author: Chief Justice Burger

text:
    BURLINGTON NORTHERN INC. et al. v. UNITED STATES et al.
    No. 81-1008.
    Argued November 3, 1982
    Decided December 13, 1982

      Burger, C. J., delivered the opinion for a unanimous Court.

      R. Eden Martin argued the cause for petitioners. With him on the briefs were Howard J. Trienens and Thormund A. Miller.

      Elliott Schulder argued the cause for the federal respondents. With him on the briefs were Solicitor General Lee, Deputy Solicitor General Shapiro, John Broadley, Kathleen M. Dollar, Robert S. Burk, and Timm L. Abendroth. William L. Slover argued the cause for respondents City of San Antonio et al. With him on the brief for respondent San Antonio was C. Michael Loftus. Mark White, Attorney General, John W. Fainter, First Assistant Attorney General, Richard E. Gray III, Executive Assistant Attorney General, and James R. Myers and Stuart Fryer, Assistant Attorneys General, filed a brief for respondent State of Texas.
   Chief Justice Burger

delivered the opinion of the Court.

We granted certiorari to clarify the allocation of authority, as between the federal courts and the Interstate Commerce Commission, to set and review rates for movements of coal by rail.

I

This case arose as a result of a 1972 decision of San Antonio, Tex., acting through its City Public Service Board, to substitute coal-generated electricity for natural gas. Toward that end, in 1974, San Antonio entered into long-term contracts to purchase coal from two suppliers in Campbell County, Wyo.; began to construct two coal-fired generating units; and initiated negotiations with Burlington Northern Inc. and Southern Pacific Transportation Co. for contracts to transport coal from Wyoming to the new plants. Although the railroads originally quoted San Antonio a rate of $7.90 per ton for moving coal from Campbell County to San Antonio, economic conditions, which were characterized by rapid inflation, required the railroads to raise the rate to $11.90 per ton. In May 1975, San Antonio filed a complaint with the Interstate Commerce Commission seeking prescription of a just and reasonable tariff.

In October 1976, the Commission rendered a decision, San Antonio v. Burlington Northern, Inc., 3551. C. C. 405 (1976) (San Antonio I), establishing a rate of $10.93 per ton for the San Antonio movement. The Commission emphasized that the prescription was temporary by noting: “The public interest requires that, in view of the parties’ inability to reach an agreement, a rate be prescribed at this time so that the movement may commence. As actual experience is gained, the parties may petition for modification of the prescription if circumstances warrant.” Id., at 417-418. The order was to “continue in full force and effect until the further order of the Commission.” Ibid.

The railroads sought review in the United States Court of Appeals for the Eighth Circuit, claiming, inter alia, that the Commission had erred in not considering the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. 94-210, 90 Stat. 31 (4-R Act), which became effective before San Antonio I was announced. The Court of Appeals affirmed the Commission, reasoning that since the rate was temporary and expressly subject to modification, the parties could return to the Commission when guidelines for implementing the 4-R Act were promulgated, Burlington Northern, Inc. v. United States, 555 F. 2d 637, 648 (1977).

In June 1977, after six months of operation at the San Antonio I rates, the railroads petitioned the Commission for a modification of the rate. In October 1977, the Commission reopened the San Antonio proceeding, and one year later, issued a new order, San Antonio v. Burlington Northern, Inc., 359 I. C. C. 1 (1978) (San Antonio II), finding that when compared to other similar movements, the San Antonio I $10.93 rate was “below a maximum reasonable rate and that modification of that rate [was] warranted.” 359 I. C. C., at 7. After making extensive new cost findings and applying the ratemaking guidelines of the 4-R Act, the Commission set the maximum rate level at $16.12 per ton.

Both San Antonio and the railroads were dissatisfied with this rate and petitioned for reconsideration. In June 1979, a third order was issued, San Antonio v. Burlington Northern, Inc., 3611. C. C. 482 (1979) (San Antonio III), which made certain modifications in the San Antonio II analysis that resulted in a new maximum rate of $17.23 per ton for the San Antonio movement. The railroads then filed tariffs at the $17.23 rate.

Petitions for review of the San Antonio II and San Antonio III prescriptions were filed in the United States Court of Appeals for the District of Columbia Circuit by all the parties. Without expressing an opinion as to whether the rate was too high, as San Antonio claimed, or too low, as the railroads urged, in June 1980, the Court of Appeals decided that aspects of both the San Antonio II and the San Antonio III rate orders were “arbitrary and capricious” and without “defensible rationale.” San Antonio v. United States, 203 U. S. App. D. C. 249, 269, 631 F. 2d 831, 851. The Commission’s orders were vacated, and the case was remanded to the Commission.

It is at this point that the present controversy arose, for the parties sharply disagreed about the effect of the Court of Appeals’ decision on the filed tariffs pending the Commission’s decision on remand. Construing the decision as vacating only the Commission’s orders in San Antonio II and III but not the rates that were filed, the railroads continued to treat the $17.23 rate as the one which San Antonio was required to pay pursuant to 49 U. S. C. §10761 (1976 ed., Supp. IV). San Antonio, on the other hand, interpreted the Court of Appeals’ decision as vacating the $17.23 rate and reviving the rate set by San Antonio I. Accordingly, the shipper unilaterally reduced its payments to the $10.93-per-ton rate set in 1976.

Although we might have thought otherwise, it was not clear to the railroads what legal action should be taken to force San Antonio to pay the filed $17.23 tariff. Several maneuvers were attempted: in its first effort to reestablish San Antonio III as the rate applicable to this period, the carriers filed a new tariff in early November 1980. That tariff, which would have required San Antonio to prepay at the $17.23 rate before coal service would be provided, was suspended by a division of the Commission which agreed with San Antonio that the Court of Appeals’ decision precluded any rate except $10.93.

The railroads asked the Court of Appeals for clarification of its decision. Pending review, however, the parties carried on their controversy in other forums. The railroads again attempted to file a tariff in conformity with San Antonio III. Although this time the tariff was not suspended or rejected by the Commission, San Antonio continued to pay at the San Antonio I rate even after the new tariff’s December 1980 effective date; in addition, it filed a complaint to enforce the San Antonio I rate in the United States District Court for the Western District of Texas. Before the District Court could rule, the railroads countered by filing a petition asking the Commission to clarify its refusal to suspend or reject the new tariff by declaring that this action amounted to a modification of San Antonio I. In addition, the carriers filed a second prepayment tariff — which was also accepted by the Commission. Before the Commission could react to the railroads’ request for clarification, however, the Texas District Court ruled in San Antonio’s favor on an application to preliminarily enjoin the railroads from conditioning service on prepayment of rates that did not conform with San Antonio I. The railroads appealed to the Court of Appeals for the Fifth Circuit.

In April 1981, while the railroads’ appeal was pending in the Fifth Circuit, the Commission finally took the step necessary to end the controversy over what rate applied from the time of the June 1980 decision of the Court of Appeals for the District of Columbia Circuit. In the context of considering the railroads’ request for clarification, the Commission formally vacated its San Antonio I prescription. The order stated that in a later proceeding, the Commission would determine “what the maximum reasonable rate should have been ... for the period during which the vacated maximum rate prescriptions in San Antonio II and III were in effect.” San Antonio v. Burlington Northern, Inc., 364 I. C. C. 887, 894 (1981) (San Antonio IV). Pursuant to 49 U. S. C. § 10327(h) (1976 ed., Supp. IV), this order became effective 30 days later, in May 1981.

It was at this point that the Fifth Circuit decided the railroads’ appeal of the Texas District Court decision. In its holding, that court vacated the preliminary injunction on the ground that only the Commission had jurisdiction to enjoin railroads from collecting their filed tariff rate. In addition, that court denied an application by San Antonio for a stay of the Commission’s San Antonio IV decision, San Antonio v. Burlington Northern, Inc., 650 F. 2d 49, clarified, 652 F. 2d 422 (1981). Thus, when the Commission’s San Antonio IV decision became effective in May 1981, San Antonio finally began to pay for the shipment of its coal at the carriers’ tariff rate of $17.23 per ton.

