States and Cuba and the act of Congress approved December 17, 1903, there quoted, imports from Cuba were not entitled to the reduction of the duties imposed by the act of July 24, 1897, until December 27, 1903, the date proclaimed by the President of the United States and the President of Cuba for the commencement of the operation of the treaty. The answer to the second contention depends upon section 20 of the Customs Administrative Act, as amended by the act of December 15, 1902. 32 Stat. 753. Section 20 provides as follows:

"That any merchandise deposited in any public or private bonded warehouse may be withdrawn for consumption within three years from the date of the original importation on payment of the duties and charges to which it may be subject by law at the time of such withdrawal: Provided, That the same rate of duty shall be collected thercon as may be imposed by law upon like articles of merchandise imported at the time of the withdrawal: And provided further, That nothing herein shall affect or impair existing provisions of law in regard to the disposal of perishable or explosive articles."

The section needs no interpretation. It is clear that it subjects merchandise to the duties prescribed by law at the time it is withdrawn for consumption. Mosle v. Bidwell, 130 Fed. Rep. 334. And our inquiry then must be, when were the sugars in controversy withdrawn for consumption? If before December 27, 1903, they were dutiable under the act of July, 1897; if after December 27, they were entitled to 20% reduction of the duties prescribed by that act.

Between September 29 and October 10 withdrawal entries were made of the entire cargo and duties at regular rates paid thereon. The delivery permits were lodged with the storekeeper at the same time. This put the sugars at the absolute disposition of the importers. It may be that the Government had the custody of them, or rather the joint custody with the importer. Section 2960, Rev. Stat. But it was a mere manual custody, not claiming any right over them or right to

detain them. Indeed it may be said that the payment of duties and the delivery of the permit to the storekeeper operated to give up the custody which the Government had jointly with the importer before the payment of duties. It is, however, pointed out by appellant that by section 2977, Rev. Stat., merchandise upon which duty has been paid may remain in the warehouse, "in the custody of the officers of the customs, at the expense and risk of the owners of such merchandise, and if exported directly from such custody to a foreign country within three years, shall be entitled to return duties." Whether this section covers a case where a permit has been issued it is not necessary to decide. It is enough to say that the section is part of the plan for the payment of drawbacks. The merchandise is identified by remaining in the warehouse. Section 2978, Rev. Stat. We think, .therefore, that where duties are paid upon merchandise and permits issued for its removal which have been delivered to the storekeeper, it is withdrawn for consumption and is subject to duties as of that time.

A contention is made based on the date of ultimate liquidation of duties, which was not until after December, 1903. In case No. 269 the effect of liquidation was apparently urged to be to entitle the importer to the benefit of the treaty, which it was contended went into operation April 10, 1903, although the act giving the treaty effect was not passed until after the importation of the sugars. In other words, it was said "before the duties had been liquidated; so much of the statute as imposed more than eighty per cent of the regular duties upon these imports was repealed, and the repeal by its very terms. took effect as of a date prior to the date of the importation." It was not necessary in No. 269 to notice the contention, as we decided the treaty did not go into effect until December 27, 1903. In the case at bar the date of final liquidation is seemingly given greater force. It is contended that "there was no liquidation until after the convention was concededly in effect," and was therefore "required to be made in accordance

with the tariff act as then in force." In other words, whether the treaty went into effect in April or in December was unimportant, being in effect under the act of Congress when liquidation was made it determined the rate of duty. The proposition, if true, is decisive and makes all others in the case valueless. Appellant submits the proposition without other argument than its statement, and we may, therefore, reply to it briefly. It is plainly in contradiction of section 20 of the Customs Administrative Act as amended. That section subjects merchandise to the rate of duty in force at the time of withdrawal for consumption, not the rate in force at the time of liquidation. See United States v. Burr, 159 U. S. 78, 83, 84. Judgment affirmed.

PEOPLE OF THE STATE OF NEW YORK UPON THE RELATION OF THE NEW YORK CENTRAL AND HUDSON RIVER RAILROAD COMPANY v. MILLER.

SAME v. SAME.

ERROR TO THE SUPREME COURT OF THE STATE OF NEW YORK.

SAME v. KELSEY.

SAME v. SAME.

SAME v. SAME.

