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

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## Record

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

## Text

No. 77-1378 } SEP & i978

'
ODAK ’
FON, JT
rr

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

JAPAN LINE, LTD., ET AL., APPELLANTS
Vv.

COUNTY OF LOS ANGELES, ET AL.

ON APPEAL FROM THE SUPREME COURT OF CALIFORNIA

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

WADE H. MCCREE, JR.,
Solicitor Genera’,

BARBARA ALLEN BABCOCK,
M. CARR FERGUSON,
Assistant Attorneys General,

KENT L. JONES,
Assistant to the Solicitor General,

LEONARD SCHAITMAN,
ERNEST J. BROWN,
Attorneys,
Department of Justice,
Washington, D.C. 20530.

INDEX

Ee TA LATOR ET EA

Statement

Summary of argument

Argument:

The Commerce Clause and the Supremacy
Clause deprive the states of authority to
levy ad valorem taxes on foreign-owned
and foreign-domiciled sea-borne contain-

ers
A.
B.

The “home port” rule ____

Appellants’ containers, like the ships
that carry them, are instruments of
foreign commerce ____

Imposition of the ad valorem tax on
appellants’ ships or on the contain-
ers carried in them is inconsistent
with the exclusive authority of the
federal government to regulate for-
eign commerce -

Imposition of the tax on appellants’
ships or the containers carried in
them interferes with the objectives
of the customs convention on contain-
ers and the comprehensive scheme of
federal regulation of instrumentali-
ties of foreign commerce .

Conclusion

Appendix A

Appendix B Saeko a
ad ee

11

14

ul baat

Hines v. Davidowitz, 312 U.S. 52 30

CITATIONS Cases—Continued Page
Cases: Page Leather’s Best, Inc. v. S.S. Mormaclynzx,
Ammex Warehouse Co. v. Department of 451 F.2d 800 12
Alcoholic Beverage Control, 224 F. Lehnhausen v. Lake Shore Auto Paris Co.,
Supp. 546 27 410 U.S. 356 — 31
Bob-Lo -pageag Co. v. . Michigan, 333 McGoldrick vy. weed Oil Cor De, 309 ‘US.
U.S. 9 414 _...... 25, 26, 27, 32
Braniff > Haove ys, Inc. v. . Nebraska ‘State Michelin Tire Corp. v. Wages, 423 U.S.
Board, 347 U.S. 590 16,17 OE Attic ocenad 2 10, 20, 31
Bremen, The v. Zapata Off-Shore Co., 407 Moorman Manufacturing Co. v. Bair, No.
US. 1. sake 22 77-454 (June 15,1978) ==——s—s—=«éQ2«4Y 909
Campbell v. . Hussey, 368 U.S. 297... 22 Morgan v. Parham, 83 US. (16 —
Chy Lung v. Freeman, 92 U.S. 275 - m 21 471 | ce ae 8 10,14
Cooley v. Board of Wardens, 53 U.S. (2 National Cable Television. Association v.
How.) 299 a 5, 8,9 United States, 415 U.S. 336 ___ 15
Department of Revenue V. , Association of Northeast Marine Terminal Co. v. Caputo,
Washington Stevedoring Companies, 432 U.S. 249 - 12
No. 76-1706 (April 26, 1978) —_. 18, 19, Ott v. Mississippi Barge Line, 336 US.
20, 31, 32 RGR OME tie I eels SP a 16
Douglas v. Seacoast Products, Inc., 431 ) Packet Co. v. Keokuk, 95 US. 80. 15
U.S. 265 . Wore a Died 27 Pullman’s Palace Car Co. v. Pennsylvania,
EVCO v. Jones, 409 U.S. 91. 19 141 US. 18 | 16
Exchange, The, 11 U.S. (7 Cranch) 116 15 Railroad Co. v. Maryland, 88. US. (21
Factor v. Laubenheimer, 290 U.S. 276.. 29 Wall.) 456 16
First Federal Savings & Loan Associa- Ray v. Atlantic Rich field Co., No. 16- 930
tion v. Tax Commission, No. 77-334 March 6, 1978) . _ 22, 30-32
(June 15, 1978) ; 29 Raymond Motor Transportation, Ine. v.
Gibbons v. Ogden, 22 U.S. (9 Wheat) 1 12 Rice, 434 U.S. 429 - 27
Harvester Co. v. Department of the Trea- Rice v. Santa Fe Elevator Corp., 331 U. s.
sury, 322 U.S. 340 19 BO SiieeaiaptapminperiiieNiaabtidociSmnibieictiiisasssd dy 22
Hays v. Pacifie Mail Steamship Co., 58 Sea-Land Service, Inc. vy. Count) y of Ala-
U.S. (17 How) 595 4, 5-6, 9, 10, 14 meda, 12 Cal. 3d 772, 528 P. 2456 __ 4
Henderson v. Mayor of New York, 92 Southern Pacific Co. v. ‘Arizona, 325 U.S.
U.S. 259 | . 12 761 | itiapsnetios ee tas 9

Cases—Continued

Southern Pacific Co. v. Kentucky, 222 U.S.
63 - miners

Standard Oil Co. v. _ Peck, 342 U. S. 382 -

Transportation Co. Vv. Parkersburg, 107
oF | eee

Western Live Stock v. Bureau of Revenue,
303 U.S. 250 _ _.

