Wallace, you've piqued my curiosity.
Why don't you read us that material you wanted to tell us about.
Mr. Wallace: All right.
These are brief--
Unidentified Justice: Put it in for what it's worth, Mr. Wallace.
Mr. Wallace: --These are brief excerpts of what Congress thought it was doing and why, and I might interject a few comments as I go along here.
In Senator Hatfield's statement, and it's in this hearing called User Fees for Ports and Waterways that we cite at the bottom of page 4 of our brief, he starts off pointing out we have not had a major authorization in this area for 15 years.
There are many economic and political reasons for this delay, but the resolution of the user fee component is a key element in getting a bill to the floor and passed.
5 years ago I convened a bipartisan group to explore legislative proposals addressing the expectations of the administration for user fees while taking into account the economic realities of the navigation economy and the users of the Nation's waterways.
Over that period I've introduced three separate and distinct proposals, one of which he explains became the bill that Congress later, shortly thereafter enacted.
He then explains, we reserved, meaning rejected in context, user fees based on tonnage because they disproportionately would effect bulk cargo marketability when compared to their impact on containerized cargo.
Unidentified Justice: What State was Senator Hatfield from?
Mr. Wallace: Oregon.
Unidentified Justice: A lot of timber.
Mr. Wallace: He was talking about a bipartisan group--
--that spent years of study on this.
He was not... these are not views stated individually.
Unidentified Justice: No, but doesn't his statement boil down to saying that a fee which is a real user fee is going to have an economic impact that we don't want.
Isn't that what it boils down to?
Mr. Wallace: Well, it depends... I mean, it's not a real user fee... tonnage is not the only measure of economic value that someone secures from facilities in these days of containerized--
Unidentified Justice: It's a measure of use, isn't it?
Mr. Wallace: --It is a measure--
Unidentified Justice: Isn't it closer to being a measure of use than value?
Mr. Wallace: --It is a measure of use.
If I may just, in answering this, the very next sentence says that a fee based on tonnage also would disadvantage export-dependent ports in contrast to import-dependent ports.
One of their concerns was that our export trade would be hurt by a user fee based on this.
Much of our export was and is bulk commodities, grains, iron ore, which was having difficulty competing in international trade from the Great Lakes ports, which were suffering some depression at the time, lumber, as is pointed out, and other wood products.
The bipartisan group also rejected a port-specific approach to fees because it would have the effect of disadvantaging ports with higher operation and maintenance costs and could cause consolidation of port facilities to a few super ports.
This could have severe economic implications for scores of communities across the country.
So then he explains that the approach they finally chose to adopt is a nationally uniform single-tier fee based on a percentage of cargo value, and this ad valorem concept, as he explains it, equitably balances containerized versus bulk cargoes, places all ports on an equal footing, and does not affect the marketability of any product or commodity.
It also treats all coastal ranges of the continental U.S. in the same manner, East and West Coast, Great Lakes, and Gulf Coasts.
Unidentified Justice: Mr. Wallace, I guess--
--And if they pay for it out of the... suppose they pay for it out of the highway trust fund.
It's part of transportation.
Is the gas tax now... it's really a user fee.
Is that right?
Mr. Wallace: That is--
Unidentified Justice: I mean, I guess... all your arguments would say, we don't even have a gas tax.
We have a highway user fee, is that right, even though they call it a gas tax.
Mr. Wallace: --It is very similar.
In fact, the trust fund--
Unidentified Justice: So if we accept your argument there is no gas tax.
It's really a highway user fee and if, in fact, they decided to pay for the ports out of the highway trust fund, then the whole thing's a highway user fee.
Maybe it's an income user fee, a facilities user fee, income tax is really a user fee for using the country's facilities.
How do you draw the line?
Mr. Wallace: --We wouldn't go this far, but the particular concern that Congress was addressing here was the disadvantage to the commercial use of our ports and to commerce resulting from the outmoded nature of the facilities.
Unidentified Justice: We can get rid of all the disadvantage to exports by putting the whole thing in the income tax.
That doesn't make the income tax a user fee.
Maybe it does.
Mr. Wallace: No, of course not, but it would mean that it would become a matter of general funding.
