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

Supreme Can

feme Court, Yj, s+

ILED

AUG 26 1978

Supreme Court of the United apes

Ocroser Term, 1977 ee

No. 77-1378

In THE

~<>—

Japan Liye, Lrp.; Kawasaki Kisex KaisHa, Lrp.; Mrrsvr

O.S.K. Lives, Lrp.; Nippon Yvsen Katsaa; SHowa

Liye, Lrp.; and Yamasuira-SuHinnrnon STEAMSHIP Co.,

Lap.,

Appellants,

—V.—

County or Los Ancetes; Crry or Los ANGELES;

and Crry or Lone Beacu,

Appellees.

ON APPEAL FROM THE SUPREME COURT

OF THE STATE OF CALIFORNIA

BRIEF OF INSTITUTE OF INTERNATIONAL

CONTAINER LESSORS, LTD.,

AS AMICUS CURIAE

Epwarp A. WooLLey

Law Fiem or Matcotm A. HorrmMann

12 East 41st Street

New York, New York 10017

(212) 685-0535

Attorney for Amicus Curiae

Micuaet D. Barret

Martin D. Goopman

Dennis J. Kenny

Rosert M. Riccs

JosepH Lewis Smron

Of Counsel

August 25, 1978

———————— nn

EE 2

ARGUMENT:

I. The Nature of the Container Industry, Shipping

and Leasing, and the Magnitude of United States

a ee 3

II. The California Tax Threatens Serious Interfer-

ence With United States Foreign Commerce and

With Imports and Exports 0 6

A. The “Home Port” Doctrine —..... 6

B. The Foreign Commerce Clause .............. i)

C. The Import-Export Clause; the Export

teres ete 10

SE 15

APPENDIX

ee — .

TaBLe oF AUTHORITIES

Cases:

Department of Revenue v. Ass’n of Washington Steve-

doring Companies, 98 8. Ct. 1388 (1978) ............ 9, 10, 11

Hays v. The Pacific Mail Steam-ship Company, 58 U.S.

I 6

il

PAGE

Leather’s Best, Inc. y. SS Mormaclyna, 451 F.2d 800

(2d Cir. 1971) . sin 4

Michelin Tire Corp. v. Wages, 423 U.S. 276, 96 S. Ct.

CS 9, 10, 11,14

Morgan v. Parham, 83 U.S. (16 Wall.) 471 (1872) .. 6

Pittston Stevedoring Corp. v. Dellaventura, 544 F.2d

35 (2d Cir. 1976) ......................... 4

Treaties :

Customs Convention on Containers, May 18, 1956.

{1969} 20 U.S.T. 301, T.I1.A.S. No. 6634 4

Convention for the Avoidance of Double Taxation with

Respect to Taxes on Income, July 22, 1954, United

States-Federal Republic of Germany, [1954] 5 U.S.T.

2768, T.LA.S. No. 3133 7

Convention on Matters of Taxation with Related Let-

ters, June 20, 1973, United States-Union of Soviet

Socialist Republics, 27 U.S.T. 1, T.LA.S. No. 8225... 7

International Convention for Safe Containers, Dec. 2,

1972, art. 11(10), Customs Convention on Containers,

1972 and International Convention for Safe Contain-

ers, Senate Executive X, Senate Comm. on Foreign

Relations, 93d Cong., Ist Sess. (Comm. Print Nov.

By IE dintentenieiticeeatin nisin “a 8

Draft Convention for the Avoidance of Double Taxa-

tion, art. 8(3), United States-United Kingdom,

Treas. News, Jan. 6,1976 7

PAGE

Constitutional Provisions:

Constitution of the United States:

Article I, Section 8, Clause 3 9

Article I, Section 9, Clause 5 10

Article I, Section 10, Clause 2 10

Constitution of the State of California:

Article 13, Section 3(1) oo

Statutes and Regulations:

N.Y. Sales Tax Reg. §528.9 Commercial Vessels 4

N.Y. Tax Law §1115(a) (8) (McKinney 1965) 000. 7

Rev. Rul. 60-185, 1960-1 C.B. 412 0 +

U.S. Customs Regulations, 19 C.F.R. §10.46a(f) 0... 4

Miscellaneous:

Cargo Systems soiicieneceiaieaeiaiaiatiaiaanaai 4,5

Container News .................... 4

Containerisation International 2,4

43 Fed. Reg. 26810 (June 22, 1978) +

International Organization for Standards, ISO 1496/1,

Series I freight containers Specification and Testing,

Part I General Cargo Containers (34 Ed.—1978-

04-01) 5

International Safe Containers Act; Hearings on H.R.

