Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, Steven R. Denton, Judge. Super. Ct. No. GIC842380.
O'ROURKE, J.
National Film Laboratories, Inc. (doing business as Crest National Film Laboratories, Inc., hereafter Crest) appeals from a judgment in favor of the California State Board of Equalization (the Board) in Crest's action for a refund of sales tax and interest paid in protest. The Board assessed sales tax and interest stemming from an audit of Crest's transactions between July 1, 1993, and December 31, 1996. After unsuccessfully petitioning the Board for a redetermination of its audit and seeking a rehearing on its administrative decision, Crest sued the Board, alleging in part that the production and distribution of its products were sales tax-exempt exports under the import-export clause of the U.S. Constitution and section 6387 of the Revenue and Taxation Code. The trial court rejected Crest's challenges and entered judgment in the Board's favor. On appeal, Crest repeats these arguments and additionally contends that its sales are tax exempt under section 6396.
Statutory references are to the Revenue and Taxation Code unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
We state the facts from the parties' joint statement of undisputed facts and the trial court's unchallenged factual findings. Crest is a film laboratory in the business of duplicating and editing motion pictures on behalf of its customers, which consist primarily of movie studios (studios). The studios own the movies and "all rights and title in the videocassette copies of movies vests with the studios." The transactions at issue involve Crest's duplication and sale of videocassette copies of movies to studios for ultimate exhibition as in-flight entertainment by British Airways.
Crest's transactions began when British Airways placed an order for a specific number of copies of a movie with one of two distributors, Spafax Passenger Electronic Entertainment Development Limited (SPEED) or Swank Motion Pictures, Inc. (Swank), who solicit movie orders from airlines and submit them to studios. The distributor negotiated a license agreement for limited exhibition rights in order to duplicate the movies onto the videocassettes, and then entered into a license agreement with British Airways for the airline's use of videocassette copies of the movie on its flights. The studio placed an order with Crest for a specific number of copies of the movie and delivered to Crest a master or submaster of the movie for duplication. After confirming proper edits had been made to the movie, Crest added certain required content and duplicated the movie onto a videocassette, using blank videocassettes from its inventory.
On completing its duplication, Crest delivered the videocassettes to Sony Trans Com, Inc. (Sony) at a location within California. Sony, which had a "contractual relationship" with British Airways, performed two functions: quality control and testing, and preparing the videocassettes for shipment to British Airways in England. More specifically, Sony would perform a visual inspection of each of the videocassettes, looking for defects in the cartridges. It would remove one videocassette from the shipment and view it in its entirety, checking if it conformed with specifications (i.e., British Airways logos and appropriate subtitles), color balance, picture quality, sound synchronization, and additional video materials. British Airways also contracted with Sony to have it ensure that objectionable material (e.g., pornography or depictions of airline disasters) did not appear on the videocassettes. Sony checked the beginning, middle and end of all videocassettes in the shipment for quality to ensure that the correct movie was on the videocassettes and to ensure it contained certain additional video materials. The process took approximately 2 to 3 days before the tapes were forwarded to British Airways. If Sony determined that an entire shipment was defective, as where sound or picture quality or editing did not meet British Airways' standards, it would return the entire shipment to Crest for correction of the defect. If only certain videocassettes within a shipment were defective, Sony would contact Crest for replacements. No party kept records of the number of occasions in which Sony rejected one or all of the videocassettes from a Crest shipment, although Crest, Sony and SPEED representatives testified in depositions that rejections were rare, with a less than 1 percent rate.
After labeling and packaging the videocassettes, Sony shipped them to British Airways. When the exhibition period for a particular movie expired, British Airways sent all the videocassettes to a company located in England for destruction. The company ground them into powder and issued a certificate of destruction to the studio.
The Board conducted an audit of Crest for the period of July 1, 1993, through December 31, 1996, and determined Crest had $2,744,337 in unreported taxable sales. On Crest's petition for redetermination, the Board reduced the amount of unreported taxable sales, but nevertheless found Crest liable for $218,272.47 in tax and $93,723.31 in interest. Crest paid the $311,995.78 in tax and interest and filed a claim for a refund, which the Board denied.
Having exhausted its administrative remedies, Crest filed the present refund action. The matter was tried on the parties' joint statement of undisputed facts, as well as three documents admitted into evidence on the parties' stipulation.
Exhibit 1 is a July 29, 1986 letter from Swank to Crest stating, "Per California tax regulation, the rental of motion pictures in California is tax exempt. As the services your company provides is part of the finished product, that will also be tax exempt to us. [¶] Please accept this letter as our exemption. [¶] . . . [¶] . . . All future invoicing, please do not include tax." Exhibits 2 and 3 are identical forms filled out and executed by representatives of Swank and SPEED in 1989 and 1993 respectively, in which each company certified that it was in the business of selling tangible personal property purchased from Crest, which "will be resold by me in the form of tangible personal property; PROVIDED, however that in the event any of such property is used for any purpose other than retention, demonstration or display while holding it for sale in the regular course of business, it is understood that I am required by the Sales and Use Tax Law to report and pay for the tax, measured by the purchase price of such property."
After hearing arguments on the matter, the trial court found that Crest's delivery of the videocassettes to Sony in California for an agreed consideration constituted a sale for purposes of imposition of the sales tax. It rejected application of California's export exemption set forth in section 6387, as well as the exemption of section 6396, which the Board raised for the first time in its trial brief. The court ruled section 6396 would not directly apply because delivery was accomplished when Crest delivered the videocassettes to Sony in California. It ruled the export exemption under the U.S. Constitution had potential application only if Sony's testing and inspection services performed after Crest's delivery of the videocassettes were includable within the section 6387 exemption, but that state exemption did not apply because Sony's testing and inspection constituted an "additional layer of service to be performed by the purchaser by its agent (Sony) prior to the commencement of the export process" and "were not the 'regular steps contemplated' to the function of getting them to the port." Based on Sony's intervening quality control functions, the court concluded the videocassettes were not " 'irrevocably committed' " to the export process and the " 'continuous export journey' " had not yet begun. Having found Crest did not meet its burden to show the export exemption applied to the transactions, the court entered judgment in the Board's favor.
Crest filed the present appeal.