In any event--
Unidentified Justice: Mr. Wallace, I thought that when we made an exception from the constitutional prohibition of Federal taxes on exports, when we enunciated an exception for user fees, I didn't think that meant any charge imposed on users.
I... that would make it no limitation at all.
So long as you impose the tax through users, you can tax exports as much as you like.
If that limitation is to have any bounds at all, it seems to me we must mean by user fee a charge that is based upon the degree of use of the port.
Mr. Wallace: --Well, I think this Court's jurisprudence in distinguishing taxes from user fees shows that it is a more variegated distinction than that.
Unidentified Justice: Not in the Export Clause field.
In other... you're referring to cases that deal with other provisions of the Constitution, not the Export Clause.
Mr. Wallace: Well, those cases all had their root in a case called Pace v. Burgess, which was an Export Clause case.
Unidentified Justice: And in Pace the Court was at pains to point out that the charge there was not an ad valorem charge.
Mr. Wallace: That is true, but it also made a... but ad valorem charges have since been upheld as permissible methods of user fees.
Unidentified Justice: Not under the Export clause.
Mr. Wallace: But in other contexts where constitutional objections were raised.
Unidentified Justice: But constitutional objections may be quite different in different cases.
We have here a very specific prohibition, and the... you know, the Pace case, the Fairbank case deal with those particular... that particular clause.
I'm surprised you... perhaps it's our fault that you haven't been able to get to those cases yet, but--
Mr. Wallace: Well, I--
Unidentified Justice: --we know the Congress--
Mr. Wallace: --I'm trying to set this up in context.
Unidentified Justice: --Yes.
We know that Congress gave its all on this thing, but now let's look at the law.
Mr. Wallace: Yes.
Yes, and I have to add one further consideration that inhibited the legislative consideration, and that was it was all done against a backdrop of awareness of our international trade relations and international agreements with our trading partners, which also do not supersede constitutional limitations, but they're relevant to whether Congress was going to be able to solve this user fee question.
Because those agreements... it was GATT at that time, and now WTO... in which there have been reciprocal reductions of tariffs, those... there are expectations and obligations that prevent members in those agreements from discriminating against the foreign industry in favor of the domestic industry.
And even though the measure adopted here was one that generally would be favorable to exports as against imports, the ad valorem method, for reasons that Senator Hatfield explained, that could be defensible under these agreements, but to charge user fees to imports and not to exports in these same harbors could be a basis for objections and retaliation by our trading partners as a disguised form of raising our tariffs again, and--
Unidentified Justice: Mr. Wallace, is that why you suggested that maybe this... if we ruled against you the whole thing would fall?
That sort of surprised me.
In page 18, footnote 8 of your brief you say that if the decision of the court of appeals stands, that would effectively abolish the trust fund.
It would void the harbor maintenance tax in its entirety, and I had been thinking up till now, well, no, it would only excise the export feature of it, and now you're suggesting well, maybe the import would also fall?
Mr. Wallace: --No, we really meant that in context only for exporters, but there is... I don't want to suggest that this would not be severable, but the concern about possible retaliation by our trading partners in saying that we've in disguise raised our tariff rates again and so they're going to raise theirs, that would not only affect the public interest in our balance of trades, but it would directly affect exporters from this country.
It would be something that would burden exports from this country.
Unidentified Justice: But it would be applied to them the same way it would apply to shipping, say, from New York to Texas?
Mr. Wallace: No.
I'm talking about retaliation by our trading partners.
If they then raise their tariffs, that makes it harder for industries in this country that wish to export to be able to export.
Unidentified Justice: Well, I take it it's more serious than that.
If we strike down the export provision and require refunds, but the importers can't get any refunds, then we're in violations of the agreement.
Mr. Wallace: Well, I wouldn't go so far as to say we're necessarily in violations, although a foreign country, one of our trading partners might make such a claim before the World Trade Organization, but they also could use this as a reason to impose retaliatory measures.
Congress was faced with a very complex problem here.
The Constitution is designed for modern commerce as well as for the commerce that was known at the time that these provisions were adopted, and we think that the court of appeals was right in pointing to this Court's user fee jurisprudence which has been developed in detail in fields other than the Export Clause after Pace v. Burgess.