Zenith Radio Corp. v. _U nited States, No.
77-539 (June 21, 1978) - |

Constitution, treaties, statutes and regulations:

Constitution of the United States, Article
I, Section 10, Clause 3 -

Chicago Convention on International Civil
Aviation, 61 Stat. 1186, Article 24

Convention Between the United States of
America and Japan, 20 U.S.T. 967

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

Chapter I, Article]

Chapter I, Article l(a). roe
Chapter II, Article 2 -_.................
Chapter II, Article 3 - |
Chapter II, Article 4 _-

Chapter IV, Article 11

General Agreement on Tariffs and Trades,
61 Stat. A3 ‘

Treaty of Friendship, Commerce and
Navigation Between the United States
and Japan, Article XI, 4 U.S.T. 2063

Page

_ 10,14
17

23
19

30

4, 23

Vv

Constitution, treaties, statutes and
regulations—Continued

Page

Federal Aviation Act of 1958, Section
1109(c), as amended, 49 U.S.C. 1509
(ce) . 28
Tariff Act of 1930, : as s added and amend-
ed, 19 U.S.C. 1001 et seq.:

Section 101,19 U.S.C.1202 15
Section 311, 19 U.S.C. 1311 25, 26
Section 322, 19 U.S.C. 1322 13, 15, 24, 28
Section 322(a), 19 U.S.C. 1322(a) 24 ©

Section 434, 19 U.S.C. 1434 28

Section 435, 19 U.S.C. 1435 28

Section 446, 19 U.S.C. 1446 __ 25

Section 484, 19 U.S.C. 1484 24, 28

46 U.S.C. 121 7 30
California Harbors and Navigation Code,

Section 4122 (West. 1978) 20

California Revenue and Taxation Code
(West. 1970):

Section 117 .

= ae 2

Section 405 2
Section 2192 eis 2

19 C.F.R. Part 4 Tee : 28
19 C.F.R. Part 6 “a é 28
19 C.F.R. 10.41a | ra 24, 28, 29
Section 10.41a(a) (1) 13, 24
Section 10.41(a) (3) 13
Section 10.4la(c) | 13, 24, 25
Section 10.4la(d) - 25
Section 10.4la(f) «5s 24

Miscellaneous : Page
Federalist Papers No. 32-34 (The Feder-

alist (B. Wright ed. 1961) ) : 30
Simon, The Law of Shipping Containers,

5 J. Mar. L. Com. 507 (1974) 11

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

No. 77-1378
JAPAN LINE, LTD., ET AL., APPELLANTS
Vv.

COUNTY OF LOS ANGELES, ET AL.

ON APPEAL FROM THE SUPREME COURT OF CALIFORNIA

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the Court’s
invitation of June 12, 1978.

QUESTION PRESENTED

Whether freight containers owned by Japanese
shipping companies, carried in Japanese vessels en-
gaged in commerce between the United States and
Japan with their home port in Japan, intermittently
in the United States to unload and load freight car-
ried in foreign commerce, may be subject to personal

(1)

2

property taxes imposed by municipalities in the State

of California.
STATEMENT

Appellants are Japanese shipping corporations,
which have their principal places of business and com-
mercial domiciles in Japan. They operate vessels used
exclusively in foreign commerce. The vessels are
registered in Japan and have their home ports in
Japan. These vessels are designed and constructed
to accommodate large shipping containers, and all
cargo is brought onto the vessel, stored during transit,
and removed at destination in these containers. The
containers, which are owned by appellants, have their
home port in Japan and are used constantly and
exclusively for the transportation of cargo for hire
in foreign commerce. Each container is in constant
transit save for repair time and time awaiting the
loading of cargo. All of the containers owned by
appellants are subject to property tax in Japan and
are in fact taxed in Japan (J.S. App. 2a-3a, 17a-18a).

A number of appellants’ containers were present in
the County of Los Angeles and the City of Los An-
geles on the dates used by appellees for tax computa-
tion purposes.’ None of these containers had been

1 Property present in California on March 1 of any year
is subject to tax in the State. See California Revenue and
Taxation Code, Sections 117, 405, and 2192 (West. 1970). This
roughly apportions the property tax for mobile goods such as
containers. Although no container is present in California con-
sistently, some containers are there at any time. For example,
if each container is present in California for approximately

Sa

in California for as much as six months during the
twelve months immediately preceding those dates. The
average stay of the containers in California was less
than three weeks (J.S. App. 2a-3a, 15a-16a, 18a).
The fair market values of the containers present in
the County and City of Los Angeles on the critical
date of the years in question ranged from a low of
$553,200 in the case of Showa Shipping Co. in 1971
to a high of $1,768,280 in the case of Kawasaki
Kisen Kaisha, Ltd., in 1972. The County of Los
Angeles and the City of Los Angeles levied the state
property tax with respect to the assessed value of
these containers.* The taxes for 1970 through 1972
were: Japan Line, Ltd., $100,632.85; Kawasaki Kisen
Kaisha, Ltd., $117,616.44; Mitsui O.S.K. Lines, Ltd.,
$111,255.25; Nippon Yusen Kaisha, $110,175.04;
Showa Shipping Co., $50,640.69; Yamashita-Shinni-
hon Steamship Co., Ltd., $69,416.39. Appellants paid
the taxes under protest and filed a suit for refund in
state court (J.S. App. 15a-17a).

three weeks each year, the number of containers present in
California on any arbitrarily selected date is approximately
3/52 of the total number of containers that enter California
at any time during the year. The number of containers physi-
cally present in Los Angeles County on March 1 of 1970, 1971,
and 1972, was representative of the number of containers
present in Los Angeles County on other dates throughout the
tax year.