One month later, on June 30, 1981, the Court of Appeals for the District of Columbia Circuit issued the clarification of its 1980 holding. 211 U. S. App. D. C. 111, 655 F. 2d 1341. It is this clarification that is under review here. Citing Consolidated Rail Corp. v. National Assn. of Recycling Industries, Inc., 449 U. S. 609 (1981) (per curiam), and Atchison, T. & S. F. R. Co. v. Wichita Board of Trade, 412 U. S. 800 (1973), the Court of Appeals held that since it was without authority to determine interim policy pending remand proceedings in the Commission, the effect of the court’s 1980 decision was necessarily to reinstate San Antonio I, which was “revived” by the vacation of San Antonio 11 and 111. 211 U. S. App. D. C., at 114, 655 F. 2d, at 1344. Tariffs set in excess of the San Antonio I rate were therefore declared “unlawful” for the period after the court vacated San Antonio II and III but before the Commission formally vacated San Antonio I. 211 U. S. App. D. C., at 113, 655 F. 2d, at 1343. We granted certiorari. 455 U. S. 988 (1982).

We agree that Consolidated Rail and Wichita Board of Trade control this case, but these holdings require federal courts to defer to the Commission on questions concerning the applicable rates; accordingly, we reverse.

II

In recent years, we have had four occasions to consider federal courts’ authority to alter rail rates regulated by the Interstate Commerce Act. In the first of these, Arrow Transportation Co. v. Southern R. Co., 372 U. S. 658 (1963), a railroad faced with declining revenues had attempted to lower its rates, and the issue before us was whether a Federal District Court had the power to enjoin this reduction at the request of competitors of the railroad and those who shipped by rail. Affirming the District Court’s denial of an injunction, we held that Congress, in the Interstate Commerce Act, meant to “vest in the Commission the sole and exclusive power to suspend” the rates. Id., at 667.

We noted several reasons for this rule. First, a review of the legislative history of the 1910 amendments to the Interstate Commerce Act demonstrated that Congress was dissatisfied with the nonuniformity in rates and inequities that resulted from the 1887 Interstate Commerce Act’s failure to give the Commission power to grant injunctive relief. We noted that the authority to suspend rates granted the Commission by the 1910 amendments would not cure the problem unless the suspension power was exclusive. Id., at 664.

Second, we held that court-ordered injunctive relief would interfere with the careful way in which the Commission’s suspension power takes into account the need of the carrier to receive a reasonable rate of return, and the desire of the shipper to pay only what is lawful. Unlike an injunction, a suspension order is limited to seven months’ duration. Id., at 665-666. The shippers, on the other hand, are fully protected by the reparation provision which requires carriers to reimburse shippers if the Commission later determines that the filed tariff was unreasonable. Id., at 666.

Finally, we emphasized that court-ordered injunctions were inconsistent with the congressional intent to vest rate-making decisions in the Commission, stating:

“Congress meant to foreclose a judicial power to interfere with the timing of rate changes which would be out of harmony with the uniformity of rate levels fostered by the doctrine of primary jurisdiction.” Id., at 668. (Emphasis in original.)

Ten years later, we again considered a federal court’s power to enjoin rail rates in United States v. SCRAP, 412 U. S. 669 (1973). There we reversed a three-judge District Court that had enjoined the Commission from permitting surcharges on shipments of recycled goods. We rejected the argument that injunctive relief could be granted under authority conferred by the National Environmental Policy Act, 42 U. S. C. §4331 et seq., stating that “to grant an injunction in the present context, even though not based upon a substan tive consideration of the rates, would directly interfere with the Commission’s decision as to when the rates were to go into effect, and would ignore our conclusion in Arrow. . . .” 412 U. S., at 697. (First emphasis added; other in original.)

A third case, Wichita Board of Trade, supra, stated our position in even stronger terms. There the Commission had approved certain rate increases but failed, in the District Court’s view, to explain its reasoning adequately. In addition to vacating the order and remanding the case for reconsideration by the Commission, the District Court enjoined the railroads from charging the rates that had been approved in the order. Although we affirmed the remand to the Commission, we nevertheless reversed as to the injunction, reiterating the views we expressed in Arrow that a federal court has no jurisdiction to enter an order that operates to fix rates.

“The only consequence of suspending [an] order is that the railroads may not rely, in some subsequent proceeding, on a Commission finding that the proposed rates were just and reasonable. . . .
“Carriers may put into effect any rate that the Commission has not declared unreasonable. . . . Suspension of the Commission’s order thus does not in itself preclude the carriers from implementing a new rate.” 412 U. S., at 818-819. (Emphasis added.)

Again we noted that Congress channeled all rate decisions to the Commission in the first instance, id., at 820; that court-ordered relief interferes with the delicate balance the Act strikes between the competing interests of shipper and carrier, ibid.; and that the equities favor allowing the railroads to charge more than the Commission may ultimately find reasonable because the Act gives the shippers a right to reparations while no such protection is given to the carriers, id., at 823.

We now turn to our recent holding in Consolidated Rail, supra, which both parties appear to concede states the controlling law. There the Commission fixed rates for recycled materials. On review, the Court of Appeals revoked the rate increases, remanded to the Commission to determine a rate structure incorporating the standards set forth in the 4-R Act, and enjoined new rates until after the Commission’s reconsideration. In reversing this holding summarily, we held:

“The authority to determine when any particular rate should be implemented is a matter which Congress has placed squarely in the hands of the Commission. Arrow Transportation Co. v. Southern R. Co., 372 U. S. 658, 662-672 (1963). . . . [T]here is no basis in our prior decisions for the revocation order or for the injunction against further increases. Tf a reviewing court cannot discern [the Commission’s] policies, it may remand the case to the agency for clarification and further justification. . . . When a case is remanded on the ground that the agency’s policies are unclear, an injunction ordinarily interferes with the primary jurisdiction of the Commission.’ Atchison, T. & S. F. R. Co. v. Wichita Board of Trade, 412 U. S. 800, 822 (1973)_” 449 U. S., at 612. (Emphasis added.)

To recapitulate, our cases stand for three propositions: (1) under the Interstate Commerce Act, primary jurisdiction to determine the reasonableness of rates lies with the Commission, see also Arizona Grocery Co. v. Atchison, T. &S.F.R. Co., 284 U. S. 370, 384 (1932); (2) federal-court authority to reject Commission rate orders for whatever reason extends to the orders alone, and not to the rates themselves, cf. 28 U. S. C. § 2349(a) (“The court of appeals . . . has exclusive jurisdiction to make. . . a judgment determining the validity of, and enjoining;. . . the order of the agency”) (emphasis added); (3) where there is a dispute about the appropriate rate, the equities favor allowing the carrier’s rate to control pending decision by the Commission, since under the Act, the shipper may receive reparations for overpayment while the carrier can never be made whole after underpayment. 49 U. S. C. § 11705(b)(3) (1976 ed., Supp. IV). Cf. Atlantic Coast Line R. Co. v. Florida, 295 U. S. 301 (1935).

HH J — I

We can discern no basis to distinguish this case from Arrow, SCRAP, Wichita Board of Trade, and Consolidated Rail, supra. By entering an order declaring that the San Antonio 1 rate order was “revived” for the period June 1980-May 1981, the Court of Appeals did that which we have said a federal court may not do: i. e., freeze the rate that railroads charge shippers prior to a decision by the Commission as to what a reasonable rate should be. That approach undermines the Commission’s ability to exercise the primary jurisdiction delegated to it by Congress to insure equitable and uniform rates. More important, the determination requires the railroads to accept a return that was considered temporary when it was approved in 1976, and “below a maximum reasonable rate” when it was modified in 1978. This result would be inequitable in the best of times, but the impact is particularly acute in a period of high inflation and changing regulatory standards.

Because the reparations provisions do not apply to both shippers and carriers, losses suffered by the carriers cannot be recovered. Carriers are not adequately protected by their authority under §§ 10761 and 10762 to file a new rate or their right under § 10327(g) to petition the Commission to modify its “revived” rate order, as San Antonio urges. It is arguable — and in other proceedings, San Antonio has so claimed, see Brief for Petitioners 38-39 — that before either action can take effect, the party adversely affected may ask for a hearing pursuant to Arizona Grocery, supra. A plenary hearing necessarily causes delay, and even if it did not, action by the Commission usually will not be effective until 30 days have elapsed after its order is served, § 10327(h).

