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The power to tax and the power to regulate interstate and foreign commerce are separate and distinct powers. Neither is dependent on the other. Even though the equalization fee could not constitutionally be imposed by the Congress in the exercise of the power to tax, that conclusion would not deny the power of Congress constitutionally to impose the equalization fee as an exercise of the power to regulate interstate and foreign commerce. Conversely, even though Congress could not constitutionally impose the equalization fee upon certain sales as an exercise of the power to regulate interstate and foreign commerce, that conclusion does not deny the power of Congress constitutionally to impose the equalization fee as an exercise of the power to tax. The present discussion, however, relates entirely to the power of Congress to impose the equalization fee upon such sales as an exercise of its power to regulate interstate and foreign commerce. The imposition of the equalization fee as an exercise of the taxing power is dealt with in Part IV.

The courts have sustained the use of monetary exactions of various forms as proper exercises of the power of Congress to regulate interstate and foreign commerce.

A. IMMIGRATION HEAD DUTY. The Act entitled "An act to regulate Immigration" approved August 3, 1882 (c. 376, 22 Stat. 214), levied a duty at the rate of 50 cents an immigrant in respect of each immigrant brought by steam or sail vessel to the United States. The duty was to be paid by the master or owner of the vessel to the collector of customs and was to be set apart in the Treasury as a special fund to be known as “the immigration fund." This fund was to be used, under the direction of the Secretary of the Treasury, for defraying the expenses of administering the act for the care of immigrants arriving in the United States and for the relief of immigrants.

The constitutionality of this statute was assailed in the Head Money cases arising in the Circuit Court of the Eastern District of New York (1883, 18 Fed. 135). In an opinion sustaining the statute Blatchford, J., held that the Act was“ manifestly, in its general purpose and effect, an act regulating commerce, and that since Congress had the power to prohibit the commerce in question it had power to authorize it on conditions to be observed. The court said (p. 138, 140): The permission to bring in alien passengers

on paying the duty is, in fact, the granting of a license to carry on such commerce, and the duty is a license fee, measured by the number of passengers. Granting such license, for a fee, is regulating commerce

It is a tax laid to create a fund to be so used (for the relief of immigrants, etc.), which it must be assumed Congress has said is a tax laid to provide for the general welfare of the United States; and it is not the province of a court to say to the contrary.

Upon appeal to the Supreme Court the objection that the duty as to immigrants was an unconstitutional exercise of the taxing power was overruled. (The Head Money cases 1884, 112 U. S. 580.)

The court said (p. 595, 600):

The burden imposed on the shipowner by the statute is the mere incident of the regulation of commerce-of that branch of foreign commerce which is involved







in immigration. * We are clearly of opinion that, in the exercise of its power to regulate immigration, and in the very act of exercising that power, that it was competent for Congress to impose this contribution on the shipowner engaged in that business.

It is enough to say that, Congress having the power to pass its laws regulating immigration as a part of commerce of this country with foreign nations, we see nothing in the statute by which it has here exercised that power, forbidden by any other part of the Constitution.

The Act of August 3, 1882, above referred to, was amended by the Act of March 3, 1903 (c. 1012, 32 Stat. 1213), but the essential principle of a fee imposed as an incident to the regulation of commerce was preserved, and in the Immigration Act of February 5, 1917 (c. 29, 39 Stat. 874), a similar fee, increased to $8, was imposed. This fee is still in effect.


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Section 15a of the Interstate Commerce Act (c. 91, 41 Stat. 456), containing what has been termed the “recapture clause,” provides that the Interstate Commerce Commission shall fix rates which will enable the railroads of the country to receive a fair net operating

their aggregate property, and that any excess over such amount in the case of any individual road, shall be contributed, one-half into a reserve fund to be administered by the carrier and used for designated purposes and one-half to be paid into a general railroad contingent fund to be administered by the commission for the purpose of supplying credit to weaker roads.

The Supreme Court, in the case of Dayton-Goose Creek Railway Co. v. United States (1924, 44 Sup. Ct. 169), upheld the monetary exaction imposed by the above Act upon the more prosperous roads as a valid exercise of Congress's power to regulate commerce. The plaintiff railroad in this case sought to restrain the collection of its earnings in excess of the fixed net income of 6 per cent on the value of its property, alleging that these provisions were unconstitutional. It appeared that the plaintiff's volume of intrastate traffic exceeded that of its interstate and foreign traffic. The court recognized, however, that the act sought affirmatively to build up a system of railways prepared to handle promptly all the interstate traffic of the country and held that this great purpose might be validly achieved under the power of Congress to regulate interstate and foreign commerce.

