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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0896%3A13

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Brief
- **Published:** January 1, 1979
- **Citation:** 441 U.S. 434

## Text

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— AUG 25 1978
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OCTOBER TERM, 1978

No. 77-1378

JAPAN LINE, LTD., et al.,
Appellants,
Vv.

CouNTY OF LOs ANGELES, et al.,
Appellees.

On Appeal from the Su»reme Court of the
State of California

BRIEF OF AMICUS CURIAE COUNCIL OF
EUROPEAN AND JAPANESE
NATIONAL SHIPOWNERS’ ASSOCIATIONS

EDWARD A. MCDERMOTT
ALLEN R. SNYDER

HOGAN & HARTSON
815 Connecticut Ave., N.W.
Washington, D.C. 20006
(202) 331-4500

Attorneys for Amicus Curiae
Council of European and
Japanese National Shipowners’
Associations

WILSON - EPES PRINTING CO., INC. - 789-0096 . WASHINGTON, D.C. 20001

TABLE OF CONTENTS

Page
INTEREST OF AMICUS CURIAE .................... 1
CONSENT OF THE PARTIES .................................... 2
PRINS Sc MEPS a Boa NR Dac RS 2

I. The Decision Below Unjustifiably Abrogates This
Court’s Home Port Doctrine, Which Has Pro-
tected International Commerce From The Bur-
dens Of Multiple Taxation And International
Juriedictional Disputes .......................................... 2

Il. If Allowed To Stand, The Decision Below Will
Have Far-Reaching And Extremely Damaging
Effects On International Commerce And On The
Economic Interests Of The United States 7

CONCLUSION .................. siedeabalatoinepieablinibcnndiiy bevaniiiilindaliiininene 13

II

TABLE OF CITATIONS

Cases:

Dep’t of Revenue Vv. Ass’n of Washington Steve-
doring Companies, 98 S. Ct. 1888 (1978) —.....
Gibbons Vv. Ogden, 22 U.S. (9 Wheat.) 1 (1824)...
Hays Vv. Pacific Mail Steam-ship Co., 58 U.S. (17
SE 5 eres Maver oe eae
Michelin Tire Corp. V. Wages, Tax Comm’r, 423
Ry RE RES oe ease rce no
Morgan v. Parham, 83 U.S. (16 Wall.) 471
cl ie
Ott v. Mississippi Valley Barge Line Co., 336 U.S.
ae
Southern Pacific Co. v. Commonwealth of Ken-
CT, Tie Ce I accented rcetvensictce
Zschernig V. Miller, 389 U.S. 429 (1968) ...............

Page

IN THE

Supreme Court of the United States

OCTOBER TERM, 1978
No. 77-1378

JAPAN LINE, LTD., et al.,
Appellants,
Vv.

CouUNTY OF Los ANGELES, et al.,
Appellees.

On Appeal from the Supreme Court of the
State of California

BRIEF OF AMICUS CURIAE COUNCIL OF
EUROPEAN AND JAPANESE
NATIONAL SHIPOWNERS’ ASSOCIATIONS

INTEREST OF AMICUS CURIAE

The Council of European and Japanese National Ship-
owners’ Associations (“CENSA”) is an international
organization whose membership consists of the national
shipowners’ associations of the following countries: Bel-
gium, Denmark, Finland, France, Federal Republic of
Germany, Greece, Italy, Japan, the Netherlands, Norway,
Sweden and the United Kingdom, together with individ-

a

2

ual liner companies (including consortia) from those
countries which trade to or from the United States.

CENSA was established in 1963 in order to provide a
medium for consultation and cooperation on common prob-
lems affecting European and Japanese shipowners. The
shipowners of the CENSA countries own over 50% of the
world’s merchant fleet, including almost 60% of the con-
tainers used in international shipping.

CENSA is filing this Amicus Curiae Brief because of
its concern that the ruling below—by abrogating the home
port doctrine presently followed by every major maritime
nation in the world—will result in multiple taxation of
foreign-owned container fleets and may cause unfortu-
nate counter-measures by other nations and disruption of
international trade relations.

CONSENT OF THE PARTIES

Amicus is filing this Brief with the consent of both
parties, whose letters of consent have been filed with the
Clerk.

ARGUMENT

I. THE DECISION BELOW UNJUSTIFIABLY ABRO-
GATES THIS COURT’S HOME PORT DOCTRINE,
WHICH HAS PROTECTED INTERNATIONAL
COMMERCE FROM THE BURDENS OF MULTI-
PLE TAXATION AND INTERNATIONAL JURIS-
DICTIONAL DISPUTES.