The claim is made that the Court of Appeals was powerless to achieve a different result because, under § 10704(a)(1), the only rate the railroads could legally charge was the rate prescribed by the Commission. Since the Commission prescribed a rate in San Antonio I, the argument is that this is the rate the railroads must charge. We disagree. San Antonio I was by its terms limited to “continue in full force and effect until . . . further order of the Commission,” 355 I. C. C., at 418. Absent a contrary indication from the Commission, San Antonio II terminated the vitality of San Antonio I.

Moreover, if the court was unsure about the continued vitality of San Antonio I, the more appropriate course would have been to remand to the Commission for explanation rather than to undertake itself to construe the order, and in so doing to interfere with the Commission’s primary jurisdiction, contrary to important congressional policies.

The existence of a 1976 rate prescription does not require a result different from the result reached in Consolidated Rail. San Antonio II and III each in turn vacated the prescription which preceded it. In striking the orders in San Antonio II and III, the court’s action operated to leave in effect the rates filed under the Commission’s authority pending the Commission’s redetermination of a reasonable rate and subject always to reparations to protect the shipper should the Commission find that these rates were too high.

The June 30, 1981, judgment of the Court of Appeals is

Reversed.

       The 4-R Act changed the regulatory atmosphere in several key respects. Especially relevant here is § 205, which, as codified at 49 U. S. C. § 10704(a)(2) (1976 ed., Supp. IV), instructs the Commission to "make an adequate and continuing effort to assist. . . carriers in attaining revenue levels” that are “adequate, under honest, economical and efficient management, to cover total operating expenses . . . plus a reasonable and economic profit or return (or both) on capital employed in the business.”

       For convenience, we continue to refer to the rates as “San Antonio I,” “San Antonio II," and “San Antonio III." In actual fact, general rate increases, which are not in issue here, have taken effect significantly raising each of these rates. See Brief for Petitioners 9, n. 3.

       Initially, the Commission took the position adopted by the panel, namely that the Court of Appeals’ decision required the railroads to charge at San Antonio I rates. While the petition for clarification was pending, however, our decision in Consolidated Rail Corp. v. National Assn. of Recycling Industries, Inc., 449 U. S. 609 (1981) (per curiam), was handed down. At about this time, the Commission revised its view to espouse the railroads’ position. The Federal Government has thus joined the railroads in asking us to overturn the decision of the Court of Appeals.

       In the period in dispute, from June 1980, when the Court of Appeals vacated the San Antonio II and III orders, to May 1981, when the Commission formally vacated the San Antonio I prescription, San Antonio’s failure to pay the tariff rate resulted in a savings to it — and a loss to the railroads — of over $19 million. See Brief for Federal Respondents 6.

       San Antonio argues that the railroads’ failure to petition for certiorari within 90 days after rehearing was denied on the June 1980 judgment deprives this Court of jurisdiction. Because the June 1981 decision “resolve[d] a genuine ambiguity in a judgment previously rendered” and dealt with a question which was not “plainly and properly settled with finality,” FTC v. Minneapolis-Honeywell Regulator Co., 344 U. S. 206, 211-212 (1952) (footnote omitted), we plainly have jurisdiction.

       Under § 207(d)(2) of the Staggers Rail Act of 1980, Pub. L. 96-448, 94 Stat. 1907, 49 U. S. C. § 10707(d)(2) (1976 ed., Supp. IV), the carrier can also receive reparations. This right is limited, however, to underpayments resulting from the Commission’s suspension of a tariff; it does not apply where, as here, a court has prevented the carrier from collecting a higher tariff.

       See, e. g., 4-R Act, discussed in n. 1, supra; Staggers Rail Act of 1980, Pub. L. 96-448, 94 Stat. 1895, supra. Both statutes are directly relevant in the determination of a reasonable rate for the San Antonio coal movement; neither was considered in San Antonio I..

       San Antonio makes much of the dictionary definitions of “modify” and “vacate.” While ordinary meanings are not insignificant in statutory construction, San Antonio has not cited a single case under the Interstate Commerce Act making this distinction.

       Another way in which the Court of Appeals might have minimized interference with congressional objectives would have been to construe its own opinion as vacating only the Commission’s new rate calculations and not the Commission’s conclusion that the San Antonio I rate was too low. See 28 U. S. C. § 2349(a), allowing the court to enjoin or set aside “in whole or part, the order of the agency.” Cf. Atchison, T. & S. F. R. Co. v. Wichita Board of Trade, 412 U. S. 800, 822 (1973).

       Because we find that Consolidated Rail mandates this result, we need not reach the railroads’ claim that the decision oí the Court oí Appeals is inconsistent with the filed rate doctrine.


source: Caselaw Access Project

author: Chief Justice Burger Justice Powell,

license: Public Domain

text:
    XEROX CORP. v. COUNTY OF HARRIS, TEXAS, et al.
    No. 81-1489.
    Argued November 10, 1982
    Decided December 13, 1982

      Burger, C. J., delivered the opinion of the Court, in which Brennan, White, Marshall, Blackmun, Rehnquist, Stevens, and O’Connor, JJ., joined. Powell, J., filed a dissenting opinion, post, p. 155.

      Alfred H. Hoddinott, Jr., argued the cause and filed briefs for appellant.

      Cheryl Helena Chapman argued the cause for appellees. With her on the brief for appellee City of Houston was Jay D. Howell, Jr. John J. Greene filed a brief for appellee County of Harris.

        James F. Gossett filed a brief for the International Association of Assessing Officers as amicus curiae.

   Chief Justice Burger

delivered the opinion of the Court.

We noted probable jurisdiction to decide whether a state may impose nondiscriminatory ad valorem personal property taxes on imported goods stored under bond in a customs warehouse and destined for foreign markets. The Texas Court of Civil Appeals held such taxes constitutional.

HH

Appellant Xerox Corp. is a New York corporation engaged in the business of manufacturing and selling business machines. Its operations span the globe, and it has established affiliates in foreign countries to facilitate foreign sales. It has assembly plants and production facilities in Mexico.

Xerox manufactured parts for copying machines in Colorado and New York which were shipped to Mexico City, Mexico, for assembly by its affiliate there. The copiers assembled in Mexico were designed for sale in the Latin American market, and all printing on the machines and instructions accompanying them were in Spanish or Portuguese. Most of the copiers operated on electric current of 50 cycles per second, rather than the 60 cycles per second that is standard in the United States. Many of the copiers assembled by appellant’s affiliate in Mexico City were not approved by either United Laboratories or the Canadian Standards Association, as required for sale in the United States. To convert the copiers for domestic sale would have cost approximately $100 per copier.

After assembly in Mexico, the copiers were transported by a customs bonded trucking company to the Houston Terminal Warehouse in Houston, Tex., a Class 3 customs bonded warehouse. There they were stored for periods ranging from a few days to three years while awaiting sale and shipment to Xerox affiliates in Latin America. The copiers remained in the warehouse, segregated from other merchandise, until a shipment order was received. When Xerox received an order, it would transport the copiers under bond to either the Port of Houston or the Port of Miami, where they were loaded on board vessels for shipment to Latin America. The copiers remained under the continuous control and supervision of the United States Customs Service from the time they entered the bonded warehouse until they cleared United States Customs at the Port of Houston or the Port of Miami for export.

None of the copiers assembled in Mexico and stored in Houston were ever sold to customers for domestic use; all were ultimately sold abroad. Consequently, Xerox paid no import duties on them.

The local authorities did not assess any taxes on the copiers stored under customs bond in 1974 and 1975. In 1977, the city of Houston assessed ad valorem personal property taxes of $156,728 on the copiers stored in the Houston warehouse during 1977. The County of Harris followed suit, assessing $55,969 in taxes for 1977 and also assessing $48,426 in back taxes for 1976, for a total of $104,395.

As soon as Xerox learned that the local authorities intended to tax its Mexican-assembled copiers, it shipped all the machines to a foreign trade zone in Buffalo, N. Y., from which it continued to fill orders for shipment to Latin America.

Declaratory and injunctive relief was sought in state court both from the taxes already assessed and such taxes as appel-lees might impose in the future. Xerox claimed that the taxes in question were unconstitutional because they violated the Import-Export Clause and the Commerce Clause of the Constitution. Art. I., § 10, cl. 2; Art. I, §8, cl. 3. Appellees counterclaimed for the taxes assessed.

