International Business Law Case Study
· State of Tennessee passed
. Labeling Act, requiring any person selling meat products which are the products of any foreign country to the United States “shall so identify each product and its foreign origin.”
. In a nutshell: a label, sign, or other indicator is required for any products sold in Tennessee which are of foreign origin to the US
· Licensing Act, requires the registration and the annual licensing of “each person, firm or corporation in the State of Tennessee engaged in the business of manufacturing, buying, selling, handling, processing, packing or distributing imported meat or imported meat products, either at retail or wholesale.”
. Manufacturers, packers or processors have to pay an annual licensing fee of $1500
. Wholesale dealers or distributors have to pay an annual licensing fee of $500
· Tupman exclusively deals in interstate and foreign commerce
· Tupman’s sales declined in July 1965, the effective date of the Acts
· Tupman Thurlow Company initiated an action against the State of Tennessee
· Complaint stated that the Labeling and Licensing Acts violated:
. Commerce Clause:
. The Acts constitute an unreasonable burden and restriction upon foreign and interstate commerce
. The Acts constitute an effort by the State of Tennessee to levy and collect duties upon foreign goods imported into the State of Tennessee
· The complaint also stated that the Acts were in violation with the Supremacy Clause and the 14th amendment. However, as case proceedings went on, the Plaintiff dropped reliance on these claims.
· The court’s opinion is based on the Acts violating the Commerce clause, without reference to the Supremacy Clause or the 14th amendment
Questions from #9:
What do you think was the legal basis for this challenge to the Tennessee law?
· In violation with commerce clause
. Solely Congress has the power to regulate commerce with foreign Nations
· The Acts were an attempt by Tennessee to regulate foreign commerce, discriminating unfairly towards foreign meat
· The defendant’s legal basis was that there were no specific standards for importers of imported meat. Since there are no particular standards, Tennessee law is superfluous and its implementation has no meaning.
What do you think was Tennessee’s argument for passing the law?
· Tennessee’s argument was that it passed the Acts on the basis of protecting public health and safety.
· States are given the power by law to impose restrictions on the basis of protecting public health and safety.
What do you think the court decided?
· Decided for the plaintiff: the acts were discriminatory against foreign products and placed burdens on foreign and interstate commerce
· The court will make a decision in favor of the exporter because the declaration of the law has no purpose
Issue: Are the Labeling and Licensing Acts passed by the State of Tennessee in violation with the United States Constitution?
Rule: “Commerce Clause”
United States Constitution; Article 1, Section 8, Clause 3: The Congress shall have power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes”
As supported by evidence from the Plaintiff’s decrease in sales from 1964 to 1965, the court deduced that the requirements imposed by the Acts placed the Plaintiff’s products at a disadvantageous competitive position and directly contributed to their exclusion from the Tennessee market. The legislation, having the impact of terminating the Plaintiff’s direct sales, creates an undue burden on interstate commerce.
Furthermore, the Labeling and Licensing acts were concluded by the court to be discriminatory in character against foreign meat products. The requirements of the Acts, which were extremely burdensome for business operations, only applied to businesses selling foreign meat or products with foreign meat ingredients. Meats produced in the United States were exempt from these requirements.
Following this reasoning, the Labeling and Licensing Acts imposed unreasonable requirements and discriminatory burdens upon interstate and foreign commerce. The Acts passed by Tennessee are therefore in violation of the Commerce Clause, as the power to regulate interstate and foreign commerce falls solely with Congress.