DISCUSSION
I. Standard of Appellate Review and Burden of Proof
The parties submitted this matter to the trial court on stipulated facts and documentary evidence. They agree that because the trial court's ruling involved the application of the law to undisputed facts, the question presented is one for our independent review. " 'When presented with uncontradicted facts on appeal in tax matters, the appellate court is free to make its own determinations. [Citation.] Our review of the legal question at issue is undertaken independently and we are not bound by the trial court's determination.' " (McDonnell Douglas Corp. v. State Bd. of Equalization (1992) 10 Cal.App.4th 1413, 1419 (McDonnell Douglas), quoting Rain Bird Sprinkler Mfg. Corp. v. Franchise Tax Bd. (1991) 229 Cal.App.3d 784, 794; see also Chevron U.S.A., Inc. v. State Bd. of Equalization (1997) 53 Cal.App.4th 289, 291, fn. 1.)
It is the taxpayer's burden to affirmatively establish the right to a refund by a preponderance of the evidence. (Richard Boyd Industries, Inc. v. State Bd. of Equalization (2001) 89 Cal.App.4th 706, 715; McDonnell Douglas, 10 Cal.App.4th at p. 1420; Gray v. Franchise Tax Board (1991) 235 Cal.App.3d 36, 40; Consolidated Accessories Corp. v. Franchise Tax Board (1984) 161 Cal.App.3d 1036, 1039.) Indeed, California law requires us to presume that all gross receipts are subject to tax unless the contrary is established. (§ 6091.) Accordingly, a taxpayer seeking to fall within an exemption must show entitlement to it. (McDonnell Douglas, at p. 1420; American Hospital Supply Corp. v. State Bd. of Equalization (1985) 169 Cal.App.3d 1088, 1091-1092.)
II. Contentions
Crest contends its transactions are exempt from sales tax because its videocassettes are exports; it maintains the videocassettes were delivered to a forwarding agent (Sony) in the business of preparing the property for export, entered the stream of export at the moment of delivery to Sony, and were not diverted from the export stream by Sony's quality inspections. Crest invokes California's sales tax exemptions under sections 6396 and 6387 as well as the U.S. Constitution's import-export clause.
We resolve whether the sales tax imposed on the videocassette sales violates the import-export clause independently from whether the sales at issue fall within either of the state statutory sales tax exemptions. If the sales tax violates the import-export clause, we need not decide whether the above-referenced statutory exemptions apply. (§ 6352.)
III. Analysis Under the Import-Export Clause
A. Overview of Import-Export Clause Jurisprudence
The import-export clause of article I, section 10, clause 2, of the United States Constitution provides in part: "No State shall, without the Consent of the Congress, lay any Imports or Duties on Imports or Exports, except what may be absolutely necessary for executing its Inspection Laws; . . . . "
In Farmers' Rice Cooperative v. County of Yolo (1975) 14 Cal.3d 616 (Farmers' Rice), the court summarized then standing United States Supreme Court authority addressing when a state's levy on exports violated the import-export clause: "The export-import clause imposes on all states an absolute prohibition against taxing exports without the consent of Congress. One of the main purposes of the clause was to eliminate any advantage the seaboard states might have in laying duties on goods and produce sent there from other states for export. 'It was important not to allow these States to take advantage of their favorable geographical position in order to exact a price for the use of their ports from the consumers dwelling in less advantageously situated parts of the country. This fear of the use of geographical position to exact a form of tribute found an especially forceful expression in the absolute prohibition against duties on exports by either Nation or States.' [Citations.] Thus once goods are actually in the process of exportation, that is have become 'exports,' their immunity from state taxation is absolute. [¶] However, although goods which are the products of a state may be intended for exportation, until they become 'exports' within the meaning of the constitutional provision, such goods do not cease to be part of the general mass of property in the state and as such within its jurisdiction and subject to taxation in the usual way. [Citations.] 'The Export-Import Clause was meant to confer immunity from local taxation upon property being exported, not to relieve property eventually to be exported from its share of the cost of local services.' [Citations.] Therefore[] in determining whether such goods are in the process of exportation, courts will pay proper respect to the competing constitutional demand that a state's right to tax goods produced within its borders and benefited by its tax supported services, shall not be unduly curtailed. []Otherwise, seaboard states would be unfairly disadvantaged themselves. 'It seems to us untenable to hold that a crop or a herd is exempt from taxation merely because it is, by its owner, intended for exportation. If such were the rule, in many states there would be nothing but the lands and real estate to bear the taxes.' " (Farmers' Rice, supra, 14 Cal.3d at pp. 620-621.)
Farmers' Rice explained that the uniform test for whether goods have entered the " 'stream of interstate commerce' " or " 'process of exportation' " was stated in Coe v. Errol (1885) 116 U.S. 517, 527 (Coe), decided under the commerce clause but applied by the high court to export clause questions. (Farmers' Rice, supra, 14 Cal.3d at p. 622, fn. 3;see also Kosydar v. National Cash Register Co. (1974) 417 U.S. 62, 71 (Kosydar).) Coe held that " '[g]oods do not cease to be part of the general mass of property in the state, subject, as such, to its jurisdiction, and to taxation in the usual way, until [1] they have been shipped, or entered with a common carrier for transportation, to another state (or country) or [2] have been started upon such transportation in a continuous route or journey.' " (Farmers' Rice, at p. 622, quoting Coe, 116 U.S. at p. 527.)
The court in Farmers' Rice observed that Coe's rule was regularly applied in other instances where the court was to decide, as against state attempts to tax, whether the taxed goods were "in the 'process of exportation' . . . ." (Farmers' Rice, supra, 14 Cal.3d at p. 623, citing Kosydar, supra, 417 U.S. 62, Empresa Siderurgica v. Merced Co. (1949) 337 U.S. 154 (Empresa), Richfield Oil Corp. v. State Board (1946) 329 U.S. 69 (Richfield Oil), and Shell Oil Co. v. State Bd. of Equal. (1966) 64 Cal.2d 713, 721.) In Empresa, the U.S. Supreme Court explained that under Coe, "it is not enough that there is an intent to export, or a plan which contemplates exportation, or an integrated series of events which will end with it. Citation. The tax immunity runs to the process of exportation and the transactions and documents embraced in it." (Empresa, 337 U.S. at p. 156.) "It is the entrance of the articles into the export stream that marks the start of the process of exportation. Then there is certainty that the goods are headed for their foreign destination and will not be diverted to domestic use. Nothing less will suffice." (Id. at p. 157.)