* The property tax rate applied to the containers during
the years involved in this case was approximately 11% of
assessed value, and the assessed value of the property ordi-
narily is 25% of fair market value. See J.S. App. 16a.

i

The superior court held that the containers in
question were instrumentalities of foreign commerce
and therefore, under the “home port” rule of Hays
v. Pacific Mail Steamship Co., 58 U.S. (17 How.) 596
(1855), were immune from property taxation ex-
cept in Japan (J.S. App. 26a-27a). The court also
held (id. at 27a-28a) that imposition of the property
tax by the County and the City was inconsistent with
the provisions of the Treaty of Friendship, Commerce
and Navigation Between the United States and Japan
(4 U.S.T. 2063).

The court of appeal, following the decision in Sea-
Land Service, Inc. v. County of Alameda, 12 Cal. 3d
772, 528 P.2d 56 (1974), a case involving a domestic
carrier, rejected the “home port” rule as anachro-
nistic and held that instrumentalities of foreign com-
merce are subject to apportioned property taxation
(J.S. Supp. SA 5). The court also rejected the con-
tention that property taxes on sea-borne containers
temporarily off-loaded by vessels in foreign commerce
constitute a duty of tonnage that is prohibited by
Article I, Section 10, cl. 3 of the Constitution (J.S.
Supp. SA 4-SA 6). Finally, the court concluded that
the treaty provisions invoked by appellants have no
application to state or local property taxation of

*'The superior court relied principally on Article XI of the
Treaty, which provides that nationals of the contracting
parties are not to be assessed taxes “within the territories
of such other Party, [that are] more burdensome than those
borne by nationals and companies of such other Party.” 4
U.S.T. at 2072.

5

instruments of foreign commerce (J.S. Supp. SA
6-SA 9). The court of appeal therefore reversed the
judgment of the superior court (J.S. Supp. SA 9).

The Supreme Court of California affirmed the
decision with some expansion and editorial emenda-
tions as its own opinion (J.S. App. la-13a).

SUMMARY OF ARGUMENT

The question in this case is whether the State of
California or its cities and counties constitutionally
may impose an annual ad valorem property tax on
cargo containers owned by Japanese shipping lines,
based and taxed in Japan, carried on Japanese ships
engaged in commerce between Japan and the United
States, and briefly in California for the sole purpose
of discharging and loading cargo carried in foreign
commerce by those ships.

In the view of the United States, they may not.
This Court has long recognized that the Commerce
Clause commits to the exclusive authority of the na-
tional government the regulation of those aspects of
interstate and foreign commerce that, by their na-
ture, require uniform national treatment. See, e..,
Cooley v. Board of Wardens, 53 U.S. (12 How.) 299
319 (1851). We believe that foreign-owned snd
foreign-domiciled instrumentalities of foreign com-
merce should be accorded uniform tax treatment. The
necessary uniformity is supplied by this Court’s deci-
sion that only the “home port” may impose ad
valorem property taxes on sea-going ships. Hays v.

6

Pacific Mail Séeamship Co., 58 U.S. (17 How.) 596
(1855). ° :

The “liome port” rule should apply to containers
as well as to ships. The development of the container
and the container-ship is one ofthe major advances
in the technology of transportation, and the container
has assumed a character as an instrument of com-
merce identical to the ship itself. It completes the
voyage in foreign commerce not at the water’s edge
but only when it discharges the cargo that it carries.
The United States recognizes the status of the con-
tainer as comparable to that of a ship by adhering
to the Customs Convention on Containers, 20 U.S.T.
301, whereby containers are admitted into the sig-
natory nations for limited periods free of custom
duties and restrictions. Neither the courts below nor
the appellees have regarded the containers as dif-
ferent from the ships that carry them. Indeed, the
California State Board of Equalization has proposed,
as a result of the decision of the Supreme Court of
California in this case, to impose its property tax on
foreign aircraft arriving in California and operating
solely in foreign commerce (App., infra, la-lla).

It is true that this Court recently has permitted
non-domiciliary states to impose ad valorem property
taxes on railroad rolling stock, vessels on inland
waterways, anc aircraft of domestic airlines, when
the taxes were apportioned to reflect the extent to
which the property was present in the taxing state.
But in each case the Court observed that its decision
did not relate to ocean-going vessels. The Court’s

7

recent decisions not only leave unquestioned Hays and
other decisions regarding the taxation of sea-going
vessels but also hold that a system that permits
imposition of apportioned property taxes by non-
domiciliary states is not consistent with taxation
of the full value of the property by domiciliary states.
Because foreign nations have the power and right
recognized by the custom of nations to tax the full
value of the ships and containers of their nations, no
system of apportionment can prevent multiple taxa-
tion. Any rule allowing property taxes to be col-
lected by non-domiciliary jurisdictions would lead
to multiple tax burdens and thus disadvantage one
form of commerce solely because it is foreign.