The trial court held that the taxes assessed by appellees violated both the Import-Export and Commerce Clauses, and it granted judgment to Xerox. The Texas Court of Civil Appeals, First District, reversed, holding that the taxes violated neither the Import-Export Clause nor the Commerce Clause. 619 S. W. 2d 402 (1981). Alternatively, it held that the trial court had violated Texas Rule of Civil Procedure 683 in granting injunctive relief. Finally, it granted judgment to appellees on their counterclaims in the amount of $131,311 plus penalties and interest to Harris County and $156,728 plus penalties and interest to the city of Houston. The Texas Supreme Court denied Xerox’s application for a writ of error and this appeal followed. We noted probable jurisdiction, 456 U. S. 913 (1982), and we reverse.

h-1 I — H

A

A preliminary question is whether this Court has jurisdiction over the appeal. Appellees argue that this Court lacks jurisdiction since the decision of the Texas court reversing the grant of an injunction rested on an independent and adequate state ground. However, an indispensable predicate to an award of judgment to the appellees on their counterclaims was a determination that the taxes at issue were permissible under the United States Constitution; the Texas Court of Civil Appeals so held. It is not claimed that any independent and adequate state-law ground supports that holding. We therefore have jurisdiction to review that judgment. 28 U. S. C. § 1257(2).

B

Pursuant to its powers under the Commerce Clause, Congress established a comprehensive customs system which includes provisions for Government-supervised bonded warehouses where imports may be stored duty free for prescribed periods. At any time during that period the goods may be withdrawn and reexported without payment of duty. Only if the goods are withdrawn for domestic sale or stored beyond the prescribed period does any duty become due. 19 U. S. C. § 1557(a) (1976 ed., Supp. V). While the goods are in bonded warehouses they are in the joint custody of the United States Customs Service and the warehouse proprietor and under the continuous control and supervision of the local customs officers. 19 U. S. C. § 1555. Detailed regulations control every aspect of the manner in which the warehouses are to be operated. 19 CFR §§ 19.1-19.6 (1982).

Government-regulated, bonded warehouses have been a link in the chain of foreign commerce since “a very early period in our history.” Fabbri v. Murphy, 95 U. S. 191, 197 (1877). A forerunner of the present statute was the Warehousing Act of 1846, 9 Stat. 58. A major objective of the warehousing system was to allow importers to defer payment of duty until the goods entered the domestic market or were exported. The legislative history explains that Congress sought to reinstate

“the sound though long neglected maxim of Adam Smith, ‘That every tax ought to be levied at the time and in the manner most convenient for the contributor to pay it; ’ [by providing] that the tax shall only be paid when the imports are entered for consumption . . . .” H. R. Rep. No. 411, 29th Cong., 1st Sess., 3 (1846).

The Act stimulated foreign commerce by allowing goods in transit in foreign commerce to remain in secure storage, duty free, until they resumed their journey in export. The geographic location of the country made it a convenient place for transshipment of goods within the Western Hemisphere and across both the Atlantic and the Pacific. A consequence of making the United States a center of world commerce was that

“our carrying trade would be vastly increased; that shipbuilding would be stimulated; that many foreign markets would be supplied, wholly or in part, by us with merchandise now furnished from the warehouses of Europe; that the industry of our seaports would be put in greater activity; [and] that the commercial transactions of the country would be facilitated . . . Cong. Globe, 29th Cong., 1st Sess., App. 792 (1846) (remarks of Sen. Dix).

To these ends, Congress was willing to waive all duty on goods that were reexported from the warehouse, and to defer, for a prescribed period, the duty on goods destined for American consumption. This was no small sacrifice at a time when customs duties made up the greater part of federal revenues, but its objective was to stimulate business for American industry and work for Americans.

In short, Congress created secure and duty-free enclaves under federal control in order to encourage merchants here and abroad to make use of American ports. The question is whether it would be compatible with the comprehensive scheme Congress enacted to effect these goals if the states were free to tax such goods while they were lodged temporarily in Government-regulated bonded storage in this country.

In McGoldrick v. Gulf Oil Corp., 309 U. S. 414 (1940), the City of New York sought to impose a sales tax on imported petroleum that was refined into fuel oil in New York and sold as ships’ stores to vessels bound abroad. The crude oil was imported under bond and refined in a customs bonded manufacturing warehouse and was free from all duties. We struck down the state tax, finding it pre-empted by the congressional scheme. Id., at 429.

The Court determined that the purpose of the exemption from the tax normally laid upon importation of crude petroleum was “to encourage importation of the crude oil for [refinement into ships’ stores] and thus to enable American refiners to meet foreign competition and to recover trade which had been lost by the imposition of the tax.” Id., at 427; see also id., at 428. The Court went on to note that, in furtherance of this purpose,

“Congress provided for the segregation of the imported merchandise from the mass of goods within the state, prescribed the procedure to insure its use for the intended purpose, and by reference confirmed and adopted customs regulations prescribing that the merchandise, while in bonded warehouse, should be free from state taxation.” Id., at 428-429.

The Court concluded that

“the purpose of the Congressional regulation of the commerce would fail if the state were free at any stage of the transaction to impose a tax which would lessen the competitive advantage conferred on the importer by Congress, and which might equal or exceed the remitted import duty.” Id., at 429.

In so deciding, the Court expressly declined to rely on the customs regulation “prescribing the exemption from state taxation,” holding that the regulation merely stated “what is implicit in the Congressional regulation of commerce presently involved.” Ibid.

The analysis in McGoldrick applies with full force here. First, Congress sought, in the statutory scheme reviewed in McGoldrick, to benefit American industry by remitting duties otherwise due. The import tax on crude oil was remitted to benefit oil refiners employing labor at refineries within the United States, whose products would not be sold in domestic commerce. Here, the remission of duties benefited those shippers using American ports as transshipment centers. Second, the system of customs regulation is as pervasive for the stored goods in the present case as it was in McGoldrick for the refined petroleum. In both cases, the imported goods were segregated in warehouses under continual federal custody and supervision. Finally, the state tax was large enough in each case to offset substantially the very benefits Congress intended to confer by remitting the duty. In short, freedom from state taxation is as necessary to the congressional scheme here as it was in McGoldrick.

Although there are factual distinctions between this case and McGoldrick, they are distinctions without a legal difference. We can discern no relevance to the issue of congressional intent in the fact that the fuel oil in McGoldrick could be sold only as ships’ stores whereas Xerox had the option to pay the duty and withdraw the copiers for domestic sale, or that in McGoldrick the city sought to impose a sales tax and here appellees assessed a property tax.

A similar conclusion was reached in District of Columbia v. International Distributing Corp., 118 U. S. App. D. C. 71, 331 F. 2d 817 (1964). There, the Court of Appeals held that a wholesaler of imported alcoholic beverages was not liable for District of Columbia excise taxes on the sale of such beverages to foreign embassies while the beverages were stored in a customs bonded warehouse. The court reasoned that Congress intended to make customs bonded warehouses federal enclaves free of state taxation and that although the imported goods were physically within the District of Columbia, they were not subject to its taxing jurisdiction until they were removed from the warehouse. Since the sales took place prior to removal, the District could not tax those sales. The Court of Appeals quoted with approval the following language of the Tax Court:

“ ‘The idea of bonded warehouses and their use by the United States custom authorities negatives the proposition that at the time of sale the alcoholic beverages were in the possession of the petitioner [the corporation]. True it is that the private bonded warehouse was physically in the District of Columbia; and the liquors were stored therein; and in that sense they were in the District. In law, however, they were still without that jurisdiction, and did not become subject thereto until they had been withdrawn from the private bonded warehouse and removed from the control of the customs official.’” Id., at 73-74, 381 F. 2d, at 819-820.

International Distributing Corp. merely confirms what this Court said in 1877 in Fabbri v. Murphy, 95 U. S., at 197-198: “Congress did not regard the importation as complete while the goods remained in the custody of the proper officers of customs.”

Accordingly, we hold that state property taxes on goods stored under bond in a customs warehouse are pre-empted by Congress’ comprehensive regulation of customs duties.

H — I HH HH

It is unnecessary for us to consider whether, absent congressional regulation, the taxes here would pass muster under the Import-Export Clause or the Commerce Clause.

The judgment of the Texas Court of Civil Appeals is reversed, and the case is remanded for proceedings not inconsistent with this opinion.