In Richfield Oil, the court struck down California sales tax imposed on oil placed in the storage tanks of a ship bound for New Zealand. (Richfield Oil, supra, 329 U.S. at pp. 71-72.) Richfield sold the oil to the New Zealand government and pumped it from a storage tank in California onto the ship. (Id. at p. 71.) California assessed a retail sales tax against Richfield measured by the gross receipts from the transaction. (Id. at pp. 71-72.) On Richfield's challenge to the tax under the import-export clause, the court, applying Coe's test (id. at p. 79), held that the oil on the ship was in the process of exportation, and that the retail sales tax violated the import-export clause. The court reasoned: "The certainty that the goods are headed to sea and that the process of exportation has started may normally be best evidenced by the fact that they have been delivered to a common carrier for that purpose. But the same degree of certainty may exist though no common carrier is involved. The present case is an excellent illustration. The foreign purchaser furnished the ship to carry the oil abroad. Delivery was made into the hold of the vessel from the vendor's tanks located at the dock. That delivery marked the commencement of the movement of the oil abroad. It is true, as the Supreme Court of California observed, that at the time of the delivery the vessel was in California waters and was not bound for its destination until it started to move from the port. But when the oil was pumped into the hold of the vessel, it passed into the control of a foreign purchaser and there was nothing equivocal in the transaction which created even a probability that the oil would be diverted to domestic use." (Richfield Oil, 329 U.S. at pp. 82-83, footnote omitted.)
In reaching its conclusion, Richfield Oil relied upon A.G. Spaulding Bros. v. Edwards (1923) 262 U.S. 66 (Spaulding), in which a Venezuelan firm ordered New York commission merchants to buy merchandise for export to Venezuela. (Spaulding, at pp. 67-68; Richfield Oil, supra, 329 U.S. at pp. 80-81.) The New York commission merchants sent a written order to the manufacturer, Spaulding, with instructions to deliver the packages to an export carrier. (Spaulding, at p. 68.) Spaulding marked and delivered the goods as directed and was given a receipt by the carrier, which it sent to the commission merchants and which was exchanged for an export bill of lading. (Ibid.) The court, striving to "fix a point at which, in the view of the purpose of the Constitution, the export must be said to begin, 'observed' while the goods were in process of manufacture they were none the less subject to taxation if they were intended for export and made with specific reference to foreign wants. [Citations.] On the other hand no one would doubt that they were exempt after they had been loaded upon the vessel for Venezuela and the bill of lading issued." (Id. at p. 69.) The court found the facts "closer to the latter than to the former" and concluded export had begun: "The very act that passed the title . . . committed the goods to the carrier that was to take them across the sea, for the purpose of export and with the direction to the foreign port upon the goods. The expected and accomplished effect of the act was to start them for that port. The fact that further acts were to be done before the goods would get to sea does not matter so long as they were only the regular steps to the contemplated result. Getting the bill of lading stands no differently from putting the goods on board ship. Neither does it matter that the title was in [the commission merchants] and that theoretically they might change their minds and retain the [merchandise] for their own use. There was not the slightest probability of any such change and it did not occur. The purchase by [the commission merchants] was solely for the purpose of [the Venezuelan firm] and for their account and risk. Theoretical possibilities may be left out of account." (Id. at pp. 69-70, italics added.)
The California Supreme Court applied Richfield Oil and Spaulding in Gough Industries v. State Board of Equalization (1959) 51 Cal.2d 746 (Gough), in which the court held a manufacturer's sale of electrical products for use in Saudi Arabia was free from sales tax under the import-export clause. The purchasers, who had informed bidders that all purchases were made strictly for direct export to foreign countries, submitted an export purchase order to the plaintiff manufacturer that among other things required the packages be marked with a Saudi Arabian port of entry, and contained a condition that the "property hereunder is for export and is to be delivered directly to a carrier or forwarding agent for shipment to a point outside the United States . . . ." (Id. at p. 747.) After being instructed to deliver the goods to a designated export packer, the plaintiff shipped the goods by truck carrier to the packer. (Id. at pp. 747-748.) Title passed at the time the goods were delivered to the packer, who then packed and crated the goods according to the purchaser's specifications and forwarded them by truck carrier to the ocean carrier that transported them to Saudi Arabia. (Id. at p. 748.) The question, as framed by the court, was whether "a continuous export journey [had] begun at, or prior to, the time the goods were delivered to the packer?" (Ibid.)It concluded it had, noting that under Richfield Oil and Spaulding the product would be free from state sales tax "if at the time title passed the certainty of the foreign destination was plain." (Id. at p. 749.)
The court in Gough explained: "In the present case all the contract documents specified the exportation, and all steps in the transportation were carried out without deviation." (Gough, supra, 51 Cal.2d at p. 749.) Based upon the trial court's factual findings, the court made note of the following factors: "(a) the agreement of sale contemplated shipment of the goods in export, that is from a seller in the United States to a buyer in a foreign country; (b) from the beginning of the transaction, the goods were committed to go all the way to the foreign country; (c) the movement of the goods had actually started when the tax was sought to be imposed; and (d) the journey was continuous and unbroken by any action or delay taken for a purpose independent of the transportation of the goods." (Ibid.) Thus, the court held it was immaterial that the goods were shipped to a packer for ocean travel elsewhere because such was "incidental and necessary for the safe transportation of the goods. . . ." (Id. at p. 750.)
In Kosydar, supra, 417 U.S. 62, the court approved the bright line rule stated in Coe, reiterating that mere intent to export will not suffice, and holding the process of exportation does not begin "until the article at issue begins its physical entry into the stream of exportation." (Id. at p. 71.) The court upheld the policy behind Coe's reasoning: "It may be said that insistence upon an actual movement into the stream of export in the case at hand represents an overly wooden or mechanistic application of the Coe doctrine. This is an instance, however, where we believe that simplicity has its virtues. The Court recognized long ago that even if it is not an easy matter to set down a rule determining the moment in time when articles obtain the protection of the Import-Export Clause, 'it is highly important, both to the shipper and to the State, that it should be clearly defined so as to avoid all ambiguity or question.' " (Kosydar, at p. 71, quoting Coe, supra, 116 U.S. at 526; see also Sumitomo Forestry Co., Ltd. of Japan v. Thurston County, Washington (9th Cir. 1974) 504 F.2d 604, 607.)