8159 Before the Subcommittee on Coast Guard and

Navigation of the Committee on Merchant Marine

¢ Fisheries, 95th Cong., ist Sess. 215-247 (1977) ... 3

Jane’s Freight Containers 1978 (10th Ed.)

U.S. Department of Commerce, Maritime Administra-

tion, Inventory of American Intermodal Equipment

1978 5

In THE

Supreme Court of the United States

Ocroper Term, 1977

No. 77-1378

—_<g>—

Japan Line, Lrpv.; Kawasaxkr Kisew Kaisna, Lrp.; Mrrsv1

O.S.K. Loves, Lrp.; Nippon Yusew Katsua; Smowa

Love, Lrp.; and Yamasurra-SHinnrnon Sreamsuir Co.,

Lap.,

Appellants,

—vVvV =

County or Los Ancetes; Crry or Los ANGELES;

and Crry or Lone Beacu,

Appellees.

ON APPEAL FROM THE SUPREME COURT

OF THE STATE OF CALIFORNIA

<>

BRIEF OF INSTITUTE OF INTERNATIONAL

CONTAINER LESSORS, LTD.,

AS AMICUS CURIAE

The Institute of International Container Lessors, Ltd.

(“IICL”) submits this brief amicus curiae with the consent

of the parties.’ IICL, a Delaware corporation authorized

to conduct activities and with principal offices in the City

and State of New York, is the trade association for the

international marine cargo container leasing industry.

* Copies of Appellants’ and Appellees’ letters of consent are sub-

mitted with the signature copy of this brief.

2

Interest of LICL

IICL’s members lease marine cargo containers (hereafter

generally “containers”) to ship lines for use in the world-

wide transportation of goods. Containers are now the prin-

cipal means for marine transportation of manufactured

products and also play an increasingly significant role in

ocean transport of certain raw materials and agricultural

products. The estimated world population of containers is

approximately 2.1 million (measured in twenty foot equiv-

alents or “TEU”). Nearly one-half of these are owned by

leasing companies, and the remainder are owned by the

ship lines themselves.’

IICL’s membership consists of both foreign and United

States leasing companies. Five of IICL’s nine members

are United States corporations; the other four are foreign

corporations.’ This appeal concerns imposition of a Cali-

fornia local personal property tax on the containers of for-

eign owners. [ICL’s foreign members are concerned by the

application of the tax to them, but IICL’s United States

members are even more concerned because of the threatened

retaliation by foreign countries, if the tax is upheld. Such

retaliation is expected to take the form of property taxes

imposed exclusively on the containers of United States

owners. IICL’s members therefore have a direct and sub-

stantial interest in the subject matter of this appeal and

in reversal of the court below.

* Approximately 700,000 TEU are owned by members of IICL;

of these, approximately 455,000 are owned by United States mem-

bers. Approximately 150,000 TEU are owned by other United

States leasing companies, not members of IICL,. United States

leasing ownership is thus about 600,000 TEU. Total United States

ownership, including both leasing companies and ship lines, is

about 1,000,000 TEU. See page 5 and note 9 below. See also 12

Containerisation International 15 (No. 5, May 1978).

* A list of members is attached as Exhibit A.

ARGUMENT

I.

The Nature of the Container Industry, Shipping and

Leasing, and the Magnitude of United States Interests

at Stake.

Container shipping was begun in the late 1950's by Sea

Land Service, Inc., a United States ship line which also

appears in this appeal as amicus curiae. Container ship-

ping did not begin in volume, however, until the middle or

late 1960's. The world population of containers increased

from approximately 250,000 TEU in 1968 to 2.1 million

TEU in 1978, an increase of over 700%.

