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414

Opinion of the Court.

violated the commerce clause of the Federal Constitution, Article I, § 8, Clause 3, Article I, § 10, Clause 2, which commands that no state shall lay any imposts or duties on imports or exports, and Article VI, Clause 2, making the "Constitution and laws of the United States which shall be made in pursuance thereof ... the supreme law of the land.”i We granted certiorari upon a petition which challenged the several grounds of decision as defined by the amended remittitur of the Court of Appeals, the questions presented being of public importance.

The taxing enactment, Local Law No. 24 of 1934 (published as Local Law No. 25) is that of the municipal assembly of the City of New York, adopted pursuant to authority of Chapter 815 of the New York Laws of 1933, as amended by Chapter 873 of New York Laws of 1934. Its details were recently discussed in our opinion in McGoldrick v. Berwind-White Coal Mining Co., ante, p. 33, and it is unnecessary to repeat them here. It suffices to say that it lays a tax on purchasers for consumption of tangible personal property at the rate of 2 per cent. of the sales price. The tax is conditioned upon events occurring within the state, either transfer of title or possession of the purchased property, or an agreement within the state, "consummated there" for the transfer of title or possession. The duty of collecting the tax and paying it over to the Comptroller is imposed on the seller,

· Certiorari which had been allowed by the Supreme Court of the United States December 4, 1939, 308 U. S. 545, before the amendment of the remittitur by. the New York Court of Appeals, was dismissed January 15, 1940, ante, p. 2, on the ground that in the absence of an explicit statement by the Court of Appeals that it had annulled the assessment of the tax solely because of the violation of the Federal Constitution, the Court was unable to find that the decision of the highest court of the state did not rest upon an adequate non-federal ground. On motion for rehearing, based on the amended remittitur of the Court of Appeals, the order of dismissal was, on February 5, 1940, vacated and the cause restored to the docket, post, p. 692.

Opinion of the Court.

309 U.S.

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who must pay it whether he collects it or not, in addition to the duty imposed upon the buyer to pay the tax to the Comptroller when not so collected.

The material facts are not in dispute. In 1934 and 1935 respondent's predecessor imported crude petroleum from Venezuela and made customs entry of it for its own manufacturing warehouse in New York City, pursuant to its bonds known as "Proprietor's Manufacturing Warehouse Bond, Class 6,” given to the United States under the warehouse laws of the United States and treasury regulations. The bonds were given for the purpose of enabling the importer, under statutes of the United States and treasury regulations, to bring the petroleum into the United States, to manufacture it while in bond into fuel oil and then to withdraw it for export or other lawful purpose free of the import duty which would otherwise be payable. The bonds were conditioned, among other things, upon compliance with laws and regulations relating to the custody and safekeeping of the imported merchandise and its products held in bond, and to its lawful withdrawal from the warehouse under permit of the collector of the customs within the time permitted by law.

The tax in question was laid on the sale of bunker "C" fuel oil, manufactured in respondent's bonded warehouse from the imported oil and delivered alongside foreign bound vessels in New York City which purchased the oil as ships' stores for consumption as fuel in propelling them in foreign commerce.

Petitioner argues that the tax imposed on the purchaser for consumption of the fuel oil after it had been changed radically by manufacture from the imported oil, and after it had been withdrawn from the bonded warehouse, is not a prohibited tax on imports and does not contravene any policy which the laws of the United States have sanctioned.

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414

Opinion of the Court.

For present purposes we may assume, without deciding, that had the crude oil not been imported in bond it would, upon its manufacture, have become a part of the common mass of property in the state and so would have lost its distinctive character as an import and its constitutional immunity as such from state taxation. See Gulf Fisheries Co. v. MacInerney, 276 U. S. 124, 126; Waring v. The Mayor, 8 Wall. 110; May v. New Orleans, 178 U. S. 496; New York ex rel. Burke v. Wells, 208 U. S. 14. Respondent rests its argument on different considerations growing out of the control over the foreign commerce involved in the importation of the oil and its ultimate disposition as ships' stores of vessels engaged in foreign commerce, which Congress has exercised in pursuance of a national policy with which, it is insisted, the tax conflicts. Expression of this policy, it is urged, is to be found in the statutes of the United States, read in light of their legislative history, exempting the imported oil from federal taxation, otherwise imposed, if it is sold for use as fuel on vessels engaged in the foreign trade, and in the measures taken in statutes and regulations to make that policy effective by segregating the oil under the direction of customs officers of the United States from the time of its importation until it is delivered to the purchasing vessel.

