Respondents Brief — Japan Line, Ltd. v. County of Los Angeles

Iy THE |

, MAY 8 197

Supreme Court of the United States .

October Term, 1977 MICHAEL RODAK, JR., CLERK

No. 77-1378 7

Japan Linz, Lrp.; Kawasaxt Kisen Kaisna, Lrp.; Mrrsvr

O.S.K. Loves, Lrp.; Nippon Yusen Kaisa; SHowa Livz,

Lrp.; and Yamasuita-Suinnrnon Sreamsuip Co., Lop.,

Appellants,

v.

County or Los Anceies; Crry or Los ANGELES;

and Crry or Lone Beracs,

Appellees.

ON APPEAL FROM THE SUPREME COURT

OF THE STATE OF CALIFORNIA

APPELLANTS’ BRIEF IN OPPOSITION TO

APPELLEES’ MOTION TO DISMISS APPEAL

OR AFFIRM THE JUDGMENT BELOW

Peter L. Briger, Esq.

Bricer & ASssOcIATES

299 Park Avenue

New York, New York 10017

(212) 758-4000

Sheldon S. Cohen, Esq.,

Conen & Unerz

1775 K Street, N.W.

Washington, D.C. 20006

(202) 293-4740

Reed M. Williams, Esq.,

Ronald L. Young, Esq.,

GranaM & JaMEs

100 Oceangate, Suite 515

Long Beach, Calif. 90802

(213) 435-4435

Counsel for Appellants

TABLE OF CONTENTS

ARGUMENT— PAGE

I. An appeal is appropriate in this case ......... me

ll. The California Supreme Court erroneously

concluded that the home port doctrine is not

RS seatineclasipeaiacilininesiialgaie 5

Ill. A limitation on the imposition of tax upon

instrumentalities of foreign commerce does

not constitute unwarranted Limitation of

ETS aS a AP silentiatumaidiainas 7

IV. This case presents important Federal! ques-

tions which were not confronted in Depart-

ment of Revenue v. Association of Washing-

ton Stevedoring Compamtes ....................0...0.00-- 9

SD itieictincicnienanid sacicalintneit seacteteivaceieisieniiaibbniisi 15

CRS ee ae, RS POPE la

TaBLe oF AUTHORITIES

Cases:

Amerwan Oil Co, v. Neill, 380 U.S. 451 (1965) ............. 5

Canadian Pacific Railroad v. King County, 90 Wash.

Se Pk RE EE A re 5

Complete Auto Transit Inc. v. Brady, 430 U.S. 274

4, FE RNa Naan OE NSO TN ne eee 10

Continental Dredging Company v. County of Los An

gcles, 366 F. Supp. 1133 (D.C. Cal. 1973) —.................. 5, 6

Department of Revenue v. Association of Washington

Stevedoring Companies, 46 U.S.L.W. 4363 (April 26,

SPIED sscindsnncuntunticnenuubatinctmanatadiniane 2, 9, 10, 11, 12, 13, 14

il

PAGE

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 228 (1824) .... 8

Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976)

11, 12, 13

Railway Express v. Virginia, 347 U.S. 359 (1954) ........ 5

Warren Trading Post Co. v. Arizona Tax Commission,

Se ey GI EIT ~~ssccstecesescrenriinseniatladieerteceiababansithdibdatieititi 5

Statutes:

28 U.S.C. §1257(2) ......... eA TL Oe 2, 3,4

a 3

Section 205, Title 18, California Administrative Code 14

Other Authorities:

Abel, The Commerce Clause in the Constitutional Con-

vention in Contemporary Comment, 25 Minn. L.Rev.

eae Se MEIN | Wictesndsctiasonsiihigsiodinennitiiibiicnieeianbipipitaiadeiiniedate 7

Customs Convention on Containers (20 U.S.T. 301,

LC cre Te 13, 14

EN ENT EI ERED 7

Federalist Papers, No. 42 (Madison) ...0.00000.000 7

General Agreement on Tariffs and Trade (61 Stat.