In 1976, after Farmers' Rice, the U.S. Supreme Court decided Michelin Tire Corp. v. Wages (1976) 423 U.S. 276 (Michelin), in which it set forth a "modern Import-Export Clause test" focusing on the nature of the challenged exaction and whether it offends policy considerations underlying the clause. (See Itel Containers Intern. Corp. v. Huddleston (1993) 507 U.S. 60, 76; Department of Revenue v. Ass'n of Washington Stevedoring Cos. (1978) 435 U.S. 734, 752-753 (Washington Stevedoring); Michelin, 423 U.S. at pp. 285-286.) The test was based on the court's statement that the Constitution's framers "sought to alleviate three main concerns by committing sole power to lay imposts and duties on imports in the Federal Government, with no concurrent state power: [1] the Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power; [2] import revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States; and [3] harmony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely flowing through their ports to the other States not situated as favorably geographically." (Michelin, at pp. 285-286; see also Itel, at p. 76.) The Michelin court proceeded to apply its three prong analysis to a Georgia ad valorem property tax imposed on imported tires, determining it was not the type of state exaction that the Framers had in mind as being an "impost" or "duty." (Michelin, at pp. 286, 293-294.) In Washington Stevedoring, 435 U.S. 734, decided shortly after Michelin, the U.S. Supreme Court reaffirmed the Michelin approach to import-export clause cases, holding its analysis "should apply to taxation involving exports as well as imports," since the export-tax ban vindicates the first and third policies identified in Michelin.
"The export-tax ban vindicates two of the three policies identified in Michelin. It precludes state disruption of the United States foreign policy. It does not serve to protect federal revenues, however, because the Constitution forbids federal taxation of exports. [Citations.]. But it does avoid friction and trade barriers among the States. As a result, any tax relating to exports can be tested for its conformance with the first and third policies." (Washington Stevedoring, supra, 435 U.S. at p. 758.)
The continued validity of the "stream of export" doctrine after Michelin is in some dispute among courts considering the issue. (See U.S. Steel Min. Co., LLC v. Helton (W.Va. 2005) 631 S.E.2d 559, 562-563, 569-570, 581-582, 586 [majority applying Michelin/Washington Stevedoring analysis; two justices in dissent rejecting notion that Michelin overruled Richfield Oil's stream of export analysis; third justice in dissent observed majority properly looked to Michelin, which "called into question" Richfield Oil test]; Virginia Indonesia Co. v. Harris County Appraisal District (Tex. 1995) 910 S.W.2d 905, 910-912 [Michelin did not overrule Coe or any of the stream of export cases]; Ammex, Inc. v. Dept. of Treasury (Mich.App. 1999) 603 N.W.2d 308, 313-314 [Richfield Oil has precedential value after Michelin, since neither Michelin or Washington Stevedoring involved a tax imposed directly on goods in export transit]; Coast Pacific Trading, Inc. v. Dept. of Revenue (Wash. 1986) 719 P.2d 541, 544 [observing that the parties "correctly point out that Michelin and Stevedoring have not overruled decisions that struck down taxes levied directly on goods that had reached the export stream"; see Bittker & Denning, The Import-Export Clause (1998) 68 Miss L.J. 521, 553-558].)
Following Michelin, one California court of appeal has applied Coe's stream of export analysis to a seller's challenge to sales taxes under the import-export clause. In McDonnell Douglas, supra, 10 Cal.App.4th 1413, 1424, the court invalidated a sales tax on McDonnell Douglas aircraft parts sold to a Mexican airline on grounds that the goods were tax-exempt exports in the export stream. Relying upon Farmers' Rice, Coe, Richfield Oil, Spaulding, Empresa, and Gough, the court distinguished Michelin and Washington Stevedoring, stating: "While later cases expanded the analysis to include other factors, at least where, as here, the tax is assessed on exported goods and not related services, the export exemption still applies to goods in the 'export stream.' " (McDonnell Douglas, supra, 10 Cal.App.4th at p. 1413, fn. 4.) Another case applied the Michelin/Washington Stevedoring test to uphold imposition of a payroll and gross receipts tax on an entity operating a customs bonded warehouse holding supplies for consumption on voyages or flights to foreign countries. (City of Los Angeles v. Marine Wholesale/Warehouse Co. (1993) 15 Cal.App.4th 1834, 1843-1846.)
McDonnell Douglas summarized: "Aeromexico bought the parts for maintenance of its aircraft. All the documents indicated that the parts were for export to Aeromexico's Mexico City maintenance facility. Aeromexico took title in California and only shipped the parts by truck because they were too large and in too great a quantity to be flown to Mexico City in its own aircraft. Aeromexico only used AM MEX [an independent freight forwarder] because U.S. trucks could not legally transport the parts from Long Beach to Mexico City. AM MEX never took title to the goods and merely facilitated their transfer to Mexican trucks to complete the journey. Indeed, the minimal border delay would have been greater had Aeromexico not used AM MEX's specialized services. The goods were delivered into the export stream and never diverted or delayed, other than for the border transfer without which they could not have completed their journey. Aeromexico had no use for the parts at the border, and never attempted to, or did, divert the parts. All the parts were delivered to Aeromexico's Mexico City maintenance facility. As in Gough, Richfield, and Spalding, and unlike in Empresa and Coe, Aeromexico's clear plan to ship the parts to Mexico City for its own use was acted upon and continued uninterrupted to completion other than for unavoidable delays incidental to their journey." (McDonnell Douglas, supra, 10 Cal.App.4th at p. 1424.)
B. Analysis
Relying on Richfield Oil, supra, 329 U.S. 69, Spaulding, supra, 262 U.S. 66, and other authorities applying a stream-of-export analysis, Crest contends that in the present case, the exportation process for the videocassettes began at the time title passed upon their delivery to Sony, who the parties stipulated is an export packer. Pointing out there is no dispute that the sale occurred and title passed to the studio at the time of delivery to Sony, Crest argues the simultaneous passage of title and delivery to Sony committed the goods to the exportation process, as in Spaulding, supra, 262 U.S. 66. Crest asserts: "Anything that was done after Export Packer/Sony received the duplicated videocassettes were only the contemplated acts that continued them on their export journey." Crest additionally looks to case law in which courts decided whether property was exempt from taxation because it was in interstate commerce, or whether it was taxable by reason of a break in continuity of transit. (E.g., Minnesota v. Blasius (1933) 290 U.S. 1, 9-10; Texas & New Orleans R.R. v. Sabine Tram Co. (1913) 227 U.S. 111; Kelley v. Rhoads (1903) 188 U.S. 1.) Under these authorities, Crest argues Sony's inspection of the videocassettes was only a temporary interruption in furtherance of the intended transportation that did not disrupt the continuity of transit, precluding the Board from imposing any tax.