ERROR TO THE COURT OF APPEALS OF THE STATE OF NEW YORK.

Nos. 81, 82, 586, 587, 588. Argued April 9, 1906.-Decided May 28, 1906.

If the state statute as construed by its highest court is valid under the Federal Constitution this court is bound by that construction. The State of origin remains the permanent situs of personal property notwithstanding its occasional excursions to foreign parts, and a State may tax its own corporations for all their property in the State during the year even if every item should be taken into another State for a period and then brought back.

The taxation of cars under the New York franchise tax law, belonging to a

202 U.S.

Argument for Plaintiff in Error.

New York corporation is not unconstitutional as depriving the owner of its property without due process of law because the cars are at times temporarily absent from the State-it appearing that no cars permanently without the State are taxed.

THE facts are stated in the opinion.

Mr. Albert H. Harris, with whom Mr. Ira A. Place and Mr. Thomas Emery were on the brief, for plaintiff in error:

The subject matter taxed, as herein complained of, is the use and exercise of the franchise, privilege and business of transportation of persons and commodities. Ownership or possession of the corporate franchise to be or to do, do not subject the owner or possessor to the tax.

Notwithstanding the continued existence of the corporation, and continued existence and possession of the corporate capacity, powers, faculties and franchises with which it was at its creation endowed, if none of its capital is employed within this State during the tax year, section 182 imposes no tax. People ex rel. Singer Mfg. Co. v. Wemple, 150 N. Y. 46; People ex rel. Niagara River Hydraulic Co. v. Roberts, 30 App. Div. 180, which the Court of Appeals affirmed on opinion below. 157 N. Y. 676.

Exercise of the franchise is the foundation for imposition of the tax, and the average amount of capital stock employed is the basis of computation of the tax. People ex rel. U. V. Copper Co. v. Roberts; 156 N. Y. 586; People ex rel. Commercial Cable Co. v. Morgan, 178 N. Y. 433; People ex rel. Brooklyn R. T. Co. v. Morgan, 57 App. Div. 335; aff'd 168 N. Y. 672; People ex rel. Mutual Trust Co. v. Miller, 177 N. Y. 51.

The use and exercise of the franchise, privilege or business of transportation thus taxed is that of carrying on commerce either intrastate, interstate or foreign. The general unrestricted power to contract for the transportation of persons and property, possessed by plaintiff in error, embraced the power not only to make contracts at places foreign to this State, but also to make contracts for such transportation to

Argument for Plaintiff in Error.

202 U.S.

and from points and via routes in foreign States and countries. Railroad Law, N. Y. § 78; Bank of Augusta v. Earle, 13 Pet. 519; Day v. O. & L. C. R. R. Co., 107 N. Y. 129; Matter of N. Y. L. & W. Ry. Co., 35 Hun, 220; Matter of Townsend, 39 N. Y. 171.

It is necessary to the power of taxation upon the use and exercise of a franchise, privilege or business, that such use and exercise thereof be carried on within the territorial domain of the taxing sovereignty; and that the franchise, privilege or business so there used and exercised be such as is within the organic prerogative of that sovereignty to tax the use of.

The State grants the privilege of exercising a public franchise, and, in consideration of that grant, exacts from those who accept and avail themselves thereof, payment, to be computed upon the basis of the amount of capital.

The business transacted and the functions exercised in movements of relator's cars outside of this State are primarily those commanded and compelled by the Federal Government in its power to regulate interstate commerce.

So far as such exercise of franchises affords warrant for state taxation, computed upon the basis of the capital employed therein or otherwise, and as well regarding such exercise of franchises as is involved in the portion of car movements, which is outside of this State, as also such exercise of franchises as have regard to transportation wholly outside of this State, the right and power of state taxation is exclusively that of the respective States wherein the cars are thus employed. The Delaware Railroad Tax, 18 Wall. 206, 232; Erie Railroad Co. v. Pennsylvania, 158 U. S. 431, 436:

Transportation between respective points one thereof within and the other without, or via routes in part within and in part without, a State, is interstate or foreign commerce. State &c. v. Knight, 192 U. S. 21.

Refusal of observance of the rule of per annum average of capital as the basis of assessment where the capital is employed in interstate commerce constitutes discrimination