Reversed and remanded.

Justice Powell,

dissenting.

Since 1799 the United States has permitted importers to post a customs bond in lieu of immediate payment of customs duties on imported goods. Today the Court holds that these goods stored in customs-bonded warehouses also are exempt from state property taxation. This holding would be unremarkable were it based on any evidence of congressional intent, but such support is lacking. The Court instead finds that state taxation is incompatible with the purposes of the federal customs-bonded warehousing system.

Customs-bonded storage enables importers to defer paying customs duties until the goods are ready for domestic sale or to avoid paying duties altogether if the goods are reexported. The Court correctly observes that Congress’ ultimate purpose has been to encourage imports and enhance the position of the United States as a center of international trade. I am not persuaded, however, that nondiscriminatory state taxation of customs-bonded goods is incompatible with this purpose.

The Court attributes significance to the “pervasive” system of customs regulation of stored goods, ante, at 153, but fails to explain how this affects a State’s power to tax. The purpose of the regulation is to guarantee the security of federal revenues. The owner of customs-bonded goods eventually must pay the customs duties or reexport the goods. The warehousing system enables the Federal Government to monitor the removal of bonded goods for sale or export and ensure that duties are paid when due. A State’s imposition of an ad valorem tax does not impair this function. The “pervasive” regulation of the manner in which customs-bonded goods are stored and withdrawn, therefore, is simply immaterial to the validity of state taxation of those goods.

The Court also argues that state taxation of customs-bonded goods would frustrate the congressional purpose of encouraging foreign trade with the United States. It asserts that appellees’ taxes are large enough “to offset substantially the very benefits Congress intended to confer by remitting the duty.” Ibid. It seems to me that the word “offset” in this context is misused. If a State were to impose a special tax on property stored in customs-bonded warehouses, perhaps such a tax could be viewed as “offsetting” the benefits of storage. An importer deciding whether to use the warehouses would weigh the amount saved through remission of duties against the amount expended to pay the property tax. In this case, however, the county and city, acting pursuant to state law, impose the same ad valorem taxes no matter where the property is stored. An importer deciding whether to bring imported goods into Texas therefore knows that while the goods are in storage he will have to pay the property tax whether or not he uses a customs-bonded warehouse. The value to him of using customs-bonded storage is the full amount of the savings from deferral or avoidance of duties — precisely the benefit Congress expressly has provided in order to encourage merchants to bring business to the United States.

The Court accepts appellant’s argument that a tax exemption for goods in customs-bonded warehouses reduces importers’ costs and thereby furthers the federal interest in encouraging trade. But the Court itself acknowledges that state legislation should be pre-empted only where “necessary” to achieve a congressional purpose. Ibid. No showing has been made that this standard is met here. Duty-free storage and exemption from state property taxation are independent policies for promoting foreign trade. Congress quite reasonably may choose one policy, as it has done, without choosing the other.

The Court relies primarily on McGoldrick v. Gulf Oil Corp., 309 U. S. 414 (1940), in which the Court invalidated a city tax on the sale of fuel oil from a customs-bonded manufacturing warehouse to foreign-bound vessels. McGoldridc does not control this case. As the Court concedes, see ante, at 152, McGoldrick did not hold that the warehousing system and customs regulations alone mandated pre-emption of state taxation. Rather, a key factor was that Congress expressly had exempted from federal taxation the imported petroleum that was refined in the bonded warehouses for sale to foreign-bound vessels as ships’ stores. The explicit congressional purpose “to enable American refiners to meet foreign competition,” 309 U. S., at 427, provided a basis on which to infer congressional intent to pre-empt state taxation. There is no analogous federal tax exemption here, nor any evidence of congressional intent to encourage meeting of foreign competition. All that exists is the warehousing system itself, and for the reasons stated above I find this insufficient.

Nor do I find merit in appellant’s constitutional arguments. Appellees’ taxes do not violate the Commerce Clause, as they are “applied to an activity with a substantial nexus with the taxing State, [are] fairly apportioned, [do] not discriminate against interstate commerce, and [are] fairly r lated to the services provided by the State.” Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 279 (1977). Nor do these nondiscriminatory ad valorem taxes violate the Import-Export Clause, Art. I, §10, cl. 2. See Michelin Tire Corp. v. Wages, 423 U. S. 276 (1976).

Appellant notes that Michelin Tire left open the possibility that even nondiscriminatory property taxes may not be imposed on goods that still are in transit. But appellant’s copiers were stored for up to three years, and under current law they could have been stored for up to five years. 19 U. S. C. § 1557(a) (1976 ed., Supp. V). The only conceivable basis for the view that these goods remain “in transit” is that Congress has so provided. I cannot agree that Congress has endowed customs-bonded goods with indefinite immunity from nondiscriminatory state-authorized local property taxation. During their prolonged period of storage, appellant’s goods benefited from police and fire protection and the various other services provided by the county and city. “[T]he State is simply making the imported goods pay their own way, as opposed to exacting a fee merely for 'the privilege of moving through a State.’” Washington Revenue Dept. v. Association of Washington Stevedoring Cos., 435 U. S. 734, 764 (1978) (Powell, J., concurring in part and concurring in result) (quoting Michelin Tire Corp. v. Wages, supra, at 290). The Import-Export Clause never was intended to exempt imported goods in these circumstances.

I would affirm the judgment of the Texas Court of Civil Appeals.

       Until 1974, Xerox shipped its Mexican-assembled copiers to the Free Trade Zone of Panama, where they were stored tax free. In 1974, rising anti-American sentiment in Panama led Xerox to seek another storage facility. It settled on the Houston warehouse because of the excellent port facilities in the Port of Houston.

       Goods stored in customs bonded warehouses are under the “joint custody” of the warehouse proprietor and the United States Customs Service. The United States Customs Service is “in charge” of the warehouse and all work performed there is under its “supervision.” 19 U. S. C. § 1555.

       At the time in question, 19 U. S. C. § 1557(a) permitted the storage of imported goods for up to three years in a customs bonded warehouse without payment of an import duty. The importer was required to post a bond for the value of the duty. At the end of the three years, the goods could be withdrawn for domestic sale upon payment of the duty owed, or could be withdrawn for reexport without payment of any duty. In 1978, the time limit on the storage period was extended from three years to five years. Customs Procedural Reform and Simplification Act of 1978, Pub. L. 95-410, § 108(b)(1), 92 Stat. 892, 19 U. S. C. § 1557(a) (1976 ed., Supp. V).

       Houston assesses and collects taxes for itself and the Houston Independent School District.

       In 1976 and 1977, Xerox paid a total of approximately $1,817,000 in ad valorem taxes to appellees for copiers located in Texas for domestic use.

       Harris County assesses and collects taxes for itself, the State of Texas, and other local taxing authorities.

       In 1846, approximately 90% of all federal revenues were derived from customs duties. U. S. Bureau of Census, Historical Statistics of the United States, Colonial Times to 1970, Part 2, p. 1106 (Bicentennial ed. 1975) (customs accounted for $26,713,000 out of total federal revenues of $29,700,000).

       Here, a footnote in the regulations governing customs bonded warehouses specifically provided that “[i]mported goods in bonded warehouses are exempt from taxation or judicial process of any State or subdivision thereof.” 19 CFR § 19.6(c), n. 11 (1982). A recent amendment to the regulations deleted this footnote on November 1, 1982, effective Decern-ber 1, 1982. 47 Fed. Reg. 49370. The Treasury Department offered no explanation for the amendment. The deletion of footnote 11 without explanation does not alter our conclusion that the ad valorem taxes here are pre-empted by the statutory scheme.

       The fair market value of the copiers located in the Houston warehouse on January 1, 1977, was $9,015,690. The duty remitted by the United States on these copiers amounted to $540,000. By comparison, the appel-lees here sought to impose taxes on the copiers for the year 1977 amounting to $211,112. App. 12a-15a, 25a.


author:
Justice White
      Justice Powell,

text:
    CITY OF PORT ARTHUR, TEXAS v. UNITED STATES et al.
    No. 81-708.
    Argued October 6, 1982
    Decided December 13, 1982

      White, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Marshall, Blackmun, and Stevens, JJ., joined. Powell, J., filed a dissenting opinion, in which Rehnquist and O’Connor, JJ., joined, post, p. 169.