The Board takes a different tack and for the first time on appeal applies the policy-based approach of Michelin/Washington Stevedoring. It alternatively argues that, assuming its viability, Crest's claim of exemption fails under the "in-transit" analysis of Coe and its progeny because when the videocassettes were delivered to Sony, none of Coe's conditions had been met and thus they were not in the export journey. Finally, the Board argues the interstate commerce cases are irrelevant because here, no interstate journey had begun upon the videocassettes' arrival at Sony.
We need not decide whether Coe's stream of export test survives Michelin, because we reach the same conclusion under either analysis. Applying the test of Coe and its progeny, on which both parties relied in the trial court below, we conclude in the present case that the videocassettes at the time of delivery to Sony had not begun an export journey that was "continuous and unbroken by any action or delay taken for a purpose independent of the transportation of the goods." (Gough, supra, 51 Cal.2d at p. 749, italics added; see also Kosydar v. National Cash Register, supra, 417 U.S. at p. 71 [a product obtains the protection of the import-export clause when there is "actual movement into the stream of export"]; Coe, supra, 116 U.S. at p. 527 [import-export clause applies to goods that had "been started upon such [export] transportation in a continuous route or journey"].)
The parties agree Crest's sale of duplicated videotapes occurred simultaneously with their delivery to Sony, who concededly is an export packer and acted as the export packer in eventually packing and shipping the videocassettes to British Airways. But the undisputed facts demonstrate that upon delivery, Sony did not immediately begin packing and shipping the products. Rather, it directly proceeded to engage in quality control testing, which sometimes resulted in the return to Crest of entire shipments of videocassettes or particular videocassettes depending on the type of defect. While the evidence indicates only a small percentage of videocassettes were returned, what is clear from the undisputed facts is that every shipment went through the quality control and testing process, indeed the parties stipulate that Sony checked the beginning, middle and end of all videocassettes in the shipment for quality and appropriate content, a process that took a couple of days before they were eventually sent to British Airways. In our view, these quality control efforts fall with the category of "action . . . taken for a purpose independent of the transportation" (Gough, supra, 51 Cal.2d at p. 749) and cannot be characterized as "incidental and necessary for the safe transportation of the goods," as were the actions involved in Gough. It appears to us that at the time of delivery to Sony, the goods had not yet begun the unbroken process of exportation, despite having been placed in the hands of the export packer. In short, Crest has not persuaded us that at that particular time, the "certainty of foreign destination" was plain. (Gough, at p. 749.)
Crest would have us hold as a bright line rule under Spaulding that the process of exportation begins when title passes on delivery to a common carrier, as occurred in the present case. Indeed, in oral arguments before us, Crest argued both Spaulding and Richfield Oil hold that the sale in those cases started the product's export stream. We do not read these cases so narrowly. In our view, Spaulding and the other cases focus upon actuality rather than form; in Richfield Oil for example, the court observed that the certainty that goods are headed out to sea may be "best evidenced by their delivery to a common carrier for that purpose," but "the same degree of certainty may exist though no common carrier is involved." (Richfield Oil, supra, 329 U.S. at p. 82, italics added.) The court stated: "The means of shipment are unimportant as long as the certainty of the foreign destination is plain." (Id. at p. 83; see also Farmers' Rice, supra, 14 Cal.3d at p. 620 [goods become exports once they are "actually in the process of exportation" (italics added)].) Similarly, in Empresa, supra, 337 U.S. 154, the court upheld a personal property tax imposed on portions of a cement plant that was intended for exportation, but only partially dismantled and prepared for shipment. (Id. at p. 155.) The court found the process of exportation on those taxed portions had not begun; it was insufficient, in its view, that there was a purpose and plan to export the property, or that in due course the plan was fully executed. (Id. at p. 157.) Because the property had not started on its export journey on the tax date, imposition of the tax was proper. In reaching this conclusion, the court rejected an argument pointing to the fact the dismantler was a licensed carrier for interstate and foreign commerce whose employment included the loading of the property on railroad cars for shipment to the seaboard: "[t]he dismantler had not in this case started the movement of the property to the rail carrier. Hence we need not determine whether that intermediate transportation would be part of the export process." (Id. at p. 157.) Both Richfield Oil and Empresa support our view that delivery to a common carrier or export packer itself is not dispositive, it is whether the common carrier or export packer in fact begins the process of shipment abroad without taking any intervening steps other than those "necessary for the safe transportation of the goods." (Gough, supra, 51 Cal.2d at p. 750.) That the vast majority of videocassettes were thereafter certain to be ultimately exported does not change our conclusion. (Coe, supra, 116 U.S. at pp. 526-528 [product is not exempt from taxation because it is intended for exportation]; Sumitomo Forestry Co., Ltd. of Japan v. Thurston County, Washington, supra, 504 F.2d at p. 608 ["[c]ertainty of export evidenced by financial and contractual relationships does not by itself render goods 'exports' before the commencement of their journey abroad"].)
Crest also relies on Matson Navigation Co. v. State Bd. of Equalization (1955) 136 Cal.App.2d 577, as support for its bright line proposition that sale to a foreign entity puts property into the export process. But the specific facts in Matson, involving the sale of a ship to a Panamanian corporation, render it inapposite. There, both parties intended at and prior to the sale that the ship would be registered as a foreign vessel upon sale and taken from the U.S. to Italy. (Id. at p. 579.) On the day title transferred, physical possession of the ship was given to the Panamanian company in San Francisco, and the vessel was registered as a Panamanian vessel with the Panamanian Consul. (Ibid.) The next day, the seller filed a declaration of export as required by federal law and regulations, and the ship's American Certificate of Enrollment was surrendered to the Collector of Customs, causing the ship to be "legally disabled from ever thereafter engaging in domestic trade." (Ibid.) Answering the question of whether the ship was sufficiently committed into the stream of export at the time of sale, the Matson court under these circumstances held "[f]or all practical purposes" the sale "extinguished United States dominion over the subject matter of sale and at the same time invested it in a foreign power." (Id. at pp. 583-584.) Matson distinguished Empresa, supra, 337 U.S. 154, acknowledging that the tax was sought to be imposed "while there still was no sufficiently positive or certain or irrevocable commitment of those goods into the export stream. The transaction had not yet advanced the goods involved to a position where they were actually subject to dominion by a foreign country nor were they in the ordinary course of events certain to so become." (Matson, 136 Cal.App.2d at p. 584.) In this case, where the videocassettes at issue are subject to quality control testing and possible return to Crest after their sale, we cannot say there is a "sufficiently positive[,] . . . certain or irrevocable commitment of those goods into the export stream." (Ibid.)