Oe eS 8S ee ee 13

Treaty of Friendship, Navigation and Commerce with

Japan (4 U.S.T. 2063, T.T.A.S. 2863) 000 13

In THE

Supreme Court of the United States

October Term, 1977

No. 77-1378

Japan Live, Lrp.; Kawasaki Kisen Katsna, Lrp.; Mrrsvt

O.8.K. Lives, Lrp.; Nippon Yusen Katsna; Sowa Liz,

Lrp.; and Yamasuita-Suinnrnon Sreamsuip Co., Lv.,

Appellants,

v.

County or Los Anceues; Crry or Los ANGELES;

and Crry or Lone Beraos,

Appellees.

ON APPEAL FROM THE SUPREME COURT

OF THE STATE OF CALIFORNIA

APPELLANTS’ BRIEF IN OPPOSITION TO

APPELLEES’ MOTION TO DISMISS APPEAL

' OR AFFIRM THE JUDGMENT BELOW

The arguments presented by the Appellees, in the hope

of avoiding review of the instant case by this Court, do not

in any manner diminish the importance of the Federal

questions presented herein. Appellees’ Motion to Dismiss

Appeal or Affirm the Judgment Below (hereinafter re-

ferred to as the “Appellees’ Motion”) should be denied on

the ground that substantial Federal questions are pre-

sented for review by this Court as more specifically de-

scribed in Appellants’ Jurisdictional Statement. Moreover,

eee

a

Appellees’ Motion must be denied on the additional

grounds that:

1. This case is properly before the Court on appeal

pursuant to 28 U.S.C. 1257(2);

2. The decision of the Supreme Court of the State of

California is erroneous as a matter of law and, at

least with respect to the “home port” doctrine, is

likely to result in forum shopping between Federal

and state courts within the State of California; and

3. The imposition of any state or local tax is subject

to, and must be consistent with, the Commerce

Clause of the United States Constitution and trea-

ties which the United States has entered into.

Lastly, the issues in this case should be reviewed due to

the fact that it presents an opportunity for clarification of

the extent to which the Court’s recent decision in Depart-

ment of Revenue v. Association of Washington Stevedor-

ing Companies, 46 U.S.L.W. 4363 (April 26, 1978) applies

to foreign commerce in those circumstances where there

exists: (i) the burden of double, and possibly multiple,

taxation; and (ii) the prospect of the imposition of retalia-

tory taxes against U.S.-owned shipping companies and

other carriers.

ARGUMENT

I.

An appeal is appropriate in this case.

It is argued in Appellees’ Motion that this case should

not be heard by the Court pursuant to the appeal pro-

cedure as set forth in 28 U.S.C, §1257(2). Rather, Appel-

lees contend that Appellants should have proceeded by way

of certiorari pursuant to 28 U.S.C. §1257(3). Appellees’

unsupported argument is in error.

The question in the instant case concerns the validity of

the tax imposed by Appellees under the Constitution of the

United States (hereinafter referred to as the “Constitu-

tion”) and various treaties. The questions involved in this

case were set forth by the Supreme Court of the State of

California as follows:

“The sole question presented by this appeal upon an

agreed statement from a tax refund judgment is

whether appellants, the County of Los Angeles and the

City of Los Angeles, may impose an apportioned ad

valorem tax upon cargo shipping containers, taxed in

Japan, used here essentially exclusively in foreign

commerce and owned and controlled by Japanese tax-

payers.”

141 Cal. Rptr. 905 at 907.

“The initial position of the taxpayers on this appeal

was that under both the home-port doctrine and the

most favored nation provisions of the 1953 treaty be-

tween the United States and Japan their containers

are not subject to taxation by any jurisdiction except

”

Japan...

141 Cal. Rptr. 905 at 907.

4

“... They there argued that the property taxes at

issue constitute indirect tonnage duties prohibited by

Article I, section 10, clause 3 of the United States

Constitution and, in support of one of their initial

contentions that these taxes are also prohibited by

applicable treaties .. .”