Unidentified Justice: Well, if a provision is under alternative 1 a tax on imports and exports, it doesn't seem to me that that makes it any more or any less a user fee under any other alternative.
Mr. Wallace: Well--
Unidentified Justice: In other words, you're... I understand the problem the Congress was faced with.
It can't tax imports... exports.
That doesn't mean that if it taxes imports and exports it's no longer an export tax.
It's still the same thing.
It's still an export tax.
Mr. Wallace: --Well, we understand that from the IBM case if this were a tax, and that is why we are arguing that this is a permissible user fee, which is one of the arguments we had made right along in the case and, indeed, had always been our principal argument, and it satisfies the basic classic attribute of a user fee that has been developed in many aspects of the Court's jurisprudence.
The funds are all impressed into a trust.
Unidentified Justice: Well, if it were imposed, let's say, on the ship... the ships, the owners of the ships or the vessels, and a charge for using the docks or the harbor, which the vessel owners could then pass on in the form of costs to the users of their vessels, I think you'd have a good argument that it's a user fee, but the nature of this makes it awfully hard to see it as a user fee.
Mr. Wallace: Well, the Court in the Evansville-Vanderburgh case did say that it seemed to the Court in that context to make no difference whether it was assessed on the airline or on the passenger, because it came down to the same thing.
The costs were to be passed along to the passenger.
There was a very practical reason for asking the shippers to be the ones to make the payment, and that was that the carrier would not be in a position... once Congress decided that the ad valorem measure was the only equitable one that they could hope to impose, the carriers would not be in a position to know the value of the cargo.
And one of the principles that this Court has recognized repeatedly in giving legislative latitude in the crafting of user fees is that you don't want to add administrative expenses that will make the fee more burdensome and more onerous for everybody, that there are virtues in keeping it simple.
And the Customs Service is there, was a resource that could be drawn upon that deals not with the carriers but with the owners of the goods with the shippers one way or the other, and Congress tried to craft this in a manner that would impose the least burden and would avoid severe economic dislocations in the country.
Unidentified Justice: Mr. Wallace, can I ask you, do we have a definition of user fee?
It seems to me your argument is that as long as the fee is paid by users and the money is used for the purpose of improving ports, that's enough.
Mr. Wallace: That is enough to make it a user fee, and it's a permissible user fee.
Unidentified Justice: But is that... is... do I correctly state your position, and if that's true, could you impose a 10-percent tax on the income of every user and then put it in this fund?
Mr. Wallace: Well, if it... that would have much more difficulty meeting this Court's criteria for what is a valid user fee.
Unidentified Justice: Well--
Mr. Wallace: There are the three-part criteria, including that it must not be excessive in relation to the cost to the Government of providing the benefits that are accorded--
Unidentified Justice: --Oh, but of course--
Mr. Wallace: --to those contributors.
Unidentified Justice: --Then don't you bump into Justice O'Connor's position that if some particularly valuable shipment is sent the cost for that particular shipment is really excessive in terms of the use that is gotten for it?
Mr. Wallace: Well, you know, that is... an ad valorem system, any system is going to have some applications that could be improved upon in a more Utopian scheme, but Congress reasonably concluded that those whose cargo in the aggregate was more valuable were getting greater benefits in terms of enhancement of value from the improvement in facilities that was being provided in order to promote their commerce, the commerce of the users.
Unidentified Justice: Mr. Wallace, tell me why it is not true that any definition of user fee, which simply defines it as a... you know, a fee imposed on users, and which does not limit it to the cost that is incurred by the facilities in providing the use, any such definition will be totally ineffective in preventing the taxation of exports, because you could always... I mean, it comes to the same.
You call it a user fee and impose an ad valorem tax, which is what has happened here.
Mr. Wallace: The three-part test has to be met.
Unidentified Justice: In fact, they didn't even call it a user fee.
They called it a tax.
Mr. Wallace: The three-part test does have to be met that this Court specified in the Massachusetts case.
Unidentified Justice: Which wasn't an export tax.
Mr. Wallace: No.
Unidentified Justice: In fact, none of your examples of user fees which were upheld have come from the prohibition against a tax on exports.
Mr. Wallace: We recognize that, except for the route in Pace v. Burgess.
Unidentified Justice: And Pace v. Burgess, as I say, pointed out expressly in the Court's reasoning, one of the reasons they upheld it, it was not an ad valorem tax.