Given our conclusion, we are not persuaded by Crest's reliance on the assertedly undisputed fact that Sony worked on behalf of and solely for British Airways. Under the stream of export analysis, it appears immaterial on whose behalf the delay in proceeding toward export took place; the relevant inquiry is the purpose of the delay and whether at the time of taxation the goods had actually begun its movement into the stream of export.
Further, we agree with the Board that the interstate commerce cases upon which Crest relies are not pertinent where exportation has not yet started. In those cases, the courts scrutinized the commerce clause's prohibition on taxing property in transit in interstate commerce, and decided whether there was "continuity of transit" where an interstate journey had begun. (E.g. Minnesota v. Blasius, supra, 290 U.S.at pp. 9-10; Virginia Indonesia Co. v. Harris Co. Appraisal Dist., supra, 910 S.W.2d at p. 908 [once exportation has begun, goods retain their export status, and thus remain exempt from state taxation as long as they are in transit; temporary interruptions " 'due to the necessities of the journey or for the purpose of safety and convenience in the course of the movement' " do not break the continuity of transit, however, stoppages that serve the owner's business purpose interrupt the goods' continuity of transit, rendering them subject to the taxing power of the state].)
Even if we were to assume export had begun immediately upon the videocassettes delivery to Sony, we would be inclined to conclude under these authorities that the stoppage removed the sale from tax immunity because it was attributable to a business purpose. (Virginia Indonesia, supra, 910 S.W.2d at pp. 912-913.) The court in Virginia Indonesia explained: "It is the purpose of the stoppage that is important. [Citation.] If the stoppage is attributable to the business purpose of the owner, then the exportation is deemed to have terminated, and the goods are subject to tax in the jurisdiction of their stoppage. [Citation.] For instance, if goods are delayed for the purpose of further processing or for storage pending the receipt of orders, the goods are no longer in the stream of commerce." (Id. at p. 912.) Here, it is important to note the studios retained title to the videocassettes at all times after the sale and only provided a license to British Airways for their use. The stoppage for the purpose of conducting quality control and inspection for required content served not a transportation purpose, but a business purpose inuring to the studios' favor by ensuring its product was adequate for British Airways' use.
Finally, were we to apply the rationale of Michelin/Washington Stevedoring, we would reach the same conclusion. The analysis of those cases would require us to decide whether the sales tax at issue is an "impost" or "duty" within the meaning of the import-export clause. (Michelin, supra, 466 U.S. at p. 360; see City of Los Angeles v. Marine Wholesale/Warehouse Co., supra, 15 Cal.4th at p. 1844.) Specifically, we ask whether the tax (1) restrains the federal government's ability to conduct foreign policy, and (2) falls upon a taxpayer with a reasonable nexus to California, is properly apportioned, does not discriminate, and relates reasonably to the services provided by the state. (Washington Stevedoring, supra, 435 U.S. at pp. 754-755.) The sales tax here was levied on sales that occurred entirely within the state of California, and thus it does not impose any burden on foreign business or create any special tariffs. We do not ascertain, and Crest has not shown, any resulting impediment to foreign trade. As for the second policy, the tax was assessed on Crest, a California corporation that receives the benefit of local police, fire and other services, and the videocassettes remained in California with Sony at the time of the sale. The Board concedes that the license or "lease" of the motion pictures from the studio to British Airways is not subject to the tax; the object of the tax is the retail sale of tangible personal property within this state and that sale is not subject to taxation by any other state. The tax is imposed on an exclusively in-state activity. Given the nature of the tax and facts surrounding the sale, no circumstances are presented requiring us to decide whether the sales tax is or is not fairly apportioned to avoid multiple tax burdens from differing state or international jurisdictions, or whether it discriminates against interstate or foreign commerce. (E.g. Goldberg v. Sweet, supra, 488 U.S. at pp. 260-261 [central purpose of apportionment requirement is to ensure each state taxes only its fair share of an interstate transaction]; Barclays Bank PLC v. Franchise Tax Bd. of California, supra, 512 U.S. at pp. 301-302, 310-311 [analyzing California's corporate franchise taxing scheme as applied to domestic corporations with foreign parents or to foreign corporations with foreign parents or foreign subsidiaries].) The sales tax at issue does not constitute an "impost" or "duty" under the Michelin analysis.
This second question parallels the multi-prong test applied in Complete Auto Transit, Inc. v. Brady (1977) 430 U.S. 274, 279, Japan Line, Ltd. v. Los Angeles County (1979) 441 U.S. 434, 444-445; Goldberg v. Sweet (1989) 488 U.S. 252, 257; Container Corp. v. Franchise Tax Board (1983) 463 U.S. 159, and Barclays Bank PLC v. Franchise Tax Bd. of California (1994) 512 U.S. 298, 310-311 in which foreign and domestic commerce clause challenges were asserted to various taxes. The Japan Line court added two additional inquiries in foreign commerce clause cases: the risk of multiple taxation and potential impairment of the nation's ability to "speak with one voice" in foreign affairs. (Japan Line, supra, 441 U.S. at pp. 446-449.)
IV. State Law Exemptions
California law preserves the constitutional protections of the import-export clause in the general exemption of section 6352: "There are exempted from the [sales] taxes imposed by this part the gross receipts from the sale of and the storage, use, or other consumption in this State of tangible personal property the gross receipts from the sale of which, or the storage, use, or other consumption of which, this State is prohibited from taxing under the Constitution or laws of the [U.S.] . . . ." (See also McDonnell Douglas, supra, 10 Cal.App.4th at p. 1420.) California law contains other statutory exemptions, including those in sections 6387 and 6396 at issue here. However, those exemptions should not be strictly construed or interpreted against their application if such interpretation would " 'fail to give to exports the liberal protection that hitherto they have received. . . . ' " (McDonnell Douglas, at p. 1420, quoting Spalding, supra, 262 U.S. at p. 70.)
