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McDonnell Douglas Corporation v. State Board of Equalization … (1992)

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Sales of Aircraft Parts to a Mexican Airline Were Tax Exempt Exports

The taxpayer sold aircraft parts to Aeromexico to service Aeromexico's airplanes. Aeromexico received the parts at the taxpayer's Long Beach plant and shipped them by U.S. common carriers to the U.S.-Mexican border at San Ysidro, California. AM MEX International, a forwarding agent, processed them through U.S. and Mexican customs. After a 48-hour customs delay, the parts were loaded onto Mexican common carriers and shipped to Aeromexico's Mexico City maintenance facility. Mexican law prohibited U.S. common carriers from operating in Mexico, and U.S. law permitted Mexican common carriers to operate in the U.S. only in the immediate border area.

The court determined that the sales were tax-exempt exports. Aeromexico's clear plan to ship the parts to Mexico City for its own use was acted upon, and continued uninterrupted until completion, except for unavoidable delays incidental to their journey. McDonnell Douglas Corporation v. State Board of Equalization (1992) 10 Cal.App.4th 1413.