For more than one hundred years the United States,
like every major maritime nation in the world, has fol-
lowed the doctrine that an instrumentality of interna-
tional commerce can be taxed only at its “home port.”
The California Supreme Court’s decision under review
here improperly abrogates this home port doctrine, in
violation of federal constitutional principles and in dis-

3

regard of the fundamental policy reasons for the estab-
lishment and continuation of the doctrine.

Appellants’ Brief filed with this Court sets forth in
detail the numerous constitutional infirmities of the deci-
sion below. Amicus CENSA adopts those legal arguments
presented by Appellants and will not repeat them here.
CENSA does wish, however, to add or emphasize a few
key points which it believes are essential to an under-
standing of the continued necessity for the home port
doctrine and the severe consequences that might follow
from its repudiation.

The home port doctrine was first enunciated by this
Court in Hays v. Pacific Mail Steam-ship Co., 58 US.
(17 How.) 596 (1854), striking down a property tax
levied by the State of California on ocean-going steam-
ships whose home port was outside that state. In Hays
and its progeny the Court held that such a tax by a state
on a vessel with a home port outside the state “is an
interference with the commerce of the country not per-
mitted to the States.” Morgan v. Parham, 83 U.S. (16
Wall.) 471, 479 (1872). See also Southern Pacific Co. v.
Commonwealth of Kentucky, 222 U.S. 63, 69 (1911)
(“this court has declared and enforced the rule of taxabil-
ity at the domicile of the owner of vessel property, when
it did not appear that the vessels had an actual situs
elsewhere”).

The home port doctrine set forth in Hays serves several
extremely important functions. First, it allows for taxa-
tion by the jurisdiction likely to have the most significant

_ contacts with the vessel involved. Moreover, the doctrine

provides an easily applied rule, with the beneficial result
of minimizing international disputes over each country’s
taxing jurisdiction or the fairness of its taxing formula.
Finally, adoption of the doctrine by all the major mari-
time nations has served to eliminate the dangers of multi-

1

ple taxation of the same property by different countries
using inconsistent taxing systems.

The court below, however, has ruled that a state or
municipality no longer must apply this salutary rule to
international commerce, simply because a different rule
is now used for American interstate commerce. The Cali-
fornia court’s application of interstate commerce princi-
ples to international trade is unsupportable as a matter
both of constitutional law and of logic.

In Ott v. Mississippi Valley Barge Line Co., 336 U.S.
169 (1949), this Court ruled the home port doctrine in-
applicable to interstate commerce, upholding the validity
of an allocation, or apportionment, system for ad valorem
property taxes on vessels serving inland waters. The Ott
Court expressly refused to reach the question of whether
a state constitutionally can apply such a system to “‘ocean
carriage,” or international commerce, as Appellees seek
to do here. See id. at 173-74.

Similarly, in Dep’t of Revenue v. Ass’n of Washington
Stevedoring Companies, 98 S. Ct. 1388 (1978), this Court
upheld application of a business and occupation tax on
stevedoring, but only after emphasizing that “[n]o for-
eign business or vessel is taxed. [The taxpayers], there-
fore, have demonstrated no impediment posed by the tax
upon the regulation of foreign trade by the United
States.” Jd. at 1401. Moreover, in Michelin Tire Corp. v.
Wages, Tax Comm’r, 423 U.S. 276 (1976), the Court up-
held a state property tax “on imported goods that are no
longer in import transit,” id. at 286, while noting that
such a tax would not reach imports destined for inland
states and using “transportation methods such as air
freight and containerized packaging.” Id. at 288 (em-
phasis added).

The distinction clearly emerges from these cases be-
tween interstate commerce—as to which an apportioned

5

tax is permissible—and international commerce—as to
which the home port doctrine remains viable and thus
no tax, apportioned or otherwise, can be levied on
the vessel except at its home port. This distinction
is a sound one that responds to practical realities as
well as to constitutional principles. An apportioned
tax is workable in the interstate commerce area be-
cause this Court is available to review any disputes
between states or any contentions that different state
apportionment formulas are inconsistent and would result
in multiple taxation. However, as was recognized by the
Superior Court judge in the decision reversed by the
California appellate courts below, no such system for
arbitration of apportionment disputes is available for
international commerce (Jurisd. Statement, at 28a) :

To consider proration of taxes with foreign entities
is not practical. There is no tribunal that can adju-
dicate these rights unless it be the International
Court and to invoke its services jurisdiction must be
consented to by all parties. For this reason, our
Federal Courts have consistently held that vessels
which are instrumentalities of foreign commerce and
engaged in foreign commerce can be taxed in their
home port only.