A. Section 6396 Exemption
Crest contends its transactions are exempt from sales tax under section 6396, which provides: "There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the retailer by means of: (a) facilities operated by the retailer, or (b) delivery by the retailer to a carrier, customs broker or forwarding agent, whether hired by the purchaser or not, for shipment to such out-of-state point. [¶] For purposes of this section, the term 'carrier' shall mean a person or firm engaged in the business of transporting for compensation tangible personal property owned by other persons, and includes both common and contract carriers. The term 'forwarding agent' shall mean a person or firm engaged in the business of preparing property for shipment or arranging for its shipment."
In support of its contention, Crest argues the videocassettes were delivered to Sony, an entity that is a forwarding agent engaged in the business of preparing property for transport. Crest maintains the trial court erroneously concluded, contrary to the stipulated facts, that Sony was an agent of the studio and the videocassettes were delivered to the studio or its agent in California, resulting in a taxable transaction. Crest argues that the undisputed facts show instead that Sony acted at all times on behalf of British Airways; that Sony "never received any property on behalf of Crest or the Purchaser/Studio."
In Chevron U.S.A., Inc. v. State Bd. of Equalization, supra, 53 Cal.App.4th 289, the court of appeal addressed the section 6396 exemption, pointing out it " 'is designed to accommodate federal constitutional restrictions on state taxation of sales in interstate commerce' " under article 1, section 8 of the United States Constitution. (Id. at p. 295, quoting Engs. Motor Truck Co. v. State Bd. of Equalization (1987) 189 Cal.App.3d 1458, 1467-1468.) "Section 6396 makes the necessary accommodation by exempting those sales where delivery, whether made by use of the retailer's own facilities or by a carrier, is to the seller at a point outside the state." (Engs., at p. 1468.) Given the backdrop of federal constitutional law (Satco, Inc. v. State Bd. of Equalization (1983) 144 Cal.App.3d 12, 16), the court of appeal in Chevron warned that the general rules of construction governing tax exemptions – requiring they be construed liberally in favor of the Board and strictly against the taxpayer – "must be applied to section 6396 with a light hand, with due deference to the overriding protections afforded by the interstate commerce clause." (Chevron U.S.A., at pp. 295-296.)
We do so here, recognizing that it is still Crest's burden to prove its transactions fell within the above-stated exemption. (McDonnell Douglas, supra, 10 Cal.App.4th at p. 1420.) It cannot assert error and shift the burden to the state to justify the tax. (Consolidated Accessories Corp. v. Franchise Tax Board, supra, 161 Cal.App.3d at p. 1039; Hall v. Franchise Tax Bd. (1966) 244 Cal.App.2d 843, 848.) Under this principle and general tenets of statutory construction, our de novo resolution of Crest's claim to the section 6396 exemption is simple. Proper statutory construction requires that we give meaning to every word in the statute so to avoid an interpretation that renders any of its terms surplusage. (Arnett v. Dal Cielo (1996) 14 Cal.4th 4, 22; see Reno v. Baird (1998) 18 Cal.4th 640, 658.) The plain language of section 6396 requires a showing that, among other requirements, the tangible personal property at issue is required – "pursuant to the contract of sale" – to be shipped to a point outside the state by specified means. (§ 6396, italics added; see also Cal. Code Regs., tit. 18, § 1620, subd. (a)(3)(B).) Giving meaning to the italicized phrase compels us to conclude that in proving a claim of exemption under the statute in an action for refund, a taxpayer's burden of proof requires it to demonstrate as a threshold matter that the terms of its sales contract required the property at issue be shipped to a point outside California. Any other conclusion would render the phrase surplusage. We will not effect such a rewriting of the statute. (California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 633 [" 'This court has no power to rewrite the statute so as to make it conform to a presumed intention which is not expressed' "].)
This conclusion is supported by the authorities addressing the section 6396 exemption, which indicate the court in some manner was provided evidence of the terms of the sales contracts at issue. (See Chevron U.S.A. v. State Bd. of Equalization, supra, 53 Cal.App.4th at pp. 292, 293 [under contract between Chevron and its mechanical contractor that was to build an oil drilling platform, Chevron "agreed to furnish to Atkinson an exemption certificate certifying that [the platform] was to be shipped 'to the Outer Continental Shelf beyond the State's territorial waters, for the purposes of meeting State sales and use tax exemption requirements' "]; Engs Motor Truck Co. v. State Bd. of Equalization, supra, 189 Cal.App.3d at p. 1463 [case involved the sale of trucks for shipment to designated locations in Arizona; "The sales invoice and bill of lading in each instance reflected an Arizona delivery point . . . ."]; Pope v. State Bd. of Equalization (1988) 202 Cal.App.3d 73, 77 [on summary adjudication, parties stipulated that the plaintiff's purchase orders reflected an out-of-state address of the purchasers and a $90.00 charge for out-of-state delivery through an entity known as 3-R Transporters].) While none of these cases directly addressed the question we face, they are consistent with our holding as to what evidence the taxpayer must produce as part of its burden of proving entitlement to the section 6396 exemption.
Here, the parties' joint statement of undisputed facts does not address the terms of Crest's contract or other agreement of sale, whether that agreement was between Crest and the distributor or Crest and the studio. Nor were any such contracts admitted into evidence. Absent competent evidence of the terms of Crest's contract, or, for that matter, any other contract involved in the subject transactions, Crest cannot meet its burden to show it is exempt from taxation under section 6396.
The record is uncertain as to whether Crest entered into a contract with the distributor or the studio, or both. Crest's complaint alleged: "A given transaction during the Audit Period for which the Board levied sales tax on Crest began with a Studio contracting with a Distributor to license exhibition rights to the movie. The Distributor, SPEED or Swank, in turn contracted Crest [sic] as exclusive Duplicator to reproduce videocassette copies of a Studio's movies for exclusive exhibition by BA [British Airways]. Under contract between the Distributor and BA, BA received the limited license right to exhibit a Studio's movies on BA's in-flight entertainment systems." (Italics added.) It is not clear whether the italicized word is a typographical error for the word "contacted" or whether it was intended to allege that the distributor contracted with Crest. The parties' joint statement of undisputed facts says nothing about a contract between Crest and either distributor; in reciting the facts of the transactions, it merely states: "The studio contacted Crest, placing an order for a specific number of copies of the movie, and delivering a master or submaster of the movie for duplication to Crest." Crest's trial brief states, "Crest merely duplicates the movie onto videocassettes at the direction of the Studio."