Containers are intermodal, that is to say, they can travel

equally well by ship, on a chassis behind a tractor over

the road, or on a railroad flat ear. They are, nevertheless,

unquestionably marine instruments. This is evidenced by

the fact that container regulation and technology are domi-

nated by marine bodies and concepts.* At least one leg of

*The United Nations body principally concerned with con-

tainers is the Inter-governmental Maritime Consultative Organi-

zation (“IMCO”) through its Sub-committee on Containers and

United States government bodies principally concerned

with containers include the State Department Working Group

on Containers and Multimodal Transport of the Subcommittee

on Safety of Life at Sea of the Shipping Coordinati Committee,

the Coast Guard, the Maritime Administration, the Customs Ser-

vice, and the Federal Maritime Commission. The Coast Guard

administers the International Convention on Safe Containers

(CSC) on behalf of the United States. See International Safe

Containers Act: Hearings on H.R. 8159 Before the Subcommittee

on Coast Guard and Navigation of the Committee on Merchant

Marine & Fisheries, 95th Cong., ist Sess, 215-247 (1977). The

recognized classification society for containers in the United

States is the American Bureau of Shipping; the same role is

performed in other countries by their maritime classification

societies, e.g. Lloyds Register Industrial Services in the U.K.,

EEESS=' rr

4

virtually every trip made by a container involves a sea

voyage. Accordingly, it has become generally accepted that

containers are pert of the ship, either structurally or as

part of the ship’s gear. See Pittston Stevedoring Corp.

v. Dellaventura, 544 F.2d 35, 53 (2d Cir. 1976); Leather’s

Best, Inc. v. SS Mormaclynx, 451 F.2d 800, 815 (2d Cir.

1971); see also Rev. Rul. 60-185, 1960-1 C.B. 412; N.Y.

Sales Tax Reg. §528.9 Commercial Vessels.

The modern containership is designed solely for the

transport of goods by container, and container owners,

both ship lines and leasing companies, jealously guard

their containers’ status as Instruments of International

Traffic in order to avoid customs duty.’ They can do this

in the United States only by ensuring that all trips are

part of a direct import or export move or are made to

reposition for an export move.° Containers are not gen-

erally used for domestic commerce simply because it is

less expensive to ship goods by ordinary tractor/trailer

truck than by container, if a trip does not involve a sea

voyage.’

———— re

Bureau Veritas in France. Other organizations performing sim-

ilar functions in the United States include International Cargo

Gear Bureau, Inc. and Marine Container Equipment Certification

Corporation. See, e.g. 43 Fed. Reg. 26810 (June 22, 1978). The

briefest glance at the trade literature is conclusive as to its marine

nature. See, eg. Cargo Systems, Containerisation International,

Container News, Jane’s Freight Containers 1978 (10th Ed.).

* As a result containers generally never become “imports” and

continue for the duration of their “lives” to make voyage after

voyage and trip after trip without ever becoming subject to cus-

toms duty in any country.

*U. S. Customs Regulations, 19 C.F.R. $10.46a(f) ; see Customs

Convention on Containers, May 18, 1956, [1969] 20 U.S.T. 301,

T.LA.S. No. 6634.

*A tiny percentage has beep “domesticated” for use in inter-

state commerce (either by being manufactured in the United States

or by payment of duty). Such use includes sea routes between the

48 contiguous states and . laska, Hawaii and Puerto Rico.

5

Containers have been able to succeed as an international

device for cargo transport because they are of standard

sizes and specifications suitable for use in the transpor-

tation and handling equipment of many different nations.

Perhaps 80% to 90% of the world’s containers are built

to the standard size and Strength specifications of the

International Organization for Standards in Geneva

(“ISO”). ISO standard containers are generally 20 or

40 feet long, 8 feet wide and 8 or 8% feet high.*

The United States interests in this industry are enor-

mous. The United States container leasing industry alone

owns approximately 600,000 TEU. When the 400,000 TEU

owned by United States ship lines are added to the United

States leasing ownership, total United States ownership

reaches approximately 50% of the estimated world popu-

lation of 2.1 million.* The replacement value of the

1,000,000 United States TEU is substantially in excess

of $2,000,000,000 *° and the five United States leasing com-

* International Standard ISO 1496/1, Series I freight containers

—Specification and Testing, Part I General Cargo Containers (3d.