Moreover, it must be emphasized that so long as other
nations continue to follow the internationally accepted
home port doctrine, ships from those nations—which in-
clude all the CENSA members’ countries—will auto-
matically be subject to multiple taxation insofar as they
utilize ports in a state, like California, following the
apportioned tax system. The reason for this is that
foreign-owned ships are taxed on their full value by their
home port nations. If states are free to levy a tax based
on the differing apportionment approach, neither the Cali-
fornia courts nor even this Court would have the power
to eliminate the resulting multiple taxation, which un-

6

fairly and illegally * would discriminate against ships and
containers from foreign nations.*

It is important to note that international treaties and
trade relationships also suggest the need for a different
rule regarding states’ tax powers over foreign, as opposed

~~~" to interstate, commerce. It simply makes no sense for the

/ United States government to be entering into solemn
treaty obligations and agreements with foreign nations,
while at the same time fifty individual states and all their
municipalities would be free to tax foreign commerce
from those nations in ways that might be (or be per-
ceived as) inconsistent with the national government’s
obligations and agreements. Indeed, the Framers of the
Constitution intended that “the Federal Government must
speak with one voice when regulating commercial rela-
tions with foreign governments, and tariffs, which might
affect foreign relations, could not be implemented by the
States consistently with that exclusive power... .”
Michelin Tire Corp. v. Wages, Tax Comm’r, 423 U.S. 276,
285 (1976).

1 As is set forth in Appellants’ Brief, such multiple taxation on
foreign ships and containers, but not on U.S. vessels, would violate
this country’s treaty obligations, including those to CENSA mem-
ber nations.

2If an apportionment system were utilized by al! American
states, U.S.-owned vessels logically could not be taxed on more than
100% of their assessed value; however, vessels serving the U.S.,
but based in countries continuing to follow the home port doctrine,
would be taxed on more than 100% of value.

* See Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 228-29 (1824)
(Johnson, J. concurring) (emphasis in the original) :

Power to regulate foreign commerce, is given in the same
words and in the same breath .. . with that over the commerce
of the States. .. . But the power to regulate foreign commerce
is necessarily exclusive... . Whatever regulations foreign com-
merce should be subjected to, in the ports of the Union, the
general government would be held responsible for them; and

all other regulations, but those which Congress had imposed, -

would be regarded by foreign nations as trespasses and viola-
tions of national faith and comity.

Se

7

7

Even when acting within an area of traditional state
jurisdiction, such as probate law, states are constitution-
ally required to avoid any interference with international
relations. See Zschernig v. Miller, 389 U.S. 429, 440-41
(1968) :

It seems inescapable that the type of probate law
that Oregon enforces affects international relations
in a persistent and subtle way. . . . The several
States, of course, have traditionally regulated the
descent and distribution cf estates. But those regula-
tions must give way if they impair the effective
exercise of the Nation’s foreign policy. . . . Where
[state] laws conflict with a treaty, they must bow to
the superior federal policy. . . . The present Oregon
law is not as gross an intrusion in the federal do-
main as those others might be. Yet, as we have said,
it has a direct impact upon foreign relations and
may well adversely affect the power of the central
government to deal with those problems.

Thus, without regard to the rules that may be appro-
priate for the very different circumstances of interstate
commerce, practical realities and constitutional principles
demand continued application of the home port doctrine
for international commerce.

Il. IF ALLOWED TO STAND, THE DECISION BELOW
WILL HAVE FAR-REACHING AND EXTREMELY
DAMAGING EFFECTS ON INTERNATIONAL COM-
MERCE AND ON THE ECONOMIC INTERESTS OF
THE UNITED STATES.

In ruling that a state or municipality is free to tax
vessels or other instrumentalities of international com-
merce, the court below totally ignored the dangerous con-
sequences of its unprecedented decision. This Court should
reassert the applicability of the home port doctrine to
such commerce in order to avoid the unfortunate possi-
bility of foreign counter-measures and the disruption of

8

international trade which would flow from the decision
below.

In assessing the impact of the lower court’s ruling, it
must be noted that far more is at stake than the few
hundred thousand dollars of tax now being levied an-
nually by these particular municipalities against these
six Appellants in the instant case. The containerized ship-
ping business, although relatively new, is an extremely
large and growing form of worldwide trade. Amicus
CENSA estimates that there currently are almost
2,000,000 twenty-foot equivalent units (“TEU”’’)* of ship-
ping containers used in world trade, with a current fair
market value of approximately two billion dollars. In
1977, approximately 900,000 TEU’s of foreign-owned con-
tainers were used in United States international com-
merce.°

