Export Clause on Crude Oil Exports – Trafigura Trading LLC v. IRS

Apr 15, 2019

Trafigura Trading LLC filed suit against the IRS on January 16, 2019. The complaint seeks a refund of federal oil spill tax on crude oil exported from the United States. According to the complaint, “the Export Clause renders IRC § 4611(b)’s export tax unconstitutional.”

The IRS position, per the complaint, is that the Export Clause of the U.S. Constitution does not address exporting crude oil from the U.S., and that the intent of the clause was to prevent taxes from being levied on trade between “states.” Trafigura argued that the IRS position is contrary to Supreme Court precedent.

IRS Notice 2000-28 appears to agree with Trafigura’s position. The document cites the export clause of the United States Constitution, art. I, section 9, cl.5, exempting excise tax on a coal producer’s sale where the coal is in the stream of export and actually exported. IRS Chief Counsel Advice memo (200211043) affirms the unconstitutional aspects described in Notice 2000-28 stating: “The coal tax itself was held unconstitutional as applied to exports in Ranger Fuel Corp. v. United States, 33 F. Supp. 2d 466 (E.D. Va. 1998), amended, 1999 U.S. Dist. LEXIS 2141 (E.D. Va. Feb. 10, 1999). Notice 2000-28, 2000-21 I.R.B. 1116, acquiesces, in effect, to Ranger.”