Ed.—1978-04-01).

*The Maritime Administration of the U.S. Department of Com-

merce publishes statistics on American ownership annually. While

these statistics do not show foreign ownership, the Maritime Ad-

ministration’s Inventory of Amerwan Intermodal Equipment 1978,

shows that at the close of 1977, United States owners, both leasing

companies and ship lines, held approximately 800,000 containers

( TEU), These 1 statistics excluded one major United States

leasing company which held in excess of 50,000 TEU. Most owners

had added substantial numbers of containers by the end of the

first six months of 1978. United States leasing companies alone

added approximately 100,000 containers.

*°A trade publication cites prices for 20 foot standard steel

containers as between $2,200 and $2,500 in Europe and $1,900

in the Far East (except for Japan where presumably the price is

higher). 5 Cargo Systems 34, 35 (No. 5, May 1978). Containers

built of other materials and specialized containers are more ex-

pensive than the standard steel container. Thus, the replacement

value of the United States fleet of 1,000,000 TEU could be expected

6

panies who are members of the TICL had annual gross

revenues of approximately $250,000,000 in 1977. Since all

or most of these revenues are collected in dollars, the

leasing industry makes a substantial contribution to the

United States balance of payments.

The California Tax Threatens Serious Interference

With United States Foreign Commerce and With Imports

and Exports.

A. The “Home Port” Doctrine.

The history of the United States has been strongly

affected by it: role as a maritime trading nation. Early

in the nation’s existence, the Supreme Court developed

principles of respect for each state’s taxation and regu-

lation of shipping in order to reflect the nature of ships

as constantly moving instruments of commerce. Those

principles were called the “home port” doctrine. Hays v.

The Pacific Mail Steam-ship ( ‘ompany, 58 U.S. (17 How.)

596 (1855); Morgan y. Parham, 83 U.S. (16 Wall.) 471

(1872).

In rejecting application of a California property tax

to a ship sailing out of the Port of New York, the Hays

case held that under the “home port” doctrine, only the

state of the domicile of the vessel, or the “home port,”

had jurisdiction to levy property taxes. A vessel acquired

no permanent situs as property in any other state. The

Court’s language was even broader in asserting that the

tax trespassed on the domain of the federal government

(58 U.S. at 599):

7

And so far as respects the ports and harbors within

the United States, they are entered and cargoes

discharged or laden on board, independently of any

control over them, except as it respects such municipal

and sanitary regulations of the local authorities as

are not inconsistent with the constitution and laws of

the general government, to which belongs the regu-

lation of commerce with foreign nations and between

the States.

The “home port” doctrine is not only embodied in case

law, but it has become codified in international tax

treaties." Moreover, the process of codification has ex-

tended the “home port” doctrine to containers. Bilateral

tax treaties now being negotiated between the United

States and other countries provide that the profits of an

enterprise from the use, maintenance or rental of con-

tainers used in international traffic shall be taxable only

in one of the two countries (e.g., Draft Convention for the

Avoidance of Double Taxation, art. 8(3), United States-

United Kingdom, Treas. News, Jan. 6, 1976 with text of

Treaty signed December 31, 197 5, now pending ratification).

A concept of complete exclusion of ships from taxation has

gained acceptance over the years, and numerous states

have adopted provisions of constitutional or statute law

prohibiting taxation of ships."

“For example, bilateral tax treaties commonly provide that

an operator of ships and airplanes registered in the operator's

country of residence, shall be exempt from tax in the other country.

E.g., Convention for the Avoidance of Double Taxation With Re-

spect to Taxes on Income, July 22, 1954, United States-Federal

Republic of Germany, [1954] 5 U.S.T. 2768, T.LA.S. No. 3133 ;

Convention on Matters of Taxation With Related Letters, June 20,

1973, United States-Union of Soviet Socialist Republics, 27 U.S.T.

1, T.LAS. No. 8225.

