Youngstown Sheet and Tube Company v. Bowers United States Plywood Corporation v. City of Algoma

• Decision Date: 24 February 1959
• Docket Number: Nos. 9,44,s. 9
• Citation: 79 S.Ct. 383,3 L.Ed.2d 490,358 U.S. 534
• Parties: YOUNGSTOWN SHEET AND TUBE COMPANY, Appellant, v. Stanley J. BOWERS, Tax Commissioner of Ohio. UNITED STATES PLYWOOD CORPORATION, Petitioner, v. CITY OF ALGOMA
• Court: U.S. Supreme Court

358 U.S. 534

79 S.Ct. 383

3 L.Ed.2d 490

YOUNGSTOWN SHEET AND TUBE COMPANY, Appellant,

v Stanley J. BOWERS, Tax Commissioner of Ohio.

UNITED STATES PLYWOOD CORPORATION, Petitioner,

v. CITY OF ALGOMA.

Nos. 9, 44.

Argued Nov. 12, 13, 1958.

Decided Feb. 24, 1959.

[Syllabus from pages 534-535 intentionally omitted] Mr. Carlton S. Dargusch, Sr. Columbus, Ohio, for appellant Youngstown Sheet & Tube Co.

Mr. William Saxbe and Mr. John M. Tobin, Columbus, Ohio, for appellee Bowers.

Mr. Roger C. Minahan, Milwaukee, Wis., for petitioner U.S. Plywood Corp.

Mr. Edwin Larkin, Mondovi, Wis., for respondent City of Algoma.

Mr. Justice WHITTAKER delivered the opinion of the Court.

The principal question presented by these cases is whether appellant in No. 9, the Youngstown Sheet and Tube Company, and petitioner in No. 44, United States Plywood Corporation, have so acted upon the materials which they have imported for use in their manufacturing operations as to cause them to lose their distinctive character as 'imports,' within the meaning of that term as used in the Import-Export Clause, Art. 1, § 10, cl. 2, of the United States Constitution.¹ The Supreme Courts of the States concerned have held that these manufacturers have done so. Our task is to decide whether, on the particular facts involved, those holdings violate the Import-Export Clause of the Constitution.

The facts in the Youngstown case are stipulated. In essence, they are that Youngstown, an Ohio corporation, operates an industrial plant in or near Youngstown, Ohio, where it manufactures iron and steel. In addition to the use of domestic ores, it imports iron ores from five countries 'for ultimate use in (its) open hearth (and) blast furnaces' in its manufacturing processes. The imported ores arrive in shiploads 'in bulk' either at an Atlantic or a Lake Erie port of entry where they are unloaded from the ship into railroad cars and are thereby transported to Youngstown's plant in Ohio. The plant is enclosed by a wire fence. Within the enclosure and 'adjacent to (the) manufacturing facilities' are several 'ore yards' for the storage of supplies of ore.² Each ore yard consists of 'two parallel walls, on which there (is) a movable ore bridge.' When the imported ores arrive at this final destination, they are unloaded into one of the ore yards but, because the ore from each country is different from the others and each is imported for a different use, the ores are kept segregated as to the country of origin by being 'placed in a separate pile in a separate area of the ore yard.' The daily manufacturing needs for ore are taken from these piles. As needed, ores are conveyed from the particular pile or piles selected to 'stock bins' or 'stock houses,' holding one or two days' supply and located in close proximity to the furnaces, from which the ores are fed into the furnaces. As ore from a particular 'pile' in the ore yard is thus taken and consumed, other like ore is similarly imported from the same country and is brought to the plant and unloaded on top of the remainder of that particular pile. This course is continuously repeated. Youngstown endeavors to maintain 'a supply of imported ores to meet its estimated requirements for a period of at least three months.' The ores are not imported 'for resale,' but 'for use in manufacturing (at the Ohio plant).'

Acting under Ohio statutes which provide, inter alia, that 'All personal property located and used in business in this state (shall be) subject to taxation * * *'³ and that 'Personal property is 'used' within the meaning of 'used in business' * * * when stored or kept on hand as material, parts, products, or merchandise * * *,'⁴ the Tax Commissioner of Ohio proposed to assess an ad valorem tax against Youngstown based on the average value of the iron ores in its ore yards during the tax year ended January 1, 1954.⁵ Youngstown contested the proposed assessment. It contended, among other things, that the imported ores had not lost their character as imports and were therefore immune from state taxation under Art. I, § 10, cl. 2 of the United States Constitution.