141 Cal. Rptr. 905 at 908.

In rendering its decision, the Supreme Court of the

State of California made a number of statements, which

establish that clearly it considered the repugnance of the

tax in relation to the Constitution, including the following:

“Sea-Land is fully dispositive of the commerce and

Federal exclusivity issues raised in the case at bench.”

141 Cal. Rptr. 905 at 909.

“The taxpayers contend that this prohibition invali-

dates the local property taxes at issue since they in

practical effect are tonnage duties upon the cargo con-

tainers.”

141 Cal. Rptr. 905 at 909.

“The taxpayers contend that the local taxation at issue

violates certain treaty obligations of the United States

and is therefore invalid under the supremacy clause of

the United States Constitution...”

141 Cal. Rptr. 905 at 910.

The arguments raised by the Appellants in the courts

below are sufficient to invoke the jurisdiction of this Court

pursuant to the appeal procedure. For purposes of invok-

ing the Court’s jurisdiction pursuant to 28 U.S.C. $1257(2),

it is necessary merely to have argued below that the prop-

erty tax cannot be imposed consistently with the Constitu-

5

tion, treaties or Federal law. American Oil Co. v. Neill,

380 U.S. 451 (1965); Warren Trading Post Co. v. Arizona

Tax Commission, 380 U.S. 685 (1965); Railway Express

Agency v. Virginia, 347 U.S. 359 (1954).

In view of the foregoing, Appellees’ contention must be

rejected, If, however, an appeal is not deemed to be the

proper mode of requesting jurisdiction, Appellants respect-

fully request that this appeal be considered as a petition

for certiorart.

The California Supreme Court erroneously concluded

that the home port doctrine is not applicable.

Appellees have insisted, throughout this proceeding, that

the “home port” doctrine is not applicable to property used

in foreign commerce. This conclusion has been supported

on the basis of this Court’s decisions regarding interstate

commerce and the decision in Canadian Pacific Railroad v.

King County, 90 Wash. 38, 155 P.2d 416 (1916).

There is no question that the “home port” doctrine re-

tains its vitality. In fact, at least one court within the

State of California has noted that the “home port” doctrine

is valid as applied to foreign commerce. It is ironic that

in Continental Dredging Company v. County of Los An-

geles, 366 F. Supp. 1133 (D.C. Cal. 1973), a case in which

Appellees’ counsel] both participated, the Federal] District

Court for the Central District of California observed that:

“The home-port rule originally provided that the tax-

able situs of ocean-going vessels was exclusively with-

in the domicile of the owners thereof and the place of

registration. Hays v. Pacific Mail Steamship Co., 58

6

U.S. 596, 17 How. 596, 15 L.Ed. 254 (1854). Hays in-

volved ships in interstate commerce but the rule stated

in Hays applies to foreign commerce as well. Subse-

quent decisions have eroded the rule with respect to

interstate commerce only, now providing for local tax-

ation on an apportioned basis in many circumstances.

See dicta in Scandinavian Airlines v. County of Los

Angeles, 56 Cal.2d 11, 14 Cal.Rptr. 25, at 29-34, 363

P.2d 25 (1961), where the Court held that a two-day

stopover was insufficient to alter foreign situs. Al-

though the theories supporting the home-port rule

have shifted over the years (see Scandinavian, supra,

at 32, 363 P.2d 25, commerce clause, due process

clause, supremacy clause), the rule itself with respect

to foreign commerce remains intact.

(Emphasis added.) 366 F.Supp. at 1139.

The decision in Continental Dredging Company under-

scores the need for review of the instant case. It is clear

that, under the authority of Continental Dredging Com-

pany, potential litigants are likely to have a distinct ad-

vantage in the Federal courts which have not ascribed to

the unwarranted extension of property tax jurisdiction in

the State of California. The continuance of such a dichot-

omy could well lead to “forum shopping.” Therefore, this

case presents a substantial Federal question which should

be reviewed by the Court.