Mr. Wallace: That is true, but ad valorem taxes have been upheld as user fees--
Unidentified Justice: --export tax.
Mr. Wallace: --in Sperry and in Capital Greyhound Lines referred to in Evansville-Vanderburgh in the discussion of Capital Greyhound Lines as one permissible approach.
Unidentified Justice: Mr. WAllace--
Mr. Wallace: So those are three decisions of this Court that have recognized that as a basis for user fees--
Unidentified Justice: --Mr. Wallace--
Mr. Wallace: --in a proper context.
Unidentified Justice: --this was in the pipeline when IBM was decided, so... and my question is, is there anything else in the wake of the IBM decision that's in the lower courts now that we might want to take account of as we decide this case?
Mr. Wallace: No.
These have been the main feature that awaited the decision in IBM, as we pointed out in the IBM briefing itself, that these cases were pending as one of the reasons why a decision was needed in that case, and then the arguments were adjusted accordingly.
But it is true that the Court has repeatedly recognized that even exporters can be charged fees for pilotage, for wharfage, for other facilities that are provided, and the line has to be drawn somewhere.
Exporters are not exempt from paying their own way in commerce the same as other users of the facilities of commerce, and the best guidance for drawing the line has been the test that the Court has developed in protecting all constitutionally protected interests.
I'd like to reserve the balance of my time.
Unidentified Justice: Very well, Mr. Wallace.
Mr. Atwood, we'll hear from you.
ORAL ARGUMENT OF JAMES R. ATWOOD ON BEHALF OF THE RESPONDENT
Mr. Atwood: Mr. Chief Justice, and may it please the Court:
First, I'd like to supplement the answer to Justice Kennedy's question about what data is in the record.
Also in the appendix at page 97 is some more updated material about the relative charge on exports and imports in domestic commerce, and in the amicus brief of the Aluminum Company of America they had the most recent, 1997 data.
Basically it tells the same story, and that is that exports have paid between 25 and 30 percent of this tax over the years, and the amount that the exports now pay is less than the annual surpluses accumulated, so you could eliminate exports entirely from this tax and there would still be more revenue coming in than the Government is spending on harbor maintenance.
Unidentified Justice: That would translate into a tax, then, on imports only, and I think would raise serious discrimination problems under trade agreements.
Mr. Atwood: Well, this... if there is an international issue there, it can be solved in the same way the export problems can be solved, which is to make this a legitimate user fee.
I think the foreign Governments are concerned by the fact that they thought they had negotiated ad valorem duties of a certain level and now the United States is imposing ad valorem charges on top of that, and that's the problem internationally, if there is one, so a valid user fee approach here I think would solve both the export problem and the import problem.
Unidentified Justice: In fact, I guess the fund has quite a surplus in it.
Mr. Atwood: It has more than a billion dollars and is expected to hit $3 billion in just a few more fiscal years.
Unidentified Justice: That money isn't... it's just not lying there.
I assume the Government is using it for other purposes, meanwhile.
Mr. Atwood: Exactly.
That is one of our--
Unidentified Justice: The way it uses taxes... the way it generally uses tax money.
Mr. Atwood: --That is one of our objections to this user fee classification.
The harbor maintenance trust fund is simply an accounting entry.
Revenues under this tax are treated as on-budget, so that every dollar that comes in offsets obligations to raise taxes for discretionary spending under the budget control process.
There is a transfer to the trust fund which is a nonevent for budget purposes.
It's simply an accounting entry, and then any expenditures actually made for harbor maintenance--
Unidentified Justice: There's enough in there to pay for the coal miners and their dependents?
Mr. Atwood: --Any appropriation for harbor maintenance has to follow the same process as if there were no trust fund.
There has to be a bill from both Houses of Congress signed by the President and Congress is free to appropriate as much or as little money as it would like for harbor maintenance, irrespective of what's in the trust fund.
I'd like to address the Government's argument that Mr. Wallace started with that the... this tax... and I hope I can call it a tax, because that's what Congress called it... was a result of a very complex, delicate legislative process and important compromises were made and sophisticated judgments as to what was possible and what wasn't possible.