      Robert Q. Keith argued the cause for appellant. With him on the briefs was James Douglas Welch.

      Carter G. Phillips argued the cause for appellees. With him on the brief for the United States were Solicitor General Lee, Assistant Attorney General Reynolds, Deputy Solicitor General Wallace, Jessica Dunsay Silver, and Marie E. Klimesz. Elizabeth K. Julian, Michael M. Daniel, William L. Robinson, Norman J. Chachkin, Elizabeth C. Petit, and Don Floyd filed a brief for appellees Douglas et al.
   Justice White

delivered the opinion of the Court.

Section 5 of the Voting Rights Act of 1965, 79 Stat. 439, as amended, 42 U. S. C. § 1973c, requires that when a State or political subdivision covered by the Act adopts or seeks to administer any change in its standards, practices, or procedures with respect to voting, it must obtain a preclearance either from the Attorney General of the United States or by obtaining a declaratory judgment from the District Court for the District of Columbia that the proposed change has neither the purpose nor the effect of denying or abridging the right to vote on account of race. Perkins v. Matthews, 400 U. S. 379 (1971), held that changes in the boundary lines of a city by annexations that enlarge the number of eligible voters are events covered by §5. The question in this case is whether the District Court for the District of Columbia correctly held that the electoral plan for the Port Arthur, Tex., City Council could not be approved under § 5 because it insufficiently neutralized the adverse impact upon minority voting strength that resulted from the expansion of the city’s borders by two consolidations and an annexation.

H — (

In December 1977, the city of Port Arthur, Tex., consolidated with the neighboring cities of Pear Ridge and Lake View. Six months later, the city annexed Sabine Pass, an incorporated area. As a result of these expansions of the city's borders, the percentage of the black population in Port Arthur decreased from 45.21% to 40.56%. Blacks of voting age constituted 35% of the population of the enlarged city.

Prior to the expansions, the city was governed by a seven-member Council, including a mayor, each member being elected at large by majority vote. Each member except the mayor was required to reside in a specific district of the city. Members were elected for staggered terms. Following the two consolidations, the City Council passed an ordinance adding an eighth member to the Council, while retaining the at-large system with residency requirements. After the annexation of Sabine Pass, the city further proposed that the Council be expanded to nine members, with at-large elections as before. The two consolidations and the annexation, together with the proposed changes in the governing system, were submitted to the Attorney General for preclearance pursuant to §5 of the Voting Rights Act. The Attorney General refused preclearance, suggesting, however, that he would reconsider if the Council members were elected from fairly drawn single-member districts.

As §5 permitted it to do, the city then filed suit in the United States District Court for the District of Columbia seeking a declaratory judgment that the expansions and the nine-member plan did not have the purpose or effect of denying or abridging the right to vote on account of color or race within the meaning of § 5. While that suit was pending, the city approved by referendum the “4-4-1” plan, calling for four members to be elected from single-member districts, four to be elected at large from residency districts identical to the single-member districts, and the ninth member, the mayor, to be elected at large without any residency requirement. That plan, like the previous plans, required a majority vote to elect each Council member. The city then moved to amend its complaint so as to seek a declaratory judgment as to the legality of the 4-4r-l plan.

The District Court concluded that because there were legitimate purposes behind the annexation and the consolidations, those actions, under City of Richmond v. United States, 422 U. S. 358 (1975), could not be denied preclearance as discriminatory in purpose. 517 F. Supp. 987 (1981). Because the expansions had substantially reduced the relative political strength of the black population, however, it was necessary for preclearance that the postexpansion electoral system be found to satisfy the requirements of § 5. The District Court held that neither the first nine-member plan nor the 4-4-1 plan measured up, not only because each was adopted, with a discriminatory purpose, but also because in the context of the severe racial bloc voting characteristic of the recent past in the city neither plan adequately reflected the minority’s potential political strength in the enlarged community as required under City of Rome v. United States, 446 U. S. 156 (1980); City of Richmond v. United States, supra; and City of Petersburg v. United States, 354 F. Supp. 1021 (DC 1972), summarily aff’d, 410 U. S. 962 (1973).

Soon after this decision, the city and the United States jointly submitted to the court for approval the “4-2-3” electoral plan. Under this scheme, the city would be divided into four single-member districts, Districts 1 through 4. District 5, comprising Districts 1 and 4 would elect another member, as would District 6, which combined Districts 2 and 3. Three additional members would be elected at large, one each from Districts 5 and 6, the third at-large seat to be occupied by the mayor and to have no residency requirement. All Council seats would be governed by the majority-vote rule, that is, runoffs would be required if none of the candidates voted on received a majority of the votes cast. Blacks constituted a majority in Districts 1 and 4, 79% and 62.78% respectively, as well as a 70.83% majority of the fifth district combining the two majority black districts. The sixth district was 10.98% black. Although the United States expressed reservations about the at-large and majority-vote features, its position was that neither of these aspects of the plan warranted a denial of preclearance.

After response to and oral argument upon the submission, the District Court concluded “that the proposed plan insufficiently neutralizes the adverse impact upon minority voting strength which resulted from the expansion of Port Arthur’s borders.” App. 87a. The court added, however, that if the plan were modified to eliminate the majority-vote requirement with respect to the two nonmayoral, at-large candidates, and to permit election to these two seats to be made by a plurality vote, the court “would consider the defect remedied and offer our approval.” Id., at 87a-88a. This appeal followed, the basic submission being that under § 5 and the controlling cases the District Court exceeded its authority in conditioning clearance of the 4-2-3 plan on the elimination of the majority-vote requirement. We noted probable jurisdiction. 455 U. S. 917 (1982).

M HH

Perkins v. Matthews, 400 U. S. 379 (1971), held that annexations by a city are subject to § 5 preclearance because increasing the number of eligible voters dilutes the weight of the votes of those to whom the franchise was limited before the annexation and because the right to vote may be denied by dilution or debasement just as effectively as by wholly prohibiting the franchise. It soon became clear, however, that § 5 was not intended to forbid all expansions of municipal borders that could be said to have diluted the voting power of particular groups in the community. In City of Petersburg v. United States, supra, the annexation of an area with a heavy white majority resulted in reducing the black community from majority to minority status. The District Court held that the annexation could nevertheless be approved but “only on the condition that modifications [in the electoral plan] calculated to neutralize to the extent possible any adverse effect upon the political participation of black voters are adopted, i. e., that the [city] shift from an at-large to a ward system of electing its city councilmen.” 354 F. Supp., at 1031. We affirmed summarily. 410 U. S. 962 (1973).

Later, in City of Richmond v. United States, supra, we expressly reaffirmed Petersburg, recognizing that the Peters-burg annexation enhanced the power of the white majority to exclude Negroes from the city council but stating that such a consequence “would be satisfactorily obviated if at-large elections were replaced by a ward system of choosing councilmen.” 422 U. S., at 370. It was our view that a fairly designed ward plan “would not only prevent the total exclusion of Negroes from membership on the council but would afford them representation reasonably equivalent to their political strength in the enlarged community.” Ibid. We applied these principles in City of Richmond. There, the annexation of a heavily white area reduced the black population of the city from 52% to 42%, and the electoral proposal submitted for preclearance replaced the prior system of at-large elections with a single-member plan under which blacks would be in a substantial majority in four of the nine councilmanic districts. We held that as long as the ward system fairly reflected the strength of the Negro community as it existed after the annexation, preclearance under §5 should be granted. Under such a plan, “Negro power in the new city [would not be] undervalued, and Negroes [would] not be underrepresented on the council.” Id., at 371. The annexation could not, therefore, be said to have the effect of denying or abridging the right to vote on account of race within the meaning of § 5.

In the case before us, Port Arthur was a party to two consolidations and an annexation. Because the areas taken into the city were predominantly white, the relative percentage of blacks in the enlarged city was substantially less than it was before the expansions. The District Court refused preclearance because in its view the postexpansion electoral system did not sufficiently dispel the adverse impact of the expansions on the relative political strength of the black community in Port Arthur. The city submits that this judgment was in error under Petersburg and Richmond.