* E.g., Calif. Const. art. 13, §3(1) ; N.Y. Tax Law §1115(a) (8)

(McKinney 1965).

8

Containers have even less permanent situs in, and even

fewer ties to, particular jurisdictions than do ships. They

travel from country to country as Instruments of Inter-

national Traffic and are as much subject to control by

international convention as to control by the laws of any

one country."’ Leasing company containers are freely inter-

changed among the ships of virtually all the maritime

nations of the world, and they spend most of their “lives”

outside of the physical contro! of their owner.“ Containers

are of such transient nature that any system of allocating

taxes other than by nationality of the owner has little

rational basis. The “home port” doctrine would seem par-

ticularly applicable.

In recent years this Court does not seem to have dealt

with taxation of vessels or maritime equipment such as

containers. Some guidance, however, is provided by sev-

eral cases considering state taxation of related matters

under the foreign commerce and import and export pro-

visions of the Constitution. In reviewing these cases, it

should be kept in mind that the matters as to which tax-

ation was approved were not instruments of foreign com-

merce, as are containers, but had, or had achieved, distinct

ties to the taxing jurisdiction.

** See text above and notes 4-6.

‘The International Convention for Safe Containers reflects

the commercial reality of this lessor-lessee relationship by defin-

ing the lessee as the “owner” if the lease provides that the lessee

is to exercise the owner’s responsibility for maintenance and

examination. International Convention for Safe Containers, Dee.

2, 1972, art. 11(10), Customs Convention on Containers, 1972

and International Convention for Safe ¢ ‘ontainers, Senate Execu-

tive X, Senate Comm. on Foreign Relations, 93d Cong., Ist Sess.

(Comm. Print Nov. 15. 1973) (enters into force for United States

Jan. 3, 1979).

9

B. The Foreign Commerce Clause.

This Court has considered the foreign commerce clause”

recently in Department of Revenue v. Ass’n of Washing-

ton Stevedoring Companies, 98 S. Ct. 1388 (1978); see

also Michelin Tire Corp. v. Wages, 423 U.S. 276, 290 n.11,

96 S. Ct. 535, 548 (1976). In the Washington case, the

Court upheld application to stevedoring of a business and

occupation tax of the State of Washington which ex-

cluded income attributable to interstate and foreign com-

merce. The Court upheld the tax on the grounds that it

was only on the value of services performed within the

state, was properly apportioned, did not discriminate

against interstate commerce, avoided the threat of mul-

tiple burdens, and did not unfairly burden by exacting

more than a just share from the interstate activity. 98

S. Ct. at 1397, 1398, 1399. As the Court later pointed out,

“No foreign business or vessel js taxed.” 98 S. Ct. at 1401.

Here, there is an obvious effort to tax an instrument

of maritime transport and a part of the vessel itself.

There is no shorebound business, part of which can be

allocated to domestic and part to foreign commerce. More-

over, California made no effort to apportion. It deemed

the number of containers in California on tax lien day

to be representative of those there every day, but this

is no different from taxing a ship in port on lien day

as representative of the owner’s fleet. Regardless of what

the parties have stipulated, the number of containers in

a state on tax lien day is arbitrary. The number of con-

tainers in any jurisdiction at one time will differ according

to the season and the level of economic activity (see pp.

12-13 below). The danger of multiple burdens is also

'* U.S. Const. art. 1, §8, el. 3.

10

evident in that lien dates differ in different states; and

a given container, which, like a ship, is intended al¥ays

to be under way, might in a single year turn out {0 be

in several states on the tax lien day of each such state.

Nor did California make any effort to eliminate jster-

state or foreign elements attributable to the commerce

which it taxed. As containers are integral parts of the

vessels in which they travel (see p. 4 above), restoration

of full freedom to the commerce here involved requires

rejection of the application of the California tax to all

containers.