In its opening brief, Crest argues that "Export Packer/Sony was contractually obligated to send merchantable property to its principal – Importer/British Airways." For this proposition, Crest cites to the joint statement of undisputed facts which states: "Sony acted as an export packer who had a contractual relationship with British Airways, performing two functions: (1) quality control and testing; and (2) preparing the videocassettes for shipment to British Airways in England. Sony received as many as 30,000 videocassettes a month from various film duplicators. Sony packaged the videocassettes and forwarded them to British Airways." Crest also argues, "[T]he Purchaser/Studio was contractually obligated to Importer/ British Airways to deliver the videocassettes to England." For this proposition, Crest cites the portion of the joint statement stating: "The distributor in turn contacted the studio that owned the movie and placed an order, requesting a specific number of copies of the movie and requesting, and receiving, from the studio limited exhibition rights to the movie. The limited exhibition rights granted by a studio for a movie related to the use of videocassettes on board British Airways' aircraft as in-flight entertainment typically for an exhibition period of one to two months." Neither of the above-quoted stipulated facts establish the terms of Sony's contract with British Airways.
B. Section 6387 Exemption
Crest additionally contends its sales fall within the exemption of section 6387, which provides: "There are exempted from the computation the amount of the sales tax the gross receipts from sales of tangible personal property purchased for use solely outside this State and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States prior to making any use thereof."
The Board responds that this exemption does not apply to Crest's sales for several reasons. First, it maintains Sony was not acting as an export packer at the time it took delivery of the tapes as it did not pack them for export until it conducted its testing. Pointing to section 6387's term requiring use "solely outside this State," the Board further argues Crest has not shown Sony did not use the tapes within the meaning of the statute when it viewed the videocassettes to confirm required edits and content, and test for sound and picture quality. It additionally points out that under section 1620 of title 18 of the California Code of Regulations, adopted as an aid to the Board's interpretation of the sales tax exemptions, Crest's sales were not exempt because the videocassettes were not "irrevocably committed to the exportation process at the time of sale." (Cal. Code Regs., tit. 18, § 1620, subds. (a)(3)(C)(1), (2).)
Section 6387's exemption was addressed in Flying Tiger Line v. State Bd. of Equalization (1958) 157 Cal.App.2d 85 (Flying Tiger). There, the Board imposed a sales tax on the price of material used to overhaul and repair some airplanes sold to a Spanish airline, Iberia, by Flying Tiger Lines, Inc. (Id.at pp. 87-89.)Iberia had purchased the aircraft in the U.S. and at the same time entered into a contract with Flying Tiger for the planes' overhaul and repair at Flying Tiger's Burbank, California plant. (Id. at p. 87.) The airplanes were flown to Burbank and delivered to Flying Tiger, where in the process of overhauling them Flying Tiger transferred to Iberia title to materials that became an integral part of the aircraft. (Ibid.) After the materials had been installed, the planes were turned over to a Spanish crew employed by Iberia and flown out of the country. (Ibid.) The trial court had found that the work was done by Flying Tiger's plant in California, that title to the materials passed to Iberia prior to the time the planes were turned over to the Spanish crews, that sales of the materials were made and completed in California at the time the material was installed in the planes and accepted by Iberia, that the aircraft were not in transit during the period of repair, and that upon installation the material became an integral part of the aircraft. (Id. at p. 89.)
Challenging some of these trial court findings, Flying Tiger on appeal contended that imposition of the sales tax violated section 6387. (Flying Tiger, supra, 157 Cal.App.2d at pp. 89, 92.) The court of appeal rejected the argument, stating: "[Flying Tiger] argues that the delivery of the airplanes was made to Mr. Carlos Goetz as the forwarding agent of Iberia; that the parts were purchased for use outside California and were, in fact, delivered to ports outside the continental United States prior to making any use thereof. But one of the essential facts in issue is whether or not Mr. Goetz took delivery as forwarding agent of Iberia. Under the evidence it appears that he was designated by Iberia as its general agent; that as such he had power to accept performance of the contract and redelivery of the planes out of bailment. Although he was named in the shipper's export declarations as a forwarding agent for export control and custom purposes, that does not mean that when the delivery of the airplanes under the contract was made to him as general agent of Iberia that he was acting in the capacity of forwarding agent. The [trial] court found that delivery was made to Iberia and the finding is supported." (Id. at p. 93.) The court of appeal validated the sales tax on the gross receipts for the sale of the parts in this situation. (Id. at pp. 88-93.)
Here, the trial court found Crest delivered the videocassettes to Sony at the studio's direction, and that "Sony's contract required it to do much more than to make the videocassettes ready for export. Sony's testing and inspection of the videocassettes constituted an additional layer of service to be performed by the purchaser by its agent (Sony) prior to the commencement of the export process." We read this as an implicit finding that Sony, acting on the studio's behalf, did not perform the function of an export packer at the time of the sale. Under Flying Tiger, supra, 157 Cal.App.2d 85,it is the function of the entity designated as the forwarding agent or export packer, not its mere designation as such, that controls whether the exemption applies. We need not address the Board's contentions as to whether the videocassettes were "irrevocably committed to the export process" within the meaning of section 1620 of the California Code of Regulations, or whether Crest preserved any appellate challenge to that regulation, as we conclude Crest has not met its burden to show that at the time of sale, they were delivered to an "export packer . . . engaged in the business of preparing goods for export or arranging for their exportation" to invoke the section 6387 exemption.
The Board has requested that we take judicial notice of certain documents from the rulemaking file pertaining to the Board's revision of section 1620 of the California Code of Regulations. Crest challenges certain assertions made by the Board in making its request, but asserts no objection to the documents subject to the request. We grant the unopposed request, though it does not alter our decision.
DISPOSITION
The judgment is affirmed.
WE CONCUR
McDONALD, Acting P. J., McINTYRE, J.