Unidentified Justice: Mr. Atwood, before you do that, may I ask if you would tell us what you think are the essential components of what one could legitimately call a user fee, because I think you told us, you're not arguing the export clause rules out user's fees, but it has to be legitimate.
Mr. Atwood: Right.
Unidentified Justice: And Mr. Wallace, if I understood him right, said, well, it's a tax on a user and it has to meet those three standards.
Mr. Atwood: We are not arguing that there is no such thing as a legitimate user fee.
In the context of the Export Clause at least, because of history, because of the unqualified nature of it, because of this Court's precedents, we think the class of user fees has to be defined strictly and narrowly.
There must be a demonstrable service provided to the exporter on that export shipment, an identifiable Government service that is being provided to the exporter, and the charge must bear a very close relationship to that service, particularly where a fee is compulsory in nature.
Unidentified Justice: For the cost of that service.
Mr. Atwood: For the cost of that service, exactly.
Unidentified Justice: Do the costs here include fixed costs for dredging the harbor originally?
Is it all maintenance, or is it--
Mr. Atwood: No.
Unidentified Justice: --Well, there is a tradition... there is a tradition of something called value of service pricing, where you charge somebody for the fixed cost in relationship to the value of the commodity that uses the service.
That's... the ICC did that for years, and--
Mr. Atwood: --I think the--
Unidentified Justice: --I don't know whether that makes it a great thing, but there is that tradition.
Mr. Atwood: --Once you're getting into value of service I think that is crossing the line into a tax.
Unidentified Justice: Well, nobody would have thought ICC railroad freight car rates were taxes.
They would have said that those are... that's simply a way of pricing the railroad line and, indeed, they have it in the telephone service business right now, where you pay lower cost of residency, and... I mean, there are all kinds of things like that where fixed costs are divided in relationship to the value of the service rather than the cost of the service to the person who's using it.
Mr. Atwood: Well, in deciding this case, this Court need not anticipate every possible cost theory that might be advanced, but an ad valorem tax based on a Nation-wide program, an infrastructure program, is about as far from costs as is possible, and it is feasible, I think, for the... for Congress to have come up with a much more sophisticated targeted user fee, and that is proven by, in the very same legislative package that included the harbor maintenance tax, there was the harbor development tax, which was the State analogue.
Under the Import-Export Clause Congress has authority to, notwithstanding the Import-Export Clause prohibition, has authority to authorize State charges of various sorts, and the same legislation included the harbor development tax, which is... the key provisions are in the appendix to our brief, where Congress said, okay, States can impose harbor dues, notwithstanding the Import-Export Clause, but they have to be on a project-specific basis, they have to... there has to be an identifiable project, they may not impose the dues until the project is up and running and providing services to the shippers, exporters or importers, the costs have to be limited... the fees have to be limited to the cost of the project, and you have to discriminate between which vessels are actually using the project and which are not.
This is in the same statute that included the harbor maintenance tax.
Unidentified Justice: Is this imposed on vessels or goods?
Mr. Atwood: That is not specified in the statute.
It says the local... the States and municipalities can consider either approach, but they may not impose charges if the vessel is of a type that would not have benefited from that project.
For example, a shallow draft vessel, regardless of what it's carrying, may not be charged for deep dredging when it did not need the deep dredging, so it's an example of an approach that is obviously far closer to a justifiable user fee, and it was in this very legislative package.
It can be done.
You know, also, as the quotations that Mr. Wallace gave us indicate, this was a difficult political process, to be sure.
The Framers were worried about how exports would survive in the political process.
That's why we have an Export Clause.
This is clear from the constitutional debates.
There was concern that, if you left these matters to Congress, that in the give-and-take of the political process exports would not come out favorably, so, instead of waiting for Congress to include exemptions in statutes, and there are a lot of exemptions in this statute, Congress... the Framers put the exemption in the Constitution itself, and that exemption is not being honored here.
There is a long tradition under the Export clause of broad liberal construction.
The Court has said that in Fairbank, it said it most recently in IBM, it said it in A. G. Spalding, and the broad construction to which the Export Clause is supposed to be given would be completely undermined here by an ad valorem tax.
Unidentified Justice: I'm not sure what your answer was to Justice Breyer's question.
There are many ways of allocating costs.