C. The Import-Export Clause; the Export Clause.

In Department of Revenue v. Ass’n of Washington

Stevedoring Companies, 98 S. Ct. 1388 (1978), the Ccurt

also reaffirmed the new approach to the Import-Exyort

Clause” and to the Export Clause” established two years

earlier in Michelin Tire Corp. v. Wages, 423 U.S. £76,

96 S. Ct. 535 (1976). In dealing with the Import-Export

Clause, Michelin had abandoned the “original package”

doctrine and instead analyzed whether the state ‘ax

offended any of three policies (98 S. Ct. at 1400-1401

quoting from 423 U.S. at 285-286, 96 S. Ct. at 540) :

The Framers of the Constitution thus sought to

alleviate three main concerns .. . : the Federal Govern-

ment must speak with one voice when regulating

commercial relations with foreign governments, and

tariffs, which might affect foreign relations, could rot

be implemented by the States consistently with that

exclusive power; import revenues were to be the major

source of revenue of the Federal Government aad

*° U.S. Const. art. I, §10, el. 2.

*' U.S. Const. art. I, §9, cl. 5.

11

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 pro-

hibited from levying taxes on citizens of other States

by taxing goods merely flowing through their ports

to other States not situated as favorably geograph-

ically.

The California tax certainly offends one and probably

two of these policy considerations. Few countries invoke

property taxes on containers at all, and virtually none

taxes the containers of foreign owners. As a result, the

imposition of the California tax on the Japanese owned

containers has brought protests from numerous nations

and the prospect of automatic retaliation under the law

of at least one (see p. 12 below). The California tax

will, therefore, cause most serious interference with com.

mercial relations with foreign governments. It clearly

invades the “exclusive power” of the federal government

“to speak with one voice when regulating commercial

relations with foreign governments.”

There is also a threat to harmony among the states.

not so much arising out of imposition of a tax by a sea-

board state as from the impact of retaliation upon citizens

of other states. The citizens of these other states will

suffer retaliation from foreign governments arising out

of the California tax without having had a voice in deter-

mining the wisdom or desirability of that tax.

Department of Revenue v. Ass'n of Washington Steve-

doring Companies, 98 8. Ct. 1388 (1978), also interprets

the separate prohibition against federal taxation of ex.

ports. The Export Clause is based on the very two policies

identified in Michelin which the California tax offends:

preventing disruption of United States foreign policy and

12

avoiding friction among the states. Since the tax offends

these two primary policies, which underly both clauses,

it should be struck down, not onl-- in regard to foreign

owned containers, but also in regard to domestic owned

containers. As a tax on a maritime instrument of foreign

commerce, it goes beyond any state tax hitherto approved

by this Court.

The threat to commercial relations with foreign govern-

ments warrants closer analysis. If California applies its

property tax to foreign owned containers, retaliation by

numerous foreign countries can be expected. These for-

eign countries include major trading partners of the

United States, such as West Germany, the law of which

mandates a retaliatory tax, and the United Kingdom,

France, Japan, the Netherlands, Norway, Denmark, Fin-

land and Mexico, which have protested application of the

California tax in letters to the State Department. See

Brief for Appellants.

California’s tax will have a special competitive impact

on United States leasing companies. It will be an impact

of the type which economists describe as pro-cyclical

because it increases during a recession and tends to ag-

gravate recessionary effects upon the industry. Taxes

imposed on containers while they are on lease to ship lines

are generally passed on by the leasing company and borne

by the lessee ship lines (see p. 13 below); but taxes im-

posed on off-lease containers must be borne by the leasing

company. Currently, the United States leasing industry

enjoys a high utilization factor. About 88% of its fleet

was on lease during the first half of 1978. Only approxi-

mately 12% of its fleet was off-lease during that period.

Thus, at that time the United States leasing industry

13

could have been compelled to pay property taxes, retalia-

\ury or otherwise, on about 12% of its fleet.

The present state of world trade is, however, relatively

healthy. When a recession next strikes the international

economy, the utilization percentage will decline, und the

current off-lease percentage of 12% could easily double.

If the off-lease percentage were to double, the number

of containers subject to retaliatory taxes borne by leasing

companies would double, and the property taxes required

to be paid by the United States leasing companies would

double. Such a doubling of a non-recoverable expense

would take place at the very time when the general effect

of the recession would cause leasing revenues to drop and

company profits to be low or non-existent. The pro-cyclical

increase in retaliatory property taxation upon the leasing

industry would thus be in the magnitude of 100%. A

competitive penalty of this size could be expected to re-

fleet itself further in a decline in revenues. A decline

in revenues would have an effect on United States dollar

payments and would have the usual multiplier effeet on

the industries with which the container leasing industry

deals, suppliers, repairers, refurbishers, ete.

