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The problem presented is, Does the establishment of the ratio price deprive any person, in violation of the due-process clause of the Fifth Amendment, of the privilege of selling or contracting to sell at any price he wishes ?
(The imposition of the equalization fee will be discussed in Parts III and IV.)
DISCUSSION. The only function of the ratio price is to establish a basis for the purchases and sales of the corporation. Any person is free to buy or sell without regard to the ratio price. If a special emergency has not been declared in respect of a particular agricultural commodity, the ratio price will not even be published. The bill merely assures the existence of a buyer (the corporation) at the ratio price, or at a price based upon the ratio price.
Your committee believes that the establishment of the ratio price does not interfere with liberty of contract and is in that respect unquestionably constitutional. Any objection to the bill based upon interference with liberty of contract is the result of misunderstanding.
THE EQUALIZATION FEE CONSIDERED AS A REGULATION OF
INTERSTATE AND FOREIGN COMMERCE.
III.-A. THE POWER OF CONGRESS TO REGULATE INTERSTATE AND FOREIGN COMMERCE BY MEANS OF A MONETARY EXACTION.
THE PROVISIONS OF THE BILL.
The McNary-Haugen bill provides (secs. 201-206) for the imposition of an equalization fee upon the sale or other disposition of basic agricultural commodities.
A. WHEAT, RICE, AND CORN.
In the case of wheat, rice, or corn the fee is imposed upon the first sale for milling or other processing for market, or for resale, or for delivery to a common carrier, and also upon the milling or other processing for market in case prior thereto there has been no sale of the wheat, corn, or rice, within the definition given that term.
It is to be noted that only sales to purchasers contemplating further marketing, i. e., sales of wheat, rice, or corn for milling or processing by the purchaser with a view to marketing, the milled or processed product, or sales with a view to the resale by the purchaser of the wheat, rice, or corn itself, are made subject to the fee; except that sales by one producer to another, or by a producer directly to a consumer, are made subject to the fee if the producers or the producer and consumer are not neighbors but are located so far apart as to necessitate delivery of the commodity by a common carrier. In other words, sales to a neighboring producer for seed purposes or sales by a producer directly to a neighboring consumer, as by the huckster who produces his own corn, the commodity being transported by the producer or consumer or a private carrier, are both exempt. Furthermore, sales by a producer to a producer, even though involving transportation by a common carrier, are subject to a further exemption in the amount of $100 a year (sec. 206 (e) (3)).
In the case of transfers to a cooperative association, the sale through the association and not the transfer to it is made subject to the fee, regardless of whether the association obtains actual title.
If a sale is made before the declaration of the special emergency, though the marketing of the commodity is not completed until after such time, such sale is not subject to the fee, inasmuch as the seller does not benefit from the establishment of the ratio price. The fee therefore is imposed upon the first sale of the commodity occurring after the declaration of the special emergency, for except under special contractual arrangement it is such seller that would benefit from the increase in value due to the establishment of the ratio price. Similarly a sale in which title passes after the declaration but in pursuance of a contract to sell at a fixed price entered into before the emergency is not subject to the fee. The fee will be collected upon the sale by the purchaser who will benefit from the ratio price, and not upon the sale by the seller who contracted to sell at the fixed price without knowledge of the future establishment of ratio prices in respect of the commodity. The converse situation that might be assumed to exist upon the termination of the special emergency in respect of a commodity will practically not come into effect because the decline in prices of the commodity thereafter will probably be much slower than the sudden increase upon the establishment of the ratio prices for the commodity.
In order to prevent escape from the imposition of the fee, the milling or processing of corn, wheat, or rice is made subject to the fee if there has not been a sale of the commodity prior to its milling or processing and after the declaration of the special emergency.
B. CATTLE, SHEEP, AND SWINE.
In the case of cattle, sheep, and swine the fee is imposed under somewhat the same circumstances as in the case of wheat, rice, or
The differences arise mainly from the fact that a person holding cattle, sheep, or swine for feeding or fattening is in part the producer of the animals. As such he participates in the increase due to the establishment of the ratio price and the fee should therefore be based upon the increased value of the animal as it leaves his hands. Consequently the first sale of cattle, sheep, or swine destined for slaughter for market, without intervening holding for feeding or fattening (other than feeding in transit), is made subject to the fee. It is to be noted that only sales contemplating further marketing, i. e., sales to a slaughterer for marketing by him of the resulting products or to a person for resale with such end in view and without such intervening feeding and fattening, are made subject to the fee.
Sales of milk cattle for milk purposes and sales of cattle, sheep, or swine for breeding purposes are exempt entirely. Furthermore, sales
between producers may be exempt by the corporation in the amount of $100 a year (sec. 206 (e) (3)).