After exhaustion of administrative proceedings, the case reached the Supreme Court of Ohio. It held that the 'protection (of the Import-Export Clause cannot) extend to such iron ore (1) after it has been commingled with other iron ore imported at a different time, even though such other iron ore is of the same grade and was imported from the same place, and (2) after portions of such iron ore have been removed for use in manufacturing.' It then entered judgment sustaining the tax, 166 Ohio St. 122, 140 N.E.2d 313, 317, and we noted probable jurisdiction of Youngstown's appeal. 355 U.S. 911, 78 S.Ct. 340, 2 L.Ed.2d 272.

The facts in the United States Plywood Corporation case were found in detail by the trial court and those findings are not challenged here. In essence, they are that United States Plywood Corporation (petitioner) operates an industrial plant in Algoma, Wisconsin, where it manufactures veneered wood products. It uses both domestic and imported lumber and veneers in its manufacturing processes. The imported lumber is shipped in railroad cars directly from Canada to petitioner's plant. It is unfinished, and is received in bulk or as loose, individual pieces or boards. It is also 'green' when received and therefore must be dried before it can be used by petitioner. Upon arrival at destination, it is unloaded and carted to petitioner's storage yard, located 'adjacent' to its plant, where it is stacked in the open in such a way as to allow the air freely to circulate through the stacks for the 'dominant purpose' of air-drying it. This method does not so completely dry the lumber as to make kiln-drying unnecessary, but it does materially reduce the time and expense of that process. From time to time, so much of the lumber as is about to be put into veneered products is taken from the stacks and placed in a kiln where the drying is completed and the lumber readied for use. The veneers are imported from three countries. They are received in bundles and are kept in that form in piles, separated as to specie, in petitioner's plant for use as needed in the day-to-day operations of the plant.

On the assessment date of May 1, 1955, the Assessor of the City of Algoma, acting under what is now Wis.Stat.1957, § 70.01, W.S.A., assessed a tax against petitioner based upon the value of one-half of the imported lumber and veneers then on hand. Petitioner paid the tax and then sued in the state court for its recovery. The trial court also found that air-drying the lumber 'was part of (petitioner's) manufacturing practices,' and that, when stacked for air-drying, the lumber 'entered the process of manufacture' and thus lost its character as an 'import,' and therefore all of it might lawfully have been taxed by the city. The court further found that the lumber and veneers had been imported by petitioner 'for use in manufacturing' at its Algoma plant, and that their importation journeys definitely had ended; that the lumber and veneers that were taxed (one-half of the amounts on hand) had been irrevocably committed to 'use in manufacturing' at that plant, were 'necessarily required to be kept on hand to meet (petitioner's) current operational needs,' were being 'used in manufacturing,' and had therefore lost their character as 'imports' and were subject to local taxation. It then entered judgment for the city, sustaining the tax, and, on petitioner's appeal, the Supreme Court of Wisconsin affirmed. 2 Wis.2d 567, 87 N.W.2d 481. Because of the importance of the constitutional question presented we granted certiorari. 356 U.S. 957, 78 S.Ct. 994, 2 L.Ed.2d 1065.

The Constitution confers on Congress the power to lay and collect import duties, Art. I, § 8, and provides that 'No State shall, without the Consent of the Congress, lay any Impost or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws * * *.' Art. I, § 10, cl. 2. That these provisions were intended to confer on the National Government the exclusive power to tax the act of importation is plain from their terms. And early in our national history Chief Justice Marshall held, in the landmark case of Brown v. State of Maryland, 12 Wheat. 419, 6 L.Ed. 678, that one who had imported goods for the purpose of selling them, had, 'by payment of the duty to the United States, (acquired the) right to dispose of his merchandise, as well as to bring it into the country' (id., 12 Wheat. at page 442), and that the State could not tax it 'while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported.'⁶ Id., at page 442. But he made very clear that '* * * there must be a point of time when the prohibition ceases, and the power of the State to tax commences.' Id., at page 441. Elaborating this concept, he said:

'The constitutional prohibition on the States to lay a duty on imports * * * may certainly come in conflict with their acknowledged power to tax persons and property within their territory. The power, and the restriction on it, though quite distinguishable when they do not approach each other, may yet * * * approach so nearly as to perplex the understanding. * * * Yet the distinction exists, and must be marked as the cases arise. Till they do arise, it might be premature to state any rule as being universal in its application. It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State. * * *' Id., at page 441—442. (Emphasis added.)

While Chief Justice Marshall did not undertake definitively to state just what acts or conduct of the importer...