Il.

A limitation on the imposition of tax upon instru-

mentalities of foreign commerce does not constitute

unwarranted limitation of state taxation.

Appellees argue that under the Constitution the states

have the uncontrolled right to raise revenues for their own

needs. In support of this proposition, Appellees cite the

Federalist Papers, No. 32. It is submitted that Appellees

have misconstrued the rights of state governments to im-

pose taxes upon foreign commerce and Appellants’ argu-

ments in relation thereto.

The cited portion of the Federalist Papers relied upon

by Appellees does not address itself to the proper relation-

ship between foreign commerce and the rights of state

governments to impose a tax. Clearly, if there is any con-

flict between foreign commerce and the states’ rights to

impose a tax, the policies in favor of foreign commerce

should prevail. The policy considerations to be applied in

the case of foreign commerce are intrinsically more impor-

tant than in the case of interstate commerce since they

concern the nation as a whole in relation to foreign gov-

ernments. Federalist Papers, No. 42 (Madison). See, also,

Abel, The Commerce Clause in the Constitutional Conven-

tion in Contemporary Comment, 25 Minn. L.Rev. 432, 465

(1941). Thus, insofar as concerns foreign commerce, the

states’ rights to impose a tax is clearly secondary to the

policies underlying free flow of commerce.

Appellees argue that the framers of the Constitution did

not intend to regulate or prohibit any state taxes under the

Commerce Clause. According to the Appellees, the impact

of state and local taxation is a matter of local governmental

discretion, notwithstanding the effect it may have upon the

8

relations of the United States with foreign nations. How-

ever, as explained by Chief Justice Marshall, the status of

states within the realm of foreign commerce is as follows:

“The states are unknown to foreign nations; their sov-

ereignty exists only with relation to each other and

to the general government, whatever regulations for-

eign commerce should be subjected to in the parts of

the Union, the general government would be held re-

sponsible for them; and all other regulations but those

which the Congress had imposed would be regarded by

foreign nations as trespasses and violations of national

faith and comity.”

Gibbons v. Ogden, 22 U.S.

(9 Wheat.) 1, 228 (1824).

The rationale of Chief Justice Marshall is directly appli-

cable in the instant case. Appellees have, with the sanction

of the Supreme Court of the State of California, elevated

themselves in importance beyond the Federal government

and asserted a position likely to create an impact and

adverse ramifications beyond their own territorial limits.

It should be noted that the State of Oregon, largely based

upon the interpretation of the law enunciated by the Su-

preme Court of the State of California, bas re-interpreted

its own property tax law in a manner that would subject to

tax foreign-owned containers used exclusively in foreign

commerce. There is attached hereto as Exhibit A, a copy

of an opinion dated January 31, 1978 of an Assistant At-

torney General of the State of Oregon to this effect. Sev-

eral of Appellants herein have been requested to file

property tax returns by officials of Multnomah County,

Oregon. This action clearly evidences the trend toward the

proliferation of such taxes as referred to in Appellants’

Jurisdictional Statement at p. 21. Therefore, this case

presents substantial Federal questions which must be

reviewed by this Court.

IV.

This case presents important Federal questions which

were not confronted in Department of Revenue v.

Association of Washington Stevedoring Companies.

On April 26, 1978, this Court rendered its decision in

Department of Revenue v. Association of Washington

Stevedoring Companies, 46 U.S.L.W. 4363 (April 26, 1978),

holding that a business and occupation tax imposed by

the State of Washington with respect to stevedoring ac-

tivities conducted entirely within the state is constitutional

under the Commerce and Import-Export Clauses of the

Constitution. The foregoing decision does not affect the

question whether the instant case should be heard by the

Court due to the fact that the tax imposed by Appellees:

(i) conflicts with the purpose of the Import-Export clause

to the extent that the taxes in the instant case constitute

a restraint upon the Federal government in relation to for-

eign policy; (ii) disturb the harmonious relationship which

exists between the states in relation to foreign commerce;

and (iii) fails to effectuate a fair and just apportionment

of taxes because, regardless of the manner in which the

said tax is applied, Appellants have been subjected to

double taxation.