The provisions of the Revenue Act of 1932 laying a tax on the importation of crude petroleum and granting exemptions, and the related provisions of the Tariff Act of 1930 and the applicable treasury regulations support this contention.

Section 601 (a), (c) (4) of the Revenue Act of 1932, 47 Stat. 169, 260, lays a tax "with respect to the importation” of crude petroleum of one-half cent per gallon unless otherwise provided by treaties of the United States, and $ 601 (b) declares that the tax imposed "shall be levied, assessed, collected, and paid in the same

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manner as a duty imposed by the Tariff Act of 1930 and
shall be treated for the purposes of all provisions of law
relating to the customs revenue as a duty imposed by
such Act. ..." Section 630 of the Revenue Act of 1932,
added by amendment of June 16, 1933, 48 Stat. 256, de-
clares that no tax under $ 601 shall be laid "upon any
article sold for use as fuel supplies, ships' stores .
or . . . equipment on vessels ...

.. actually engaged in foreign trade ..." and provides that “articles manufactured or produced with the use of articles upon the importation of which tax has been paid under this title, if laden for use as supplies on such vessels shall be held to be exported for the purposes” of the drawback provision of $ 601 (b).

Section 309 (a) of the Tariff Act of 1930, 46 Stat. 590, 690, authorizes the withdrawal, duty free, under regulations of the Secretary of the Treasury of articles from bonded manufacturing warehouses, for supplies to vessels of the United States engaged in foreign trade and directs that no such article shall be landed at any port or place in the United States or its possessions. By virtue of the terms already noted of $$ 601 and 630 of the Revenue Act of 1932, these provisions were extended to articles sold for fuel to vessels engaged in foreign trade, and the provisions of statutes and regulations relating to withdrawal from manufacturing bonded warehouses ? for export were thus extended to similar withdrawals of fuel oil for disposition as ships' stores.»

* Article 829 of the Customs Regulations of 1929, in force when the Tariff Act of 1930 was enacted and continued as Article 921 of Customs Regulations of 1931, and as Article 919 of Customs Regulations of 1937, defines Class 6 warehouses as those "for the manufacture in bond, solely for exportation, of articles made in whole or in part of imported materials. ..."

* Section 311 of the Tariff Act of 1930, 46 Stat. 691, under which respondent's Class 6 bonded warehouse was established and operated, provided for the manufacture in such warehouse of articles made from

414

Opinion of the Court.

It will be noted that the tax imposed on importation of crude petroleum by § 601 of the Revenue Act of 1932 is, by force of its own provisions to be treated as a duty imposed by the Tariff Act of 1930, which, in turn, has incorporated, by reference, customs regulations relating to the entry of merchandise in bonded manufacturing warehouses, its manufacture there and its withdrawal from bonded warehouses for exportation or disposition as ships' stores; 4 that § 630, read in conjunction with $ 601 (b) and the related provisions of the Tariff Act of 1930 (8 309 [b]) provides that articles manufactured from imported articles and laden for use on vessels engaged in foreign commerce under customs regulations are to be duty free and considered or held as exported for the purpose of the drawback provisions of both $ 601 of the Revenue Act of 1932 and § 309 (b) of the Tariff Act of 1930.

From the time of importation until the moment when the bunker "C" oil is laden on vessels engaged in foreign trade, the imported petroleum and its product, the fuel oil, is segregated from the common mass of goods and

imported materials and intended for exportation free of duty under such regulations as the Secretary of the Treasury might prescribe, and also declared that the provisions of § 1351 of Title 26, U. S. C. (8 3433 of the Revised Statutes) should, so far as practicable, apply to such bonded manufacturing warehouses. Section 1351 provides for the manufacture in bonded warehouse of articles from imported materials under such rules as the Secretary may prescribe and under the direction of the proper customs officer, and directs that no article so manufactured in a bonded warehouse “shall be taken therefrom except for exportation under the direction of the proper officer having charge thereof ... whose certificate describing the articles . . . shall be received by the Collector of Customs in cancellation of the bonds, or return of the amount of foreign import duties.” See Articles 455, 457, and 960 of the 1931 Customs Regulations.

See Articles 455 to 461, Customs Regulations of 1931, cf. Articles 410-414, Regulations of 1915; Articles 433-437, Regulations of 1923 and Articles 464-470 of the 1937 Regulations.

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