In Justice O'Connor's example, I suppose a valuable shipment needs some extra security guards and a safe warehouse facility.
Maybe that's included in the act.
It seems to me that ad valorem is certainly the simplest way to measure the benefit that the person is getting.
Now, maybe that's not a use tax.
Are you saying that a use tax can never be measured by the benefit that the user derives?
Mr. Atwood: I believe a proper user fee should be framed in terms of the cost of the benefit and not the benefit.
The examples you gave, first of all, don't involve Federal services.
The Federal Government does not provide any marshalls at ports.
That's separate altogether.
And the lower courts, I think they both considered this question of whether ad valorem is a reasonable measure, even of benefit.
They gave the Government the benefit of the doubt and said, even if we analyze this on the basis of benefits, ad valorem is irrational, because benefits have to do with the profitability of the shipment, not its total value or--
Unidentified Justice: That argument runs into Justice Breyer's point.
I mean, we've considered it rational enough for regulatory pricing.
You know, value-of-service pricing has been common, and we've never thought it was irrational.
And even if you--
--It's rational enough.
I think your point has to be that it's simply not compatible with any limitation on the taxation of exports, because once you go to ad... it comes to the same.
Except that if you relate it to costs... say you're putting in a new lighthouse at the harbor entrance, which would benefit everybody who uses it, and if the total amount collected doesn't exceed the cost of the lighthouse, doesn't that satisfy your cost test?
Mr. Atwood: --A port-specific charge for a lighthouse.
Unidentified Justice: Correct.
Mr. Atwood: That would... sounds to me like a proper user fee, although I still wonder--
Unidentified Justice: And say... and it's measured by those who use it, by the value of the goods shipped.
Mr. Atwood: --I would think the proper approach is not to measure it by value but to measure it by--
Unidentified Justice: Well, your ceiling--
Mr. Atwood: --numbers of passages past the lighthouse, or some--
Unidentified Justice: --Number of calls on the port.
Mr. Atwood: --Number of calls at the port, exactly, and that's how State taxes are often allocated between ports.
You measure relative port days.
Ad valorem really just slides you right into wealth transfers and taxing of value, and particularly so when you do it on a Nation-wide basis, where the costs of dredging in Oregon are paid for by shippers on the East Coast.
So I... and given the history of this clause and the purpose for which it was intended to be there, which is to protect exports from the vagaries of the political process, I think it does require a broad construction.
If there are no--
Unidentified Justice: There was a jurisdiction point.
Do I understand correctly, if it... if the CIT is the right place the cases that were started in... what is the proper title now, the CFC?
could be transferred under 1631 and that would take care of the statute of limitations?
Mr. Atwood: --That doesn't affect my client--
Unidentified Justice: Because you started out on the CIT--
Mr. Atwood: --so we do not take a position on the--
Unidentified Justice: --You don't take any position on that?
Mr. Atwood: --On the transferability of cases from that other court, because in this case it's clear that the CIT... conceded by both sides the CIT and the Federal Circuit had jurisdiction.
Unidentified Justice: Thank you, Mr. Atwood.
Mr. Wallace, you have a minute remaining.
REBUTTAL ARGUMENT OF LAWRENCE G. WALLACE ON BEHALF OF THE PETITIONER
Mr. Wallace: If itemization requirements are carried too far, and you get into an example for... where wharfage capacity has been increased, does that mean that only the users of the new wharves can be charged user fees?
If the channel has been deepened and somebody could have gotten along with a shallower vessel but because of the deepening of the channel had to use the larger vessel, does he have to bear part of the costs?
The Constitution may not prohibit Congress from causing serious economic dislocations in exercising its power, but the Court should be hesitant to require Congress to cause serious economic dislocations by not allowing it the latitude that it needs in fashioning an equitable method of devising user fees.
Yes, Congress does have to address the surplus that is accumulating in this fund, but all of the account is impressed for operation and maintenance of the harbors and for no other purpose, and that... and those funds are still available for that.
Congress has been reluctant to expand the authorizations to NOAA, for example, or to the Coast Guard, because the more aspects of navigation are brought under this fund while litigation is pending, the more it's argued that these are general expenditures.
Chief Justice Rehnquist: Thank you, Mr. Wallace.
The case is submitted.