The tax considered in Association of Washington Steve-

doring Companies concerned business and occupation taxes

imposed on the business of loading and unloading cargo

ships, which activity was, in its entirety, conducted within

the State of Washington. No foreign business or vessel

was actually subjected to such tax. Based on these factors,

il

10

this Court held that the Commerce and Import-Export

Clauses of the Constitution were not violated by the imposi-

tion of the tax.

The Court's decision with respect to the Commerce

Clause was based upon three premises. First, the Court

held that a tax imposed upon interstate commerce is not

unconstitutional per se. In following the rationale estab-

lished in Complete Auto Transit Inc. v. Brady, 430 U.S.

274 (1977), the Court held that the Commerce Clause does

not relieve interstate commerce from its just share of state

tax burdens. Second, the Court noted that the tax im-

posec. by the State of Washington did not impose multiple

tax burdens. Third, the Court reasoned that a state tax

would be unconstitutional, pursuant to the Commerce

Clause, only in an instance where the tax unfairly burdens

commerce by exacting more than a fair share of tax upon

the interstate activity. There was no suggestion in the

facts brought before the Court, as well as in those brought

before the lover courts, in the Association of Washington

Stevedoring Companies case that the tax was not fairly

related to services and protections provided by the state

in relation to the activity conducted therein.

The facts in the instant case are in direct contrast with

those in Association of Washington Stevedoring Com-

panies. First, the instant case presents a situation wherein

double tax burdens have resulted. As noted in the Appel-

lants’ Jurisdictional Statement, Appellants are foreign

persons, the property of which is subject to full ad valorem

property tax in Japan. Therefore, regardless of any al-

location formula that may have been applied by Appellees,

Appellants have been subject to a double tax burden.

Second, the property taxes levied by Appellees do not

bear a fair relation to the presence of the containers of

Appellants within the jurisdiction of Appellees or the lim-

~—_ oe

ll

ited quantum of services or protection rendered by Ap-

pellees. The sole contact which Appellants’ property main-

tains with such jurisdictions is limited to the passage of

ocean-going shipping containers through such counties as

an integral part of a shipment in foreign commerce. In this

respect, the activity of Appellants is different from the

activity conducted in Association of Washington Stevedur-

ing Companies. In Association of Washington Stevedoring

Companies, the activity involved was the rendering of local

services on a continuous basis solely within the State of

Washington. Third, as concerns the balancing of the needs

of Appellees in relation to the activity of Appellants here-

in, it is submitted that the amount of tax imposed does not

provide a fair relationship to the limited services and pro-

tections provided by the Appellees.

The Court also held, in the Washington Stevedoring

Companies case, that the business and occupation tax in-

volved therein did not contravene the policies of the Im-

port-Export Clause. In reaching this conclusion, the Court

summarized the purpose of the Import-Export Clause as

enunciated in Michelin Tire Corp. v. Wages, 423 U.S. 276

(1976) in the following terms:

“The framers of the Constitution thus sought to alle-

viate three main concerns . . . 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 imple-

mented by the states consistently with that exclusive

power; import revenues were to be the major source

of revenue of the Federal Government and should not

be diverted to the States; and harmony among the

states might be disturbed unless seaboard states, with

their crucial ports of entry, were prohibited from levy-

ing taxes on citizens of other states by taxing goods

12

merely flowing through their ports to the other states

not situated as favorably geographically.”

423 U.S. at 285-6.

(Footnotes omitted).

The imposition of a business and occupation tax was

deemed to be consistent with the policies of the Import-

Export Clause principally due to the nature of the activity

involved. First, the Court noted that the tax involved did

not restrain the ability of the Federal government to con-

duct foreign policy. In reaching its conclusion, the Court

stated that:

“The assessments in this case are only upon business

conducted entirely within Washington. No foreign

business or vessel is taxed.”