If the California ruling were al!owed to stand, it is
reasonable to assume that most other states and munici-
palities would follow in seeking to increase their always-
insufficient revenues through the politically attractive and
lucrative means of taxing foreign-owned containers pass-
ing through their territory. One state, Oregon, has al-
ready announced it intends to join California in assess-
ing such a tax; other states are sure to follow. Indeed,

‘The “TEU,” or twenty-foot equivalent unit, measure converts
container volume into the equivalent number of standard, twenty-
foot containers. Most shipping containers are either twenty feet or
forty feet in length, approximately nine feet in height, and eight
feet in width.

*CENSA estimates that the current fair market value, after
depreciation, of these foreign-owned containers is $900,000,000.
Applying the industry rule-of-thumb that such containers spend
approximately one third of each year in their home port country
or other overseas location, one third on the seas, and one third at
some coastal or inland location in the United States, the application
by all states of California’s allocation system would result in a pro-
rated fair market value of $300,000,000 worth of containers which
U.S. States and municipalities would be free to tax.

-

+t g

under California’s allocation system virtually any state
or municipality in the Union could gain some advantage
from such a tax, since containers are unloaded and
shipped via truck and rail through and to almost all
inland locations in this country. Thus, affirmance of the
decision below would lead to a total state tax burden on
containers amounting to many, many millions of dollars.

Moreover, the necessary implications of the decision
below by no means are limited to containers. In rejecting
the home port doctrine of Hays and its progeny, the Cali-
fornia court has cleared the way for a similar allocated
tax on every foreign-based ship and international pas-
senger or freight airplane that arrives on its shores. The
assessed value of all such vessels arriving in California
alone is of staggering proportions. Moreover, as noted
above, such a vast new source of tax revenue is unlikely
to escape the attention of other states and municipalities.
Affirmance here would allow every locality with an ocean
port or an international airport to begin assessing and
taxing on a pro rata basis every ocean vessel, each jumbo
jet or freight airplane landing even briefly in its area,
even though these ships and planes are owned, registered,
based, and taxed in their home port countries. Since
CENSA is aware of no maritime nation whose law pro-
vides a “credit” against home port property taxes for
such taxes paid to another nation, the result would be
multiple taxation of foreign-owned vessels. This would
create an unfair advantage for U.S.-owned vessels in
international commerce, in violation of the non-discrimi-
nation provisions of various international agreements
entered into by the United States.

Even more significantly, CENSA believes that the deci-
sion below is likely to lead to counter-measures being
taken against U.S.-owned vessels by this country’s trad-
ing partners. It is simply unrealistic to assume that all
the other nations which follow the home port doctrine will

10

sit by idly and watch their containers, ships and planes
being subjected to multiple taxation by states or munici-
palities here, without taking any action in response—such
as imposing their own taxes on United States vessels that
land in their countries.*

As is indicated in Appellants’ Brief, numerous foreign
countries—including many of the CENSA members’ na-
tions—already have lodged formal protests with the
United States Department of State against what they
reasonably view as an unjust and discriminatory tax
in violation of international law and agreements. The
potential danger of “retaliation” by other countries and
possible disruption of international trade was summarized
well by the Federal Republic of Germany in its June 23,
1978, filing with the State Department, which focused
especially on the effects on air transportation of Califor-
nia’s allocation system:

|A]part from the distortion of cost structures be-
tween airports the California tax example might
induce other States to levy comparable taxes. on for-
eign aircraft and eventually on other modes of inter-
national transportation as well. Retaliation by other
countries might then subject international carriers to
multiple taxation which would be clearly in contra-
diction to efforts to facilitate international Com-
merce.

* Government figures indicate that there currently are 797,690
TEU’s of containers owned by United States steamship and leasing
companies and used in international commerce. CENSA estimates
that the fair market value of these containers is approximately
$798,000,000. Thus, other nations would be free to levy taxes on a
pro-rated value of $266,000,000 worth of U.S. containers, see note 5,
supra, and possibly even more if those nations do not limit them-
selves to the allocation formula adopted by California.

It is interesting to note, also, that worldwide abandonment of the
kome port doctrine would enable those U.S. trading partners who
have no substantial merchant marine of their own to tax United

States vessels without any reciprocal tax being recovered by this
country.

11

Similarly, the Government of Japan in an Aide-
Memoire to the State Department has cautioned that