The analogy between the recapture clause in the Interstate Commerce Act and the provisions of the McNary-Haugen bill is close. In the opinion of Mr. Chief Justice Taft, the monetary exaction in the recapture clause regulates commerce in the sense that the exaction is intended “to foster, protect, and control the commerce, with appropriate regard to the welfare of those who are immediately concerned as well as the public at large, and to promote its growth and insure its safety.” So in the McNary-Haugen bill, the monetary exaction upon each sale of a basic agricultural commodity fosters, promotes, and controls commerce in such commodity, promotes the growth of foreign commerce in the commodity, and insures the financial safety of sales of such commodity in interstate and foreign commerce. In each case the regulatory effects are obtained by a monetary exaction which aids in equalizing the financial benefits conferred on the various persons subject to the Act.


Section 6 of the Act of March 3, 1865 (c. 80, 13 Stat. 493), provided that there should be collected and paid on goods grown or produced in countries east of the Cape of Good Hope, when imported from places west of the Cape, a duty of 10 per centum ad valorem in addition to duties imposed on such goods when imported directly from the place of growth. In Russell v. Williams (1882, 106 U. S. 623), the defendant collector assessed this duty of 10 per centum ad valorem on tea, the product of China, imported from England, in addition to a duty of 15 cents per pound under the Act of July 14, 1870 (c. 255, 16 Stat. 256), which provided that in lieu of duties theretofore imposed by law the duties specified in the Act of July 14, 1870, should be collected. The plaintiff contended that this provision repealed the 10 per cent provision in the Act of March 3, 1865, and sued to recover the additional duty imposed by that Act which he alleged was not lawfully exacted. The court said (p. 624-5):

This depends on the question whether the provision of the act of 1865 was a general commercial regulation for the encouragement of direct trade with those countries, as well as for the benefit of American shipping, or whether it was intended simply as an increase of duties for purposes of revenue. If the former, it would be independent of the duties imposed on the articles, and would not be repealed by a modification of them; if the latter, the result might be different. We are of opinion that it was intended as a general regulation of com

The object of the law was to favor direct importation from countries east of the Cape, without regard to the amount of dutics imposed on the articles imported. This would incidentally benefit our own shipping, as that principally employed in the direct trade; whereas importation of the same goods to European ports, and thence to this country, would generally be made in foreign vessels.






The following are legislative precedents for monetary exactions imposed by Congress in pursuance of the power to regulate interstate and foreign commerce:

(1) Section 5 of the Panama Canal Act of August 24, 1912 (c. 390, 37 Stat. 560), provides for the collection of tolls upon vessels passing through the canal.

(2) The Water Power Act, approved June 10, 1920 (c. 285, 41 Stat. 1063, 1069), authorizes the Water Power Commission to fix the reasonable annual charges which should be paid by the licensee under the act.

(3) Section 5 of the United States Cotton Standards Act, approved March 4, 1923 (c. 288, 42 Stat. 1517, 1518), provides that the Secretary of Agriculture might cause to be collected reasonable charges for licenses issued in pursuance of this Act, and that the amount so collected should be used by the Secretary in paying the expenses of the department thereby incurred.

(4) Section 6 of the United States Grain Standards Act of August 11, 1916 (c. 313, 39 Stat. 446, 484), authorizes the Secretary of Agriculture to fix reasonable fees in case of an appeal.

(5) Sections 4185 and 4186 of the Revised Statutes, under the title “Regulation of commerce and navigation”, contained provisions enacted as early as 1792 authorizing officers of the Government to collect and retain as their compensation fees imposed to cover the cost of the regulation of commerce and navigation by the Government. While subsequent acts (see Act of June 19, 1886, c. 421, 24 Stat. 79; Act of June 10, 1890, c. 407, 26 Stat. 140) have changed the policy of paying the officers of the Government directly from the fees received, there are many provisions in the navigation laws requiring fees to be paid to the United States for regulatory services.

The Secretary of Commerce shall establish and promulgate a proper scale of fees to be paid for the admeasurement of the spaces to be deducted from the gross tonnage of a vessel. (Sec. 3 of Act of August 5, 1882, c. 398, 22 Stat. 300, and sec. 4 of Act of March 2, 1895, c. 173, 28 Stat. 741.)