Richmond, however, involved a fairly drawn, single-member district system that adequately reflected the political strength of the black community in the enlarged city. The plan was consequently an acceptable response to the annexation’s adverse impact on minority voting potential. It does not necessarily follow that the mixed single-member and at-large system at issue in this case sufficiently dispelled the impact of Port Arthur’s expansions on the relative political strength of the black community. The District Court concluded that although the 4-2-3 system provided a black majority in three councilmanic districts, it was necessary also to eliminate the majority-vote requirement with respect to the two nonmayoral at-large council positions. For several reasons, we cannot say that the District Court erred in this respect.

First, whether the 4-2-3 plan adequately reflected the political strength of the black minority in the enlarged city is not an issue that is determinable with mathematical precision. Because reasonable minds could differ on the question and because the District Court was sitting as a court of equity seeking to devise a remedy for what otherwise might be a statutory violation, we should not rush to overturn its judgment. Cf. Swann v. Charlotte-Mecklenburg Board of Education, 402 U. S. 1, 15 (1971).

Second, the 4-2-3 plan undervalued to some extent the political strength of the black community: one-third of the Council seats was to be elected from black majority districts, but blacks constituted 40.56% of the population of the enlarged city and 35% of the voting age population. In light of this fact, eliminating the majority-vote requirement was an understandable adjustment. As the District Court well understood, the majority-vote rule, which forbade election by a plurality, would always require the black candidate in an at-large election, if he survived the initial round, to run against one white candidate. In the context of racial bloc voting prevalent in Port Arthur, the rule would permanently foreclose a black candidate from being elected to an at-large seat. Removal of the requirement, on the other hand, might enhance the chances of blacks to be elected to the two at-large seats affected by the District Court’s conditional order but surely would not guarantee that result. Only if there were two or more white candidates running in a district would a black have any chance of winning election under a plurality system. We cannot say that insisting on eliminating the majority-vote rule in the two at-large districts would either overvalue black voting strength in Port Arthur or be inconsistent with Richmond.

Third, even if the 4-2-3 electoral scheme might otherwise be said to reflect the political strength of the minority community, the plan would nevertheless be invalid if adopted for racially discriminatory purposes, i.e., if the majority-vote requirement in the two at-large districts had been imposed for the purpose of excluding blacks from any realistic opportunity to represent those districts or to exercise any influence on Council members elected to those positions. City of Richmond v. United States, 422 U. S., at 378-379. The District Court made no finding that the 4-2-3 plan was tainted by an impermissible purpose; but it had found that the two preceding plans, the first nine-member plan and the 4r-4r-1 plan, had been adopted for the illicit purpose of preventing black candidates from winning election. The court had also found that the majority-vote requirement was a major means of effectuating this discriminatory end. When it was then presented with the 4-2-3 plan retaining the requirement for the two nonmayoral at-large seats, the Court conditioned approval on eliminating the majority-vote element. It seems to us that in light of the prior findings of discriminatory purpose such action was a reasonable hedge against the possibility that the 4-2-3 scheme contained a purposefully discriminatory element. On balance, we cannot fault the judgment of the District Court.

The judgment of the District Court is accordingly

Affirmed.

Justice Powell,

with whom Justice Rehnquist and Justice O’Connor join,

dissenting.

The Court affirms the District Court’s order, concluding that although the 4-2-3 plan ensures proportional representation for the black voting age population, a district court nevertheless is free under §5 — in the exercise of a newly perceived equitable jurisdiction — to require a city to “enhance” the chances of increased minority representation on a city’s governing body. In this case, the perceived enhancement would be that a plurality, rather than a majority election requirement, would give black citizens a better chance of capturing — in addition to the three district seats assured them — the two at-large seats. Ante, at 167-168. Because the Court’s decision is irreconcilable with City of Richmond v. United States, 422 U. S. 358 (1975), and authorizes a standardless equitable jurisdiction in district courts, I dissent.

I

In City of Richmond, the city annexed territory reducing the percentage of the city’s black population from 52% to 42%. After the Attorney General refused to preclear submitted election plans, he and the city came to an agreement and jointly submitted a plan for approval to the District Court for the District of Columbia. The District Court rejected this plan, because the city had failed to “minimizfe] the dilution of black voting power to the greatest possible extent.” Id., at 367. This Court, in an opinion by Justice White, vacated the District Court’s order, holding that a district court must accept a new electoral plan for the enlarged municipality as long as it “fairly reflects the strength of the Negro community as it exists after the annexation” and “would afford [it] representation reasonably equivalent to [its] political strength in the enlarged community.” Id., at 370-371. See City of Rome v. United States, 446 U. S. 156, 187 (1980), aff’g 472 F. Supp. 221, 245 (DC 1979); City of Rome, supra, at 188 (Blackmun, J., concurring); United Jewish Organizations v. Carey, 430 U. S. 144, 160 (1977) (opinion of White, J.); Beer v. United States, 425 U. S. 130, 139, n. 11 (1976). In dissent, Justice Brennan stated that he would find the dilutive effect of an annexation cured only by an election plan “calculated to neutralize to the extent possible any adverse effect upon the political participation of black voters.” 422 U. S., at 389.

In this case, the city expanded its boundaries by annexation and consolidation. This resulted in reducing the percentage of its black population from 45.21% to 40.56%. The electoral plan for the enlarged city, submitted to the Attorney General under § 5 of the Voting Rights Act of 1965, was disapproved both by the Attorney General and then by the District Court for the District of Columbia. Following negotiations, the Attorney General and the city reached agreement that the 4-2-3 electoral plan — at issue in this case — complied with the requirements of the Voting Rights Act. Accordingly, the plan was jointly submitted by the Attorney General and the city to the District Court for its approval. Under this plan, the city’s 35% black voting age population was assured of 33% of the City Council positions, i. e., three of nine members.

The District Court rejected the agreed upon plan in a brief order because, in words reminiscent of Justice Brennan’s dissent in City of Richmond, it “insufficiently neutralizes the adverse impact upon minority voting strength.” App. 87a. The court added, however, that it would approve the plan were it modified “so as to provide for the election of the two non-mayoral, at-large representatives by plurality vote,” ibid., a condition to approval that the Attorney General had expressly considered and found not to be required by the Act.

I find the Court’s decision in City of Richmond and in this case fundamentally inconsistent, because the proportional representation assured by the 4-2-3 plan must, by definition, “afford [blacks] representation reasonably equivalent to their political strength in the enlarged community.” 422 U. S., at 370-371. Cf. United Jewish Organizations, supra, at 169 (Brennan, J., concurring in part) (“[T]he very definition of proportional representation precludes either underrepresen-tation or overrepresentation . . .”). Apparently in an effort to justify its decision, the Court states that the agreed 4-2-3 plan “undervalued to some extent the political strength of the black community.” Ante, at 167. No support for this statement is cited, and none is found in the record. The District Court made no such finding and the Government, in its submission to the District Court, expressly asserted that the city’s plan “would appear to provide the minority community with a fair opportunity to obtain ‘representation reasonably equivalent to their political strength in the enlarged community.’ City of Richmond v. United States, 422 U. S. 358, 370 (1975).” App. 79a-80a. The black intervenors also agreed at the time of the submission that “the plan does approach affording blacks representation reasonably equivalent to their voting strength in the at-large community . . . .” Id., at 83a.

II

Furthermore, the Court’s decision finds no support in any prior decision of this Court. The theory that political strength should be enhanced, rather than preserved, is new doctrine. It is a view Congress has never embraced, and indeed one that the 1982 extension of the Voting Rights Act fairly can be viewed as rejecting. Moreover, although I do not question the power of a district court to disagree with the Attorney General’s construction of the Act, it does not follow that the District Court was “sitting as a court of equity,” ante, at 167, and had the power to require political enhancement. We are interpreting and applying a statute that vests no such open-ended jurisdiction in any court.

In the first six months of this year, the Department of Justice received approximately 8,709 applications for pre-clearance of voting changes under § 5, an average of 66 per working day. Congress, with the approval of the President, has recently reaffirmed the authority of Department of Justice personnel to exercise this extensive control over state and local political decisions. The sheer volume of applications for preclearance makes imperative the prescribing of predictable standards. Proportional representation, whatever its theoretical and practical limitations may be in a nation with populations as diverse and mobile as that of the United States, is at least an objective standard, and when it is found to exist in a §5 case — whether deemed necessary under the Act or not — it should be dispositive. The Court’ today, however, finds for the first time a standardless equitable discretion in the District Court for the District of Columbia to impose requirements in addition to proportional representation. This leaves the responsible authorities in the State and communities under the Act — as well as the Attorney General — without guidance as to the requirements of § 5.