California’s property tax on containers owned by foreign
shipping lines constitutes double taxation and “impedes
the smooth development of trade between the two coun-
tries.” Jurisd. Statement, at 50a.

Another indication of the possibility of foreign counter-
measures against such a discriminatory United States tax
arose at the June 12, 1978, meeting of the Council of
European Communities. At that meeting, the Council
adopted a resolution proposed by the European Economic
Community (the “Common Market”), calling for con-
certed action by the Common Market countries “to decide
suitable counter-measures against offending countries”
that engaged in discrimination against “the maritime in-
terests of Member States.” *

* Other countries that have lodged similar protests against Cali-
fornia’s action are: Canada, Denmark, Finland, France, Federal
Republic of Germany, Japan, Mexico, the Netherlands, New Zealand.
Norway, Sweden and the United Kingdom.

* See Minutes of 521st Council Meeting—Transport—Council of
the European Communities, at 20-21 (June 12, 1978):

ACTIVITIES OF CERTAIN NON-MEMBER COUNTRIES IN THE FIELD
OF MARITIME TRADE

In the light of difficulties observed as a result of the activity
of certain third countries in the field of maritime trade the
Council examined measures to be taken by the Community to
counteract this trend. It recorded its agreement on a frame-
work decision binding each Member State to take steps to set
up a system by which to gather information on the activities
of the fleets of countries whose practices are detrimental to the
maritime interests of Member States, in particular insofar as
these activities undermine the competitivity of Member States’
fleets engaged in international maritime trade.

To attain these goals each Member State must be able to
obtain information on the level of services offered, the nature,

volume, value, origin and destination of goods loaded and
unloaded and on the rates charged for these services.

[ Footnote continued on page 12)

12

A recent letter from the Office of the United States
Special Representative for Trade Negotiations attests to
the fact that CENSA’s concern regarding possible counter-
measures against United States ships and potential dis-
ruption of international trace is not mere speculation. As
stated by the General Counsel of that Office, the Califor-
nia tax “may well constitute a non-tariff trade barrier”
that will complicate current international negotiations,
and “significant problems may arise on the part of the
trading partners of the United States, not only with
respect to containers, but also in other areas through re-
taliation and the imposition of similar types of levies.”
Jurisd. Statement, at 48a-49a.°

The Framers of the United States Constitution wisely
prohibited individual states from levying tariffs or other-
wise interfering in the regulation of foreign policy and
trade. Fifty separate states, with their countless munici-

* [Continued]

The Council will decide on the countries to whose fleets the
all-round Community system of information will apply.

On this point the Council instructed the Permanent Repre-
sentatives Committee to work out in conjunction with the Com-
mission measures for implementing these provisions, for adop-
tion by the Council at its next transport meeting in November,
bearing in mind the wishes expressed by delegations as regards
the activities of State-trading countries and flag of convenience
countries.

On the basis of the information gathered, the Council will be
able to decide suitable counter-measures against offending coun-
tries. These will form part of national legislation, be applied
in concert, and might include restrictions, depending on the
circumstances.

One delegation gave its agreement subject to confirmation,
and will make known its firm position at the earliest opportunity.

* Similarly, in a letter to Governor Jerry Brown, dated April 17,
1978, The Honorable Julius L. Katz, Assistant Secretary of State
for Economic and Business Affairs, warned of “the likelihood of
retaliatory taxation measures against U.S. citizens engaged in ocean
commerce abroad” if California fails to change its current combiner
tax policy.

13

palities, cannot participate in international trade negotia-
tions or develop appropriate reciprocal tax structures.
Yet, under the ruling below, each would be able to levy
taxes on a portion of this nation’s foreign trade, raising
the spectre of unfortunate responses and _ counter-
measures by this country’s foreign trading partners.

Amicus CENSA respectfully submits that this Court
should retain the home port doctrine—which has been so
long and universally applied by the world’s major mari-
time nations—so that individual states and localities will
not become hopelessly and dangerously enmeshed in in-
ternational trade and taxing disputes that surely would
result in damage to the economic interests of the United
States and all its trading partners.

CONCLUSION

For the foregoing reasons, Amicus CENSA urges this
Court to adhere to the home port doctrine and to reverse
the decision below.

Respectfully submitted,

EDWARD A. MCDERMOT?T
ALLEN R. SNYDER

HOGAN & HARTSON
815 Connecticut Ave., N.W.
Washington, D.C. 20006
(202) 331-4500

Attorneys for Amicus Curiae
Council of European and
Japanese National Shipowners’
Associations

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0896%3A13. Public record. Not legal advice.