(6) Collectors of customs are required to issue 'certificates, certified copies of documents, etc., from the records of their offices upon payment of specified fees. (Subsec. I of sec. 30 of the Merchant Marine Act, 1920, c. 250, 41 Stat. 1002).

All vessels subject to enrollment or license shall be liable to the payment of the fees established by law for services of customs officers incident thereto. (R. S. 4384; subject to limitations of subsequent acts.)

(7) Shipping fees abolished by the Act of June 19, 1886, c. 421, 24 Stat. 79, included fees charged for: "Measurement of tonnage and certifying the same, issuing of license or granting of certificate of registry, record, or enrollment, including all indorsements on the same and bond of oath; indorsement of change of master; certifying and receiving, manifest, including, master's oath, and permit;" inspecting, examining, and licensing steam vessels, including inspection certificates and copies thereof; and licensing of master, engineer, pilot, or mate of a vessel, etc.

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Your Committee concludes that the regulation of interstate and foreign commerce through the means of fees and other monetary exactions has not only widespread legislative precedents but has been so squarely sustained by the Supreme Court in decided cases as to leave no doubt as to the constitutionality of the enactment by the Congress of such a regulatory device.




The pertinent provisions of the bill have been outlined above (p. 61).

The interstate and foreign commerce features of the particular sale or disposition upon which the fee is imposed may be complete, or in some cases if the sale or disposition is regarded as an isolated transaction, may be entirely absent. In practically all cases, however, if the sale or disposition is considered in its relation to the aggregate of marketing sales of the commodity, it will be seen to bear the closest possible relation to interstate and foreign commerce.

It is to be borne in mind that any unit of a basic agricultural commodity that goes untaxed nevertheless gets the benefits of the ratio price established under the bill. Yet if the equalization fee is not paid on such unit, the particular unit does not bear its share of the burden of the losses. For instance, assuming that one-fifth of the bushels of wheat in the country escaped the equalization fee while retaining the benefits of the established ratio price and that the equalization fee were 10 cents a bushel, the remaining four-fifths of the wheat supply would be burdened with this loss and the equalization fee would need to be increased from 10 cents to 121 cents. If the sales on intrastate commerce escape the equalization fee and the sales in interstate or foreign commerce pay the fee, it is apparent that the unregulated intrastate commerce will be casting a very substantial burden upon the regulated interstate and foreign commerce. If the equalization fee were not increased to meet the losses resulting from the evasion of the sales in intrastate commerce, the result would be that, to a proportionate extent, sales of the surplus wheat in foreign commerce would be discouraged, that commerce would be obstructed, and the purposes of the bill to stimulate commerce would be nullified.


The problem is, To what extent may Congress in the exercise of its power to regulate commerce with foreign nations and among the several States impose its regulations upon the various classes of sales and other transactions covered by the bill?


The problem of whether the regulation under the power to regulate interstate and foreign commerce may take the form of a fee or other monetary exaction has been discussed above. The following discussion concerns the question as to what transactions the fee may be constitutionally applied. Illustrative transactions that are typical of the constitutional problems presented may be taken as a basis for discussion.

(1) Sales by A in State X to B in State Y, A to make delivery in State Y to B.


(a) A wheat grower in Montana sells his wheat to a miller in Minnesota, the wheat to be delivered to the miller at his warehouse in Minnesota.

(b) A cattle raiser in Kansas ships his cattle upon consignment to Chicago, where they are sold to a packer and delivered at his stockyards in Chicago.

The above sales may, of course, be made either directly by the farmer or through an agent.

The above sales are all within the jurisdiction of Congress to regulate under the commerce clause. Commerce comprehends intercourse for the purposes of trade in all its forms, including transportation, purchase, and sale of commodities. Contracts to buy, sell, or exchange goods to be delivered in pursuance thereof in commerce among the several States are a part of interstate commerce. Where goods in one State are transported to another in pursuance of a sale, interstate commerce embraces not only the transportation but the sale itself. See, for instance, cases cited in Dahnke-Walker Co. v. Bondurant (1921, 257 U. S. 282) and Weeks v. United States (1918, 245 U. S. 618).

(2) Sales by A in State X to B in State Y, delivery to be made to B at the office of a common carrier in State X, for shipment by B to State Y.

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