Republic Steel Corp. v. Porterfield

HERBERT, J. The question before the court is whether a tax assessment by the state of Ohio upon an import— manganese ores — while in storage in a United States Customs bonded warehouse, in its original form as imported and before being used by the importer for the purposes for which it was imported, is an invasion of the prohibition against state taxation under the provisions of Clause 2, Section 10, of Article I of the federal Constitution? This clause reads: [103] “No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws; * * Republic Steel is a manufacturer of steel products. Ferromanganese alloy is an essential ingredient in Republic’s manufacturing process. It is obtained by smelting manganese ores. The bonded warehouse, where Republic stored its manganese ore, is on the property of Union Carbide plants at Ashtabula and Marietta, Ohio. After the ore has met the requirements of the United States Customs Service, it is left in storage in the bonded warehouses until needed. Pursuant to the requirements of Republic’s current operational needs for ferromanganese, Union Carbide withdrew manganese ore from the bonded warehouses, smelted it and delivered the alloy to Republic. The manganese ore, which the Tax Commissioner contends was subject to Ohio’s personal property tax, and upon which the questioned assessment was made, was at all times before being put to any use by Republic in the bonded warehouses on the premises of Union Carbide. Upon the facts of record it appears that the cases of Orr Felt & Blanket Co. v. Schneider, 3 Ohio St. St. 2d 14, and Wheeling Steel Corp. v. Porterfield, 14 Ohio St. 2d 85, are dispositive of the issues presented in the case at bar. The first paragraph of the syllabus in Orr Felt reads: “"When grease wool, imported for use in manufacturing upon which no duty has been paid, is stored in its original packages by a manufacturer-importer in a bonded warehouse, which warehouse is under the exclusive control of the United States Customs officer, such wool has not definitely ended its importation journey and has not been irrevocably committed to supply the manufacturer-importer’s ‘current operational needs,’ and, therefore, such wool retains its constitutional immunity as an import and is not taxable under the Ohio personal property tax laws.” In Orr Felt, the grease wool was removed by the importer from the bonded warehouse after payment of duty and stored in its private warehouse where it remained until [104] used. Yet, in the private warehouse of the importer the constitutional immunity still protected the import from state taxation. In the case at bar, the tax was assessed while the import was still in the storage yards of the bonded warehouse, before it completed its importation journey, or had been put to any use for which it had been imported. The ore remained an import immune to state taxation while stored, and until removed from the warehouses for smelting. A tax on such ore stored in its original form as imported by the importer is “too plainly a duty on imports to escape the prohibition of the Constitution.” Brown v. Maryland, 25 U. S. (12 Wheat.) 419, 439, 441 and 442. See, also, Wheeling Steel Corp. v. Porterfield, 14 Ohio St. 2d 85, and Hooven & Allison Co. v. Evatt, 324 U. S. 652. It follows, therefore, that the imposition of the Ohio personal property tax upon the manganese ore in question, while in storage in a United States Customs Service bonded warehouse, before being put to any use by the importer, is unreasonable and contrary to law. The decision of the Board of Tax Appeals is reversed. Decision reversed. Matthias, O’Neill and Blown, JJ., concur. Zimmerman and Schneider, JJ., dissent.