(Emphasis added.)

46 U.S.L.W. at 4368.

Second, the Court held that the tax merely compensated

the state for services and protection extended to the steve-

doring business and the tax was not applied directly to

the import of goods. Last, the Court held that the tax in-

volved was applied to a taxpayer with a reasonable nexus

to the state.

The considerations applied by the Court in Association

of Washington Stevedoring Companies to sustain the va-

lidity of the tax under the Import-Export Clause must be

reconsidered in view of the varied circumstances involved

herein. First, Appellants are foreign entities, the princi-

pal places of business of which are located in Japan, The

assessment is imposed upon an instrumentality of foreign

commerce, which begins its voyage in a foreign country,

such as Japan, and ends at some point in the United

13

States, or vice versa. In this connection, the assessment of

tax in this case is upon businesses conducted exclusively in

foreign commerce and almost in their entirety outside of

the local jurisdiction that imposes the tax. The object of

the tax is a foreign business and an instrumentality of

foreign commerce. The United States Government has at-

tempted to avoid the exaction of such taxes by means of

the Customs Convention on Containers (20 U.S.T. 301,

T.LA.S. 6634), the General Agreement on Tariffs and

Trade (61 Stat. [5], [6], T.LA.S. 1700), and the Treaty

of Friendship, Navigation and Commerce with Japan (4

U.S.T. 2063, T.I.A.S. 2863). Therefore, the imposition of

a tax in this case constitutes an impediment upon the regu-

lation of foreign trade by the United States.

As a second basis for holding that the Import-Export

Clause was not violated as a result of the tax imposed in

Association of Washington Stevedoring Companies, the

Court noted that the object of the tax, the rendering of

services, was somewhat attenuated from the imported

goods themselves. In the instant case, the object of the

tax is, in essence, the vessel that is carrying the goods

or an integral part of such vessel. This Court clearly has

stated in its decision in Michelin that property taxes im-

posed by coastal states could be avoided by importers

through the use of such containers. 423 U.S. at 288-90.

Therefore, the containers involved in this case are in-

trinsically interrelated with the goods involved to a much

greater extent than were the stevedoring activities in-

volved in the Association of Washington Stevedoring

Companies case.

Moreover, the third consideration applied to the Asso-

ciation of Washington Stevedoring Companies case does

not appear in the instant case. In the former case, it was

clear that the taxpayer had a reasonable nexus with the

14

state imposing the tax. In the instant case, the only nexus

between Appellants and the Appellees is that some of

Appellants’ containers pass through the territorial limits

of Appellees and remain therein for transitory periods of

time, such as several weeks, as an integral part of an un-

interrupted shipment in foreign commerce. Moreover, the

relationship between the tax imposed and the services

actually rendered, in terms of police and fire protection

as well as road construction and maintenance, is wholly

disproportionate. Finally, it appears that the utilization

of an “average presence” formula by Appellees is contrary

to the provisions of Section 205, Title 18, California Ad-

ministrative Code, which provides that before movable

property will be considered to have a taxable situs in the

taxing jurisdiction, such property must remain therein

for a minimum period of time, a prerequisite which is not

satisfied in the instant case. The same condition is im-

posed by the Customs Convention on Containers, 20 U.S.T.

301, T.I.A.S. 6634. Consequently, it is submitted that the

property in question lacks a taxable situs within, and a

reasonable relationship to, the territorial limits of Appel-

lees.

Moreover, it should be noted that Association of Wash-

ington Stevedoring Companies did not present any ques-

tions concerning the Tonnage Duties Clause of the

Constitution. The taxes in the instant case fall particularly

within the prohibition established in the Tonnage Duties

Clause inasmuch as an instrumentality of commerce is

involved.

For the above mentioned reasons, this case presents a

number of substantial Federal issues that were not con-

sidered in Association of Washington Stevedoring Com-

panies and should be reviewed by the Court.