This Court has not been reluctant to hold inopera-
tive state statutes having impact upon foreign na-
tionals-or foreign commerce where it has perceived
friction with federal policy or federal interests. We
are informed by the Department of State that six
foreign nations have expressed concern about Cali-
fornia’s tax on containers. See App., infra, 15a.
Even more have raised questions about the State’s
proposal to impose its property tax on foreign air-
planes. Jbid. Jf these expressions of concern are
followed by action by nations feeling themselves dis-
advantaged, as we must anticipate they may be, the
responsive action will affect not only California but
also the United States.

Moreover, the action of California and the appellees
in this case lessens the effectiveness of the Customs
Convention on Containers in aiding foreign commerce

8

and interferes with the comprehensive scheme of fed-
eral regulation of instrumentalities of foreign com-
merce. The state tax thus constitutes an obstacle to
the realization of the foreign policy of the United
States. It intrudes, as the voice of one of 50 states,
into an area where the United States has spoken and
should continue to speak with one voice.

ARGUMENT

THE COMMERCE CLAUSE AND THE SUPREMACY
CLAUSE DEPRIVE THE STATES OF AUTHORITY
TO LEVY AD VALOREM TAXES ON FOREIGN-
OWNED AND FOREIGN-DOMICILED SEA-BORNE
CONTAINERS.

A. The “Home Port” Rule

In Cooley v. Board of Wardens, 53 U.S. (12 How.)
299 (1851), this Court for the first time dealt ex-
plicitly with the question (53 U.S. (12 How.) at 318)
“whether the grant of the commercial power to Con-
gress, did per se deprive the states of all power” to
deal with foreign and with interstate commerce. The
Court’s response demonstrated the difficulties of giv-
ing an unvarying answer (id. at 319):

Either absolutely to affirm, or deny that the
nature of this power requires exclusive legisla-
tion by Congress, is to lose sight of the nature of
the subjects of this power, and to assert concern-
ing all of them, what is really applicable but to
a part. Whatever subjects of this power are in
their nature national, or admit only of one uni-
form system, or plan of regulation, may justly

be said to be of such a nature as to require
exclusive legislation by Congress. * * *

The Cooley formulation has at times been phrased
somewhat differently (see Southern Pacific Co. v.
Arizona, 325 U.S. 761, 775-776 (1945) ), but in every
case where the impact of a state statute on interstate
or foreign commerce has drawn into question the
constitutional validity of the statute, the Court has
appraised the federal interest and the degree of state
interference before giving a constitutional answer.*
Soon after the decision in Cooley, this Court held in
Hays v. Pacific Mail Steamship Co., supra, that Cali-
fornia could not impose its property tax on an ocean-
going vessel that was engaged in interstate and in-
ternational commerce and that stopped in California
ports to unload and load mail, passengers, and freight,
and for repairs and refitting. The Court observed
that the vessel was owned and registered in another
state and that, while engaged in interstate and for-
eign trade, the vessel could not be regarded as “abid-
ing within [the] limits [of California] so as to be-

*In Bob-Lo Excursion Co. v. Michigan, 333 U.S. 28 (1948),
for example, the Court found that an equal-accommodation
statute of the State of Michigan could be anplied to a vessel
transporting passengers between Detroit and a nearby amuse-
ment park on Canadian soil. This was because, in the unusual
circumstances of the case, there was “nothing out of harmony,
much less inconsistent, with our federal policy in the regula-
tion of commerce between the two countries; nor, so far as we
are advised, with Canadian law and policy.” Jd. at 37. The
Court was nevertheless careful to recognize that “we must
be watchful of state intrusion into intercourse between this
country and one of its neighbors.” Jd. at 35.

10

come incorporated with the other personal property
of the state * * *.” Id. at 599. Although California
could impose “municipal and sanitary reguiations
* * * not inconsistent with the constitution and laws
of the general government” (ibid.), the Court held
that only the home port could impose a property tax.
Accord, Southern Pacific Co. v. Kentucky, 222 U.S.
63 (1911); Morgan v. Parham, 83 U.S. (16 Wall.)
471, 477 (1872).

Although, as we discuss at pages 15-17, infra,
this Court has held, with respect to various forms of
domestic commerce, that the states may levy “ap-
portioned” property taxes—that is, taxes fairly re-
flecting the extent to which particular transient prop-
erty actually is present in a state—it has been care-
ful in each case to exclude sea-borne transport from
its holding. We believe that Hays continues to state a
sound principle which rests on the uniform practice of
nations and protects the federal interests in the reg-
ulation of sea-borne commerce, particularly in com-
merce with foreign nations, and in speaking with one
voice in matters affecting our foreign relations. See
Michelin Tire Corp. v. Wages, 423 U.S. 276, 285
(1976). As we shall indicate, the imposition of the
tax by appellees entails substantial intrusion on these
interests. We turn first, however, to consider the
specific property involved, appellants’ containers.