As stated above, ship line lessees normally pay any

taxes on leased containers in their possession. These taxes

would include property taxes, and such levies would result

in severe competitive injury to United States flag steam-

ship lines. These lines already suffer sufficient com-

petitive disadvantages. United States leasing companies

have achieved their position in world commerce, however,

by leasing to foreign ship lines as well as to United States

ship lines. It is anticipated that when retaliatory taxes

are imposed on containers on lease to foreign ship lines,

these taxes will be refunded (or application withheld)

14

because the containers are in the service of the foreign

ship lines, but there is no guarantee that the taxes will

be administered in this manner. If the United States leas-

ing companies cannot obtain refunds or otherwise avoid

these taxes on leases to foreign ship lines, the competitive

penalty will be a most heavy one, regardless of the state of

world trade. United States companies will be compelled

to pass on the taxes in their charges to foreign ship lines

as well. If these charges cause the rates of United States

companies to be higher than those of their foreign counter-

parts, foreign ship lines will have a simple choice; they

will simply lease from foreign leasing companies.

One of the reasons for the establishment of the federal

government and the delegation to it of the powers hitherto

possessed by the states over foreign policy and foreign

commerce was that, under the Articles of Confederation,

states had adopted their own taxes on imports and passed

individual and conflicting regulations regarding foreign

commerce. Michelin Tire Corp. vy. Wages, 423 U.S. at 283,

96 S. Ct. at 539-540 (1976). Permitting California to impose

a tax on containers which will cause retaliation by foreign

countries will bring this country back to the conditions

which prevailed before 1789. It was to establish a single

foreign policy, economic as well as political, that the

States delegated to the federal government their powers

over these matters in 1789. The United States must “speak

with one voice” to the world abroad. Its citizens cannot

afford to have their policy dictated by a single, or even

several, states of the Union. Taxation of the instruments

of foreign commerce is a field in which federal power

must claim exclusive control.

15

Conclusion

WHEREFORE, TICL, as amicus curiae, respectfully re-

quests this Court to hold invalid the application of the

California personal property tax (i) to all marine cargo

containers as instruments of foreign commerce having no

Single situs or, in the alternative, ( ii) to foreign owned

containers.

Respectfully submitted,

Epwarp A. Woo.iEy

Law Firm or Matcotm A. HorrmMann

12 East 41st Street

New York, New York 10017

(212) 685-0535

Attorney for Amicus Curiae

Micuag. D. Barrett

Martin D. Goopman

Dennis J. Kenny

Rosert M. Ricas

Josera Lewis Simon

Of Counsel

August 25, 1978

APPENDIX

17

EXHIBIT A

List of Members of UCL

CTI-Contarvern Transport INTERNATIONAL, Iwo.

445 Hamilton Avenue

White Plains, New York 10601, U.S.A.

Contrans GESELLSCHAFT fiir ConTAINERVERKEHR M.B.H.

2000 Hamburg 50

Bugdahnstrasse 5, Germany

IpgaL Conrarner di A.ronso Donati

16121 Genoa

via XX Settembre, 34-7, Italy

INTEGRATED CONTAINER Service, Inc.

522 Fifth Avenue

New York, New York 10036, U.S.A.

InTERPooL, Limrrep

630 Fifth Avenue

New York, New York 10017, U.S.A.

Nippon INTERNATIONAL ConTarner Services Co., Lrp.

World Trade Center Building

4-1, 2 Chome, Hamamatsu-cho

Minato-ku, Tokyo, Japan

Sea Conrarvers Inc.

39 Park Street

London, W1, Y3HG, England

SSI Conrarver Corporation

Two Embarcadero Center

San Francisco, Calif. 94111, U.S.A

Trans Ocean Lrasine CorPORATION

114 Sansome Street

San Francisco, Calif. 94104, U.S.A.