15

CONCLUSION

In view of the foregoing, Appellees’ Motion should be

denied and probable jurisdiction should be noted in order

that plenary consideration, on the basis of briefs and oral

argument, may be given to the questions presented herein.

Respectfully submitted,

Peter L. Briger, Esq.

Bricesr & Associates

299 Park Avenue

New York, New York 10017

(212) 758-4000

Sheldon S. Cohen, Esq.,

Conen & Unerz

1775 K Street, N.W.

Washington, D.C. 20006

(202) 293-4740

Reed M. Williams, Esq.,

Ronald L. Young, Esq.,

Granam & JaMEs

100 Oceangate, Suite 515

Long Beach, Calif. 90802

(213) 435-4435

Counsel for Appellants

SE

Exhibit A

DEPARTMENT OF JUSTICE

Tax Drviston

104 State Office Building

Salem, Oregon 97320

Telephone: (803) 376-4494

January 31, 1978

Mr. Lindy Freeman

Division of Assessment & Taxation

Room 136

Multnomah County Courthouse

Portland, Oregon 97204

Re: Personal Property Tax on Cargo

Containers

Dear Mr. Freeman:

This opinion is in response to a question presented by

your office concerning cargo containers

Question PResENTED

Are cargo containers used in interstate and foreign com-

merce subject to persona] property ad valorem tax as-

sessment?

Answer Given

Cargo containers continuously present in Multnomah

County are not constitutionally immune from an appor-

tioned persona! property ad valorem tax. Neither do these

cargo containers qualify for exemption under Oregon’s

freeport law, ORS 307.810.

la

2a

Exhibit A

Discussion

You have asked whether cargo containers used on con-

tainer ships in interstate and foreign commerce can be

assessed under the personal property ad valorem tax. Tax-

payers have claimed that these containers are either im-

mune under the protection of the United States Constitu-

tion or are exempt under Oregon’s free port law.

To support their position of constitutional immunity,

taxpayers have cited a decision by the Superior Court of

California.. Japan Line, Ltd. v. County of Los Angeles,

132 Cal Rptr 531 (L.A. County 1973). However, the Su-

preme Court of California recently reversed this superior

court’s decision. Japan Line, Ltd, v. County of Los An-

geles, 141 Cal 905 (1977). The California Supreme Court

held that an apportioned ad valorem tax on the cargo

containers violated neither the Commerce Clause, the Im-

port-Export Clause nor the Supremacy Clause of the United

States Constitution. A copy of this recent decision and a

copy of an earlier decision in Sea-Land Service, Inc. v.

County of Alameda, 117 Cal2d 448, 528 P2d 56 (1974) are

enclosed. Assuming that the cargo containers’ presence in

Multnomah County are similar to those in the California

counties, these two cases clearly indicate that the cargo

containers are subject to the ad valorem tax.

The taxpayers also contend that their cargo containers

are exempt from ad valorem taxation under the Oregon

free port law. However, ORS 307.810 grants an exemption

only for

“Personal property in transit through this state

[that] is goods, wares and merchandise destined for

sale in the ordinary course of trade or business. . . .”

ee ee ee —

3a

Exhibit A

The cargo containers are used to transport personal prop-

erty destined for sale in the ordinary course of the trade or

business, but are not, themselves, destined for sale out of

state. The Oregon free-port law was not intended to ex-

tend to containers used and reused transporting goods.

The two enclosed California decisions clearly hold that

cargo containers used in interstate and foreign commerce

are not immune under the United States Constitution from

an apportioned ad valorem tax. In addition, the Oregon

free port law does not extend its exemption protection to

the containers. Consequently, the continuous presence of

cargo containers in Multnomah County subjects them to

an apportioned ad valorem tax.

Sincerely,

/s/ James D. Manary

James D. Manary

Assistant Attorney General

bem

ce: Walt Taylor

Personal Property Assessment

REcEIVED

Muttynoman County

Fes 02 1978

Bruce G. Lawman

Drmector, Division oF

Assessment & Taxation