11

B. Appellants’ Containers, Like The Ships That Carry
Them, Are Instruments Of Foreign Commerce

In the technology of sea-borne transportation in
recent decades, the container and the container-ship

stand out as among the most significant develop-
ments:

One of the most important technological devel-
opments in the transportation of goods by sea
since steam replaced sail is the recent advent of
the “container revolution”. This radically novel
concept of transferring, handling, stowing, dis-
charging and delivering hundreds of packages
simultaneously and mechanically by means of
large reusable permanent metal containers, con-
tainerships, special container handling equip-
ment and container terminals is so efficient a
labor-saving device that it has already, to a large
extent, altered conventional methods of shipping
large numbers of packages individually. In
short, containerization has rendered shipping “a
whole new ball-game’”’.

Simon, The Law of Shipping Containers, 5 J. Mar. L.
Com. 507 (1974). Containers of the type involved
in this litigation are not merely packages to contain
goods, but are “a permanent, reusable article of trans-
port equipment * * *.” Jd. at 513. A container is
(ibid. )

durably made of metal, and equipped with doors

for easy access to the goods and for repeated

use. It is designed to facilitate the handling,

loading, stowage aboard ship, carriage, discharge
from ship, movement, and transfer of large

12

numbers of packages simultaneously by mechani-
cal means to minimize the cost and risks of man-
ually processing each package individually. It
functions primarily as ship’s gear for cargo han-
dling, and is usually provided by the carrier.

As this Court put it, “the container is a modern sub-
stitute for the hold of the vessel.” Northeast Marine
Terminal Co. v. Caputo, 432 U.S. 249, 270 (1977).
The Court held in Caputo that loading and unloading
a container is the same thing as loading and unload-
ing the ship itself, thus establishing that a container
is “functionally a part of the ship * * *.” Leather’s
Best, Inc. v. S. S. Mormaclynx, 451 F.2d 800, 815
(2d Cir. 1971).

The container, just as the ship, is continuously
engaged in foreign commerce from the time its cargo
is loaded and movement starts until its cargo is dis-
charged at destination. As the superior court ob-
served (J.S. App. 26a), the containers involved in
this case “only come into this country for the pur-
pose of bringing in cargoes or shipping them out in
foreign commerce. There is no interstate or intra-
state use.” And the Supreme Court of California
acknowledged (id. at 2a) that “[t]hey are used
exclusively for the transportation of cargo for hire in
foreign commerce.” °

’>This Court recognized as early as 1824, in the seminal
opinion of Chief Justice Marshall in Gibbons v. Ogden, 22 U.S.
(9 Wheat.) 1, 195, that foreign commerce “does not stop at
the jurisdictional lines of the several States” but proceeds
within the states until the movement in commerce is completed.
See also Henderson V. Mayor of New York, 92 U.S. 259, 271
(1875).

13

The United States, in common with many other
nations, recognizes containers as instruments of for-
eign commerce integral to the ships that carry them.
Chapter II, Article 2 of the Customs Convention on
Containers, 20 U.S.T. 301, 304, provides for the “tem-
porary admission [of sea-borne containers] free of
import duties and import taxes and free of import
prohibitions and restrictions” when they are imported
for use solely in foreign commerce and subject to
reexportation. Similarly, 19 C.F.R. 10.4la(a)(3)°
designates sea-borne containers as “instrumentalities
of international traffic” within the meaning of 19
U.S.C. 1322. Pursuant to these regulations and Sec-
tion 1322, containers may be bonded and “released
without entry or the payment of duty” so long as they
are used exclusively in foreign commerce and subject
to reexportation. 19 C.F.R. 10.4la(a)(1), (ec). Ina
number of bilateral income tax conventions, including
the Convention Between the United States of America
and Japan, 23 U.S.T. 967, 987, 1084, and 1093, the
United States further associates containers with the
ships that carry them by providing that the income
from the use of containers and related equipment in
international traffic shall be treated in the same fash-

°19 C.F.R. 10.41(a) (3) provides:

As used in this section, “instruments of international
traffic includes the normal accessories and equipment
coy ene with any such instrument which is a “container”
as defined in Article 1 of the Customs Convention
Containers. at

14

ion as income from the ships in connection with which
they are used.

Neither the court below nor appellees have sought
to treat the appellants’ containers as other than in-
strumentalities of foreign commerce or to differenti-
ate them in any fashion from the ships that were de-
signed and constructed to carry them. Indeed, after
the decision of the Supreme Court of California in
this case, the California State Board of Equalization
gave notice of public hearing on its proposal to amend
the California Administrative Code to make foreign
aircraft operated solely in foreign commerce sub-
ject to property taxation in California. App., infra,
la-lla. The notice of public hearing was cancelled,
subject to possible rescheduling, only after this Court
set the present case for oral argument (id. at 12a-
13a).

For these reasons, we believe that the question of
the states’ constitutional power to tax appellants’ con-
tainers is not distinct from the question of their
power to tax the vessels on which the containers
are carried.

