Export Taxation Clause

No Tax or Duty shall be laid on Articles exported from any State.

Article I, Section 9, Clause 5

The Export Taxation Clause was one of the many accommodations that the Framers made to cement unity among the various sections of the union. Many of the Southern delegates at the Constitutional Convention regarded the clause as a prerequisite to gaining their approval of the Constitution. As the primary exporter of goods in the late eighteenth century, the South would have borne a disproportionate burden from export taxes. In addition to their disproportionate burden argument, George Mason voiced the South's fear that a tax on exports would create a mechanism through which the more numerous Northern states could overwhelm the Southern states' economies. They also worried that export taxes could be used indirectly to attack slavery. They were joined by Northerners such as Oliver Ellsworth, who declared that export taxes would stifle industry.

In response, some of the most distinguished delegates at the Convention, including James Madison, Alexander Hamilton, George Washington, Gouverneur Morris, and James Wilson, favored export taxes. They argued variously that export taxes were a necessary source of revenue, that they were a necessary means for the federal government to regulate trade, that they could become a necessary source of income for the central government, and that the South's disproportionate need for naval protection justified its disproportionate share of export taxes. Attempts to limit the absolute prohibition on export taxes failed. James Madison's attempt to require a supermajority for passage of an export tax was barely defeated by a 6–5 vote. The absolute prohibition on export taxation then passed by a 7–4 vote. It provoked little discussion during the ratifying conventions.

Cases interpreting the Export Taxation Clause have made clear that the clause "strictly prohibits any tax or duty, discriminatory or not, that falls on exports during the course of exportation," and that the protection extends to "services and activities closely related to the export process." United States v. IBM Corp. (1996). Unlike its analysis of Commerce Clause cases, the Court has kept distinct what is intended for export and what remains available for local trade. Although a product may ultimately be intended for export, the Export Taxation Clause does not prohibit federal taxation of goods and services before they enter the course of exportation, or even of services and activities only tangentially related to the export process. Thus, the Court has invalidated taxes on bills of lading, ship charters, and marine insurance; but it has upheld federal assessments on preexport goods and services, such as an excise tax on manufactured tobacco, a tax on the manufacturing of cheese intended for export, and a corporate income tax on exporters.

Although the Export Taxation Clause was integral to the evaluation of numerous levies between 1876 and 1923, the clause did not make its way back onto the Court's docket until 1996. After over seven decades of obscurity, the Court utilized the Export Taxation Clause twice between 1996 and 1998 to strike down federal tax statutes. In United States v. IBM Corp., the Court relied on the Export Taxation Clause to strike down a nondiscriminatory federal excise tax on insurance premiums paid for the purpose of insuring goods against loss during exportation. The Court also expressly rejected the government's arguments that the dormant Commerce Clause and Import-Export Clause jurisprudence altered or governed the interpretation of the Export Taxation Clause. In United States v. United States Shoe Corp. (1998), a unanimous Court relied on the Export Taxation Clause to strike down, to the extent it applied to exports, the Harbor Maintenance Tax. The tax was an excise imposed on any "port use." The Court rejected the government's contention that the charge was a valid user fee rather than a tax.

Although the original purpose of the Export Taxation Clause was to prevent sectional favoritism by Congress, the Court has chosen to enforce the flat ban that the Framers placed into the Constitution's text, rather than seeking to measure an export tax's discriminatory effect. Under the Commerce Clause, Congress retains the power to regulate exports, even to the extent of creating embargoes. It may not, however, utilize export taxes as a means of regulation.

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David F. Forte
Professor of Law
Cleveland-Marshall College of Law