Export Taxation Clause
No Tax or Duty shall be laid on Articles exported from any State.
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 (particularly cotton) in the late eighteenth century, the South believed that it would have borne a disproportionate burden from export taxes. In addition to the 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 (because slaves were then very important in harvesting cotton). The Southerners 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 for the central government, that they were an important means for the federal government to regulate trade, 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.
Scholars point out that the Export Taxation Clause was part of a complex set of compromises related to the South’s economic interest in slaves and in the products that slaves produced. They argue that inclusion of the clause was linked to the removal of a two-thirds voting requirement to pass a navigations act and the inclusion of a twenty-year limitation of Congress’s power over the slave trade (Article V).
What the South did not realize until John C. Calhoun noted it in 1828 was that by taxing imports of goods that competed with Northern manufacture, Congress could increase the value of Northern goods relative to Southern ones, all without ever actually taxing exports. Calhoun stated, “To the growers of cotton, rice, and tobacco, it is the same, whether, the Government takes one-third of what they raise, for the liberty of sending the other two-thirds abroad, or one-third of the iron, salt, coffee, cloth, and other articles they may need in exchange, for the liberty of bringing them home.”
Despite the position of Calhoun and the findings of contemporary economists that import duties are indirect export taxes, the federal courts have relied on a textual, not an economic, definition of the Export Taxation Clause. The Court will enforce the flat ban that the Framers placed into the Constitution’s text, rather than seeking to measure an export tax’s discriminatory effect.
Moreover, unlike its analysis of Commerce Clause cases, the Supreme 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 or of imports before they enter the course of exportation. Nufarm America’s Inc. v. United States (2008). But the prohibition does extend to services and activities directly 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 pre-export 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. Congress does retain the power to regulate exports under the Commerce Clause, even to the extent of creating embargoes, but it may not utilize export taxes as a means of regulation.
Although the Export Taxation Clause was integral to the judicial 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. (1996), the Court relied on the Export Taxation Clause to strike down a nondiscriminatory federal excise tax on insurance premiums paid to foreign insurers, but which were, in this case, 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.
Congress may not tax exports, but under the Commerce Clause, it constitutionally may impose an embargo on goods for export, even though—in an economic sense—an embargo is functionally equivalent to an unlimited export tax.
In sum, 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. However, Congress may modify procedural remedies available for claims based on a violation of the Export Taxation Clause. So, for example, the Court recently held that Congress may place time limitations on export clause claims. See United States v. Clintwood Elkhorn Min. Co., 553 U.S. 1 (2008).">
Ben Baack et al., Constitutional Agreement During the Drafting of the Constitution: A New Interpretation, 38 J. LEGAL STUD. 533 (2009)
Erik M. Jensen, The Export Clause, 6 FLA. TAX. REV. 1 (2003
- RONALD D. ROTUNDA & JOHN E. NOWAK, TREATISE ON CONSTITUTIONAL LAW: SUBSTANCE AND PROCEDURE §1.1(q)(v) (5th ed. 2012)
Turpin v. Burgess, 117 U.S. 504 (1886)
Fairbank v. United States, 181 U.S. 283 (1901)
Cornell v. Coyne, 192 U.S. 418 (1904)
Thames & Mersey Marine Insurance Co. v. United States, 237 U.S. 19 (1915)
United States v. Hvoslef, 237 U.S. 1 (1915)
W.E. Peck & Co. v. Lowe, 247 U.S. 165 (1918)
National Paper & Type Co. v. Bowers, 266 U.S. 373 (1924)
Mulford v. Smith, 307 U.S. 38 (1939)
United States v. IBM Corp., 517 U.S. 843 (1996)
United States v. United States Shoe Corp., 523 U.S. 360 (1998)
Nufarm America’s Inc. v. United States, 521 F.3d 1366 (Fed Cir. 2008)
Consolidation Coal Co. v. United States, 528 F.3d 1344 (Fed. Cir. 2008)
United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1 (2008)