C. Imposition Of The Ad Valorem Tax On Appellants’
Ships Or On The Containers Carried In Them Is
Inconsistent With The Exclusive Authority Of The
Federal Government To Regulate Foreign Commerce

As we have noted, this Court held in Hays v.
Pacific Mail Steamship Co., supra, in Morgan v.
Parham, supra. and in Southern Pacifie Co. v. Ken-
tucky, supra, that only the home port, or the juris-
diction in which it is located, may impose a property
tax on ocean-going ships. Other ports in which those

15

ships may be found from time to time may not con-
stitutionally impose a general property tax on the
vessels. Those decisions, expressing the mandate of the
Constitution, express as well the custom of nations.
We are informed by the Department of State that
after inquiry of its posts abroad, it determined that
only one nation, Afghanistan, imposes property taxes
on foreign containers or other instruments of foreign
commerce entering its jurisdiction (App., infra, 14a).
All other nations have adhered to the international
custom of allowing containers, as well as vessels
and other instruments of foreign commerce, to be
introduced for the exclusive purpose of conducting
such commerce free of all customs duties and gen-
eral taxes, including property taxes.’ Cf. 19 U.S.C.
1322; 19 U.S.C. 1202 (General Note 5(e)). Al-
though positive law may override international cus-
toms that bear on ships and instruments of com-
merce of other nations, see The Exchange, 11 U.S.
(7 Cranch) 116, 136, 144 (1812), such law can be
enacted only at the national level if the nation is to
speak with one voice in matters of foreign commerce.

It is true that, with respect to the several forms
of inland transportation, this Court has held that
instrumentalities of interstate commerce are subject

'“Fees” that are related to the value of specific services
provided to vessels and containers, as opposed to generai taxes
to support the operations of government (see National Cable
Television Association V. United States, 415 U.S. 336, 340-341
(1974)), are, however, permissibly charged under the custom
of nations. See App., infra, 14a-15a. Cf. Hays v. The Pacific
Mail Steamship Co., supra, 58 U.S. (17 How.) 596; Packet Co.
v. Keokuk, 95 U.S. 80, 88-89 (1877).

16

to apportioned property taxation by the states in
which they operate. But in each instance it has been
careful to state that its decision did not involve for-
eign or ocean-borne commerce. In Pullman’s Palace
Car Co. v. Pennsylvania, 141 U.S. 18, 23-24 (1891),
upholding apportioned property taxation of railroad
rolling stock engaged in interstate commerce, the
Court explicitly differentiated the case of ships and
vessels upon the high seas. Quoting from Railroad
Co. v. Maryland, 88 U.S. (21 Wall.) 456, 470 (1874),
the Court pointed out (141 U.S. at 24) that:

Again, the vehicles of commerce by water being
instruments of intercommunication with other
nations, the regulation of them is assumed by
the national legislature. So that state interfer-
ence with transportation by water, and especially
by sea, is at once clearly marked and distinctly
discernible. But it is different with transporta-
tion by land.

Similarly, when the Court upheld apportioned prop-
erty taxation of barges on the Mississippi River by
non-domiciliary states in Ott v. Mississippi Barge
Line, 336 U.S. 169 (1949), it was careful to point
out that “[w]e do not reach the question of taxability
of ocean carriage but confine our decision to trans-
portation on inland waters.” Jd. at 173-174. And in
Braniff Airways, Inc. v. Nebraska State Board, 347
U.S. 590 (1954), upholding Nebraska’s apportioned
property taxation of the aircraft of an airline domi-
ciled in another state, the Court differentiated the
“home port” rule in Hays and other decisions involv-

17

ing sea-borne transportation, remarking (347 U.S.
at 600):

A closer analogy exists between planes flying in-
terstate and boats that ply the inland waters.
We perceive no logical basis for distinguishing
the constitutional power to impose a tax on such
aircraft from the power to impose taxes on river
boats. Ott v. Mississippi Valley Barge Line Co.,
336 U.S. 169 * * *,

But the Court has done more than leave Hays and
companion decisions unquesticned. It has held in
Standard Oil Co. v. Peck, 342 U.S. 382 (1952), that
its decisions upholding apportioned property taxation
of vessels on inland waters, and of aircraft of domes-
tic airlines engaged in interstate flights, neces-
sarily entailed disapproval of taxation of the full
value of those instrumentalities of interstate com-
merce by the jurisdictions of the domicile or home
base of the owner (id. at 384): “The rule which per-
mits taxation by two or more states on an apportion-
ment basis precludes taxation of all of the property
by the state of the domicile.” Accord, Braniff Air-
ways, Inc. v. Nebraska State Board, supra, 347 U.S.
at 601-602. In other words, one of the foundations
for the Court’s approval of apportioned property tax-
ation has been its ability to enforce full apportion-
ment by all of the potential taxing bodies, so that no
property was subject to multiple taxation on its full
value.