The exceptional provisions as to transfers to cooperative associations, sales before the declaration of an emergency of a commodity whose marketing is not completed until after such time, and sales after such time in the case of a contract to sell at a fixed price entered into before such time-all extend to cattle, sheep, and swine; and a provision equivalent to that in respect of milling by the producer himself is included in the case of slaughter of cattle, sheep, or swine by the producer.
C. FLOUR, WOOL, AND FOOD PRODUCTS OF CATTLE, SHEEP, OR SWINE
In the case of flour, wool, and food products of cattle, sheep, or swine, the first sale only is subject to the fee, with exceptions similar to those abowe noted as to transfers to a cooperative association, sales before the declaration of an emergency, sales in pursuance of a contract to sell at a fixed price, and sales between producers in the amount of $100 a year.
D. UNDERLYING PRINCIPLES IN IMPOSITION OF FEE.
In the imposition of the fee there are to be noted underlying principles which may be roughly stated as follows:
(1) The fee is imposed in almost all cases upon transactions occurring in the current of commerce flowing through the usual channels of interstate marketing. In the case of wheat or cattle, for instance, this current would be from producer through miller or packer to consumer. The transactions subjected to the imposition are not for the most part isolated transactions in intrastate commerce, but transactions contemplating a series of future transactions terminating in most instances in sales to consumers in other States or in foreign countries.
(2) The fee is imposed upon the producer who is the ultimate beneficiary of the increase in price resulting from the establishment of ratio prices in respect of the commodity. This follows the principle of the assessment of the cost of benefits to the persons benefited.
(3) Exemption in great part of commodities to be used for seed and breeding purposes.
(4) Avoidance of retroactive effect by confining the imposition of the fee to transactions occurring after the special emergency is declared.
(5) Exemption, for sake of administrative simplicity, of the greater part of the sales between producers and in some cases of sales by the producer directly to neighboring consumers.
It is believed that the above-deduced principles show that the imposition of the equalization fee is not arbitrary, does not in its application impair existing contract obligations, and has due regard for and does not dislocate the normal current of commerce in the commodities. It would therefore seem that the only constitutional question remaining in respect of the fee, that is at all in doubt, is: May the fee be imposed in the exercise by Congress of its power to tax, or its power to regulate interstate and foreign commerce, or both, and if attributable to the power to regulate interstate and foreign
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commerce, what are the limits as to the transactions which may under such power be brought within the scope of the bill?
E. COLLECTION OF FEE.
The method of collecting the equalization fee is to be prescribed by regulation by the corporation. The Act contemplates, however, that the fee will in most cases be collected by the purchaser from the seller in respect of each taxable sale or other disposition. Usually this will be done by withholding part of the purchase price. The purchaser may be required to issue to the seller a certificate which shall be evidence of the participating interest of the seller in the equalization fund for the commodity. Such receipts will be issued by and obtained from the corporation either directly or through other Government agencies such as the Federal Reserve System or the Post Office Department. The bill also provides that the fees may in the discretion of the corporation be collected through periodical returns, presumably to be made to the corporation in much the same manner as in the collection of many of the internal-revenue excise taxes.
F. PURPOSE OF FEE.
The remaining aspects of the necessity for the fee that have legal significance may be outlined as follows: Assuming a surplus of any basic agricultural commodity, it becomes necessary in order to raise the domestic price to the level of the ratio price and to keep it there that the corporation purchase in the domestic market certain amounts of the commodity. These purchases are to be made at the ratio price. The corporation must then either hold the commodity for sale at such future time as the domestic market price may go above the ratio price or else sell the commodity abroad at the world price. (See secs. 43 and 44.)
Inasmuch as the world price will be lower than the ratio price, the producer can not sell abroad at the world price without sustaining a loss. He therefore unloads the domestic surplus on the domestic market with the resultant lowering of the domestic price to the world price level. Foreign commerce in the basic agricultural commodities is thereby suppressed and interstate commerce congested. The corporation in purchasing at the ratio price and selling abroad at the world price creates foreign commerce in the commodity. The losses it suffers on each bushel of wheat, for example, sold abroad are paid by the producer in the equalization fee imposed upon the sale of every bushel of wheat whether or not the particular bushel finds its way into the domestic or the foreign market. It would seem, therefore, that the effect of the equalization fee is to stimulate and create commerce with foreign nations and to regulate both domestic and foreign commerce through the equalizing process.
The first problem is, May Congress, in the exercise of its power to regulate commerce with foreign nations and among the several States, impose a fee as a means of accomplishing the regulatory and stimulating results above described ?
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.
Á. 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