H-( HH

The Court’s discussion of discriminatory purpose as providing some support for the District Court’s “effects” determination is disquieting for a number of reasons. First, as the Court notes, the District Court made no finding that the 4-2-3 plan was tainted by an impermissible purpose. Second, the District Court expressly found that no discriminatory motive prompted the city’s annexation of the three jurisdictions involved. 517 F. Supp. 987, 1019-1021 (DC 1981). Third, the factors that led the District Court to conclude that the earlier 8-0-1 and 4-4-1 plans had been adopted for a discriminatory purpose have no bearing on the question whether the city was similarly motivated when it adopted the 4-2-3 plan at a later time and pursuant to good-faith negotiations with the Attorney General. Finally, the Government concedes that purpose is not a factor in this case. Indeed, the Court fails to explain — nor can it explain satisfactorily— how a plan negotiated with and acceptable to the Attorney General was adopted for a discriminatory purpose.

In my opinion, the city has shown that its 4-2-3 plan has satisfied fully § 5’s effect-and-purpose test and the standard adopted in City of Richmond. We now should demand no more. I would reverse the District Court’s order.

       It is undisputed that the city of Port Arthur is a political subdivision to which § 5 is applicable. See 28 CFR, p. 461, Appendix (1982).

       Section 5, as set forth in 42 U. S. C. § 1973c, in relevant part provides as follows:
      “Whenever a State or political subdivision with respect to which the prohibitions set forth in section 1973b(a) of this title based upon determinations made under the first sentence of section 1973b(b) of this title are in effect shall enact or seek to administer any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting different from that in force or effect. . . such State or subdivision may institute an action in the United States District Court for the District of Columbia for a declaratory judgment that such qualification, prerequisite, standard, practice, or procedure does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color, or in contravention of the guarantees set forth in section 1973b(f)(2) of this title, and unless and until the court enters such judgment no person shall be denied the right to vote for failure to comply with such qualification, prerequisite, standard, practice, or procedure: Provided, That such qualification, prerequisite, standard, practice, or procedure may be enforced without such proceeding if the qualification, prerequisite, standard, practice, or procedure has been submitted by the chief legal officer or other appropriate official of such State or subdivision to the Attorney General and the Attorney General has not interposed an objection within sixty days after such submission, or upon good cause shown, to facilitate tate an expedited approval within sixty days after such submission, the Attorney General has affirmatively indicated that such objection will not be made.”

       The preannexation and postannexation percentages are based on the 1980 census. The figure for the percentage of blacks in the voting age population is an estimate, which the District Court derived by extrapolating from the 1970 census data. The 1970 census showed that at that time 34.6% of the voting age population was black while 40.01% of the general population was black. The District Court itself noted the dangers of extrapolation, but explained that both parties had suggested the procedure for determining the percentage of the current voting age population that is black. Port Arthur also has a Hispanic community, which comprises 6.30% of the enlarged city’s population.

       The United States unsuccessfully sought to enjoin the referendum election before a three-judge court in the Eastern District of Texas. United States v. City of Port Arthur, No. B-80-216-CA (Sept. 5, 1980).

       The city argues that the District Court was required to approve a plan jointly submitted by the city and the Attorney General. The Voting Rights Act, however, assigns primary responsibility to the District Court to determine whether a change in voting procedures violates § 5. Pre-clearance by the Attorney General may obviate a court suit, but here the Attorney General was acting in the capacity of a litigant when he joined the city in submitting a plan for the court’s consideration. In that posture, neither the Attorney General, the city, nor both of them together could dictate the court’s conclusion as to the acceptability of the plan under § 5.

       The Court has recognized that a majority-vote requirement in at-large elections, unless adopted as a change for discriminatory purposes, is a valid and long-accepted practice “that is followed by literally thousands of municipalities and other local governmental units throughout the Nation.” See City of Mobile v. Bolden, 446 U. S. 55, 60 (1980) (plurality opinion).

       The District Court acknowledged benefits for the entire population from consolidation:
      “Port Arthur . . . was extremely interested in maintaining a population in excess of 50,000 so as to remain entitled as a matter of right to funds from federal agencies including the Department of Housing and Urban Development (‘HUD’). Were the population to decrease below the 50,000 level, HUD would diminish the amount of the direct grant by one-third each year; in the fourth year, the City would have to [compete] with other applicants for discretionary awards. Since 1975, . . . there was evidence that the municipal population was [declining towards] the 50,000 mark. . . . Having already annexed all of the adjacent black communities, the City turned to Pear Ridge, Lakeview and Griffing Park.
      “. . . Although the City would be required to provide services to the new residents, it was anticipated that the additional cost would be minimal and greatly outweighed by the increased tax revenue. . . . Furthermore, Port Arthur hoped that the increased visibility resulting from consolidation would attract new businesses and thereby create new jobs.” 517 F. Supp. 987, 999 (1981) (footnote omitted).

       In interim elections held in 1981, the city’s electorate chose three black Council members. In fact, the city notes that it is now governed by a Council consisting of four blacks and five whites. Reply Brief for Appellant 6.
      The Court seems to rely on two factors for its conclusion: a slight differential between the percentage of black seats and the percentage of black voting age population; and a larger differential between the percentage of black seats and the percentage of the black population. There is a preference for voting age population statistics, see United Jewish Organizations v. Carey, 430 U. S. 144, 164, n. 23 (1977) (opinion of White, J.), because they are more “probative” of the “electoral potential of the minority community,” City of Rome v. United States, 446 U. S. 156, 186, n. 22 (1980), than population statistics. Even if the Court were to rely on population statistics here, this Court’s formulations reflect the recognition that it would be unreasonable, if not impossible, to require cities to devise voting plans that afford minorities representation ‘precisely proportional to their political strength in the jurisdiction. Indeed, the Court has indicated that proportional representation would be found in circumstances quite similar to those presented here. See Beer v. United States, 425 U. S. 130, 159, n. 19 (1976) (MARSHALL, J., dissenting) (approving representation/voting age population differential of 6%).
      Moreover, the Court’s conclusion that the 4-2-3 plan will “permanently foreclose” blacks from being elected to either of the at-large seats, ante, at 167, ignores the dynamics of the region, to which the facts of this case attest. With 35% of the voting age population composed of black citizens, it is politically naive to think that these citizens will not have significant — and indeed often decisive — influence in the election of at-large Council members. The results in numerous state and local elections demonstrate the political power of such a large and cohesive segment of the electorate. See J. Wilkinson, Harry Byrd and the Changing Face of Virginia Politics, 1945-1966, p. 346 (1968) (“By the middle of the 1960's . . . Negroes provided balanee-of-power ballots [in Virginia and] elsewhere in the South . . .”).

       Section 3 of the Voting Rights Act Amendments of 1982, Pub. L. 97-205, 96 Stat. 131, 42 U. S. C. § 1973b (1982 ed.), states that a violation has been established if it is shown, “based on the totality of circumstances,” that the political processes “are not equally open to [blacks].” The amendment expressly provides that “[t]he extent to which members of a protected class have been elected to office ... is one circumstance which may be considered . . . .” The Senate Committee Report stated:
      “Electoral devices, including at-large elections, per se would not be subject to attack under Section 2. They would only be vulnerable if, in the totality of circumstances, they resulted in the denial of equal access to the electoral process. [T]he presence of minority elected officials is a recognized indicator of access to the process . . . .” S. Rep. No. 97-417, p. 16 (1982).

       See U. S. Dept. of Justice, Civil Rights Division, Voting Rights Section, Number of Changes Submitted under Section 5 and Reviewed by the Department of Justice, By State and Year, 1965 — June 30, 1982 (unpublished).

       The following exchange took place at oral argument:
      “[The Court]: And may I get clear, is purpose still in this case at this level?
      “[The Government]: Not in terms of the submission to this Court, no, Your Honor.
      “[The Court]: So we consider only the effect?
      “[The Government]: Yes, Your Honor. I don’t believe that the district court’s opinion or order can fairly be read to cast any doubt on the purpose of the plan as adopted.” Tr. of Oral Arg. 30.