But neither the Court nor the United States as a
whole can ensure full apportionment when one of the

18

taxing bodies is a foreign nation. We deal here with
ships, and containers, owned by Japanese corporations,
based in Japan, subject to property taxation in Japan,
and in fact taxed in Japan (J.S. App. 18a). As the
superior court pointed out (id. at 28a): “There is
no way to prorate the [taxes on this property], as we
do in interstate commerce. The Japanese would be
paying a double tax, while a domestic company would,
by reason of proration, be paying only one tax.” The
multiple burden that unapportioned taxation places
on foreign-owned instruments of foreign commerce is
thus a reality and not merely “an abstraction.” De-
partment of Revenue vy. Association of Washington
Stevedoring Companies, No. 76-1706 (April 26,
1978), slip op. 11 (hereafter Washington Stevedor-
ing).. Only the application of the “home port” rule

®*In Washington Stevedoring this Court upheld application
of a general state occupations’ tax to stevedoring. The Court
stated that, because the incidence of the tax was on stevedor-
ing services performed wholly within one state, “the tax is
properly apportioned and multiple burdens logically cannot
occur.” Slip op. 11. In this case, however, the incidence of the
tax is on property employed as an instrumentality of foreign
commerce that comes within the jurisdiction of several na-
tions. Each nation may claim a right to tax all or part of
the property value. Moreover, in Washington Stevedoring
the Court was careful to observe that the tax on stevedoring
did not interfere with our foreign relations because it was
applied to services performed wholly in the State of Washing-
ton and was not assessed against any “foreign business or
vessel * * *.” Jd. at 19. The tax involved in this case has
directly affected our foreign relations by its application to
foreign-owned instruments of foreign commerce. See pages
20-22, infra.

19

can make our practice consistent with that of other
nations and avoid a multiple tax burden on foreign
commerce that domestic commerce does not share.
This Court has held that a state tax or regulation
that disadvantages interstate or foreign commerce
simply because it is interstate or foreign interferes
with the exclusive national authority to regulate such
commerce and is thus invalid under the Supremacy
Clause. See Washington Stevedoring, supra, slip op.
15; EVCO v. Jones, 409 U.S. 91, 93-94 (1972);
Harvester Co. v. Department of the Treasury, 322
U.S. 340, 349, 358-362 (1944) (Rutledge, J., con-
curring); Western Live Stock v. Bureau of Revenue,
303 U.S. 250, 255-256 (1938). The Supreme Court
of California reasoned in this case, however, that the
double taxation of foreign-owned containers that re-
sults from the state scheme is “not attributable to
* * * the taxing state” but instead to the foreign
state, and that it can be alleviated by “international
agreement” (J.S. App. 6a). But the state cannot dic-
tate to the United States or to foreign nations how to
agree on matters of foreign policy or foreign com-
merce; nor can the national government unilaterally
impose international agreements on foreign nations.’
The state tax must thus be evaluated within the real-
istic framework of the custom of nations; it is within
that framework that the state tax creates an imper-

* Nothing could prohibit the Government of Japan from
taxing its nationals and corporations on the full value of their
property, and it now does so.

20

—_—

missible multiple burden on foreign-owned instru-
ments of foreign commerce.”

If it were thought that treaties could or should be
adopted to establish systems of apportioned taxation
of property in international commerce, this would, of
course, be a matter of national, not state concern.
We are informed by the Department of State that six
foreign governments, including some of our most im-
portant trading partners, have written to the Depart-
ment expressing concern about the effect on foreign
commerce of the California container tax (App.,
infra, 15a). In addition, 12 countries have sent
diplomatic notes concerning the stated intention of

© The discriminatory burden of the state’s tax on foreign-
owned instrumentalities of foreign commerce is sufficient by
itself to invalidate the tax under the Commerce Clause. We
note, however, that it appears that the tax, as applied to
foreign-owned containers, may be invalid for the additional
reason that it is not fairly related to the services provided
by the State. Although the factual record in this case is in-
adequate to support firm conclusions, it seems implicit from
the findings of the superior court (J.S. App. 16a-19a) that,
for the large part of their presence in this country, the con-
tainers taxed in this case are located at the wharf or in re-
lated dockside facilities. While they are thus located, they are
subject to ordinary wharfage or dockage fees assessed as com-
pensation for services actually provided by the State. See
California Harbors and Navigation Code, Section 4122 (West.
1978); Appellants’ Br. 46-47. Additional general taxation on
an ad valorem basis could thus subject the containers to taxa-
tion by the State twice under the same theory for the same
services. The case is thus distinct in this regard from the
general occupations tax upheld in Washington Stevedoring,
supra, and the general ad valorem tax upheld in Michelin Tire
Corp. V. Wages, supra, where no double taxation by the assess-
ing state was involved.

21

the State of California (id. at la-1la) to permit local
personal property taxation of foreign flag aircraft
flown to and from California in foreign commerce
(id. at 15a). These expressions of concern over
action disadvantageous to our trading partners may
be followed, if they produce no satisfactory response,
by other action. If the California tax should lead
to responsive actions (say, the imposition of counter-
vailing taxes) by nations deeming themselves disad-
vantaged, it could be anticipated that the responsive
action would be not to California, or to California

interests alone, but to the interests of the United
States.”

This case thus falls within the scope of the rule,
stated in Moorman Manufacturing Co. v. Bair, No.

“ This Court recognized an analogous situation in Chy Lung
Vv. Freeman, 92 U.S. 275 (1875). California had detained a
number of immigrant passengers on a ship from China because
of their failure to give bond, required by a California statute,
intended to indemnify counties, towns, and cities against lia-
bility for their support or maintenance for two years. In
holding that the Constitution prohibited California’s scheme.
the Court pointed out (id. at 279): .

* * * [I]f this plaintiff and her twenty companions had
been subjects of the Queen of Great Britain, can any one
doubt that this matter would have been the subject of in-
ternational inquiry, if not of a direct claim for redress?
Upon whom would such a claim be made? Not upon the
State of California; for, by our Constitution, she can hold
no exterior relations with other nations. It would be made
upon the government of the United States. If that govern-
ment should get into a difficulty which would lead to war,
or to suspension of intercourse, would California alone
suffer, or all the Union?

22

77-454 (June 15, 1978), slip op. 12, that “the free-
dom of the States to formulate independent policy in
{the] area [of commerce] may have to yield to an
overriding national interest in uniformity * * *.”
“We cannot have trade and commerce in world
markets and international waters exclusively on our
terms, governed by our laws, and resolved in our
courts.” The Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 9 (1972). The taxation of foreign-based in-
struments of foreign commerce is thus a matter that
is subject only to a national rule conformable with
the practice of nations or adopted pursuant to the
authority of the federal government.

D. Imposition Of The Tax On Appellants’ Ships Or The
Containers Carried In Them Interferes With The
Objectives Of The Customs Convention On Containers
And The Comprehensive Scheme Of Federal Regula-
tion Of Instrumentalities Of Foreign Commerce

The Commerce Clause affords Congress the power
to “regulate commerce with foreign nations, and
among the several States * * *.” Although a state
may, in some circumstances, take action that affects
foreign or interstate commerce, a state may not in-
trude in an area where there is pervasive federal
regulation. Ray v. Atlantic Richfield Co., No. 76-930
(March 6, 1978); Campbell v. Hussey, 368 U.S. 297,
300 (1961). Nor may a state take action that de-
feats the objectives of federal regulation. Rice v.
Santa Fe Elevator Corp., 331 U.S. 218, 229-230
(1947). In the instant case, a comprehensive ar-
rangement of federal regulation has been adopted;

23

this arrangement precludes general state taxation ™
of foreign-owned instruments of foreign commerce,
and of sea-borne containers in particular.”

Article 2 of the Customs Convention on Containers
requires the United States to grant “temporary ad-
mission free of import duties and import taxes and
free of import prohibitions and restrictions * * * to
containers” used exclusively in international com-
merce. 20 U.S.T. at 304." Article 1(a) of the Con-

* Tolls and fees charged in connection with specific services
rendered by the states to instruments of foreign commerce
are not affected by the federal scheme. See note 7, supra. Cf.
Transportation Co. V. Parkersburg, 107 U.S. 691, 696 (1882).
Nothing in our argument or in the Court’s cases would pre-
vent the states from collecting wharfage fees and other
similar user charges.

** Appellants argue (Br. 32) that Article XI of the Treaty
of Friendship, Commerce and Navigation Between the United
States and Japan (4 U.S.T. 2063) prohibits application of the
state tax to their containers. The United States does not sup-
port this contention. Article XI states only that nationals of
the contracting parties are not to be assessed taxes “within
the territories of such other Party, [that are] more burden-
some than those borne by nationals and companies of such
other Party.” 4 U.S.T. at 2072. This provision guarantees
that the United States will not levy on Japanese nationals,
“within the [United States],” taxes that exceed those that it
levies on its own nationals. The treaty does not purport to
equalize world-wide tax burdens; so long as appellants are not
treated differently from United States citizens under domestic
tax statutes, the treaty has no application.

* Under Article 11 of the Customs Convention on Con-
tainers, 20 U.S.T. at 308, containers that are used “even
occasionally” for domestic traffic while in a foreign nation
may be subjected to duties and taxes within that nation.

24

vention provides that “the term ‘import duties and
import taxes’ shall mean not only Customs duties but
also all duties and taxes whatsoever chargeable by
reason of importation.” Jbid. The obligations of the
United States under the Convention are implemented
by regulations (19 C.F.R. 10.41a) adopted by the Sec-
retary of the Treasury pursuant to Section 322(a) of
the Tariff Act of 1930, 19 U.S.C. 1322(a). This
statute authorizes the Secretary to grant the “cus-
tomary exceptions from the application of the customs
laws” to “[v]ehicles and other instruments of inter-
national traffic.”

Under the Secretary’s regulations and the Customs
Convention itself, the United States allows the tem-
porary admission of containers without formal entry
into the commerce of the United States,” and without
payment of duty, when the containers are being used
exclusively in international commerce. Customs Con-
vention on Containers, Articles 3, 11, 20 U.S.T. at
306, 308; 19 C.F.R. 10.4la(a)(1), (c), (f).° Ad-
mission is conditioned, however, on payment of a
bond (1) to secure compliance with the requirement

1° All imported articles (with certain specified exceptions)
must be formally entered into the commerce of the United
States within five days of arrival in a port of the United
States. 19 U.S.C. 1484.

Reexportation may be excused because of damage to the
container or at the election of the owner. However, customs
duties will then become applicable (Customs Convention on
Containers, Article 4, 20 U.S.T. at 306) and the container must
then be formally entered into commerce under 19 U.S.C.1484.
See note 15, supra.

25

that the containers be reexported and (2) to ensure
that the container is used exclusively for foreign
commerce. 19 C.F.R. 10.4la(c). See note 14, supra.
The effect of granting temporary admission in a
bonded status for containers used exclusively in
foreign commerce is to preclude these articles from
entering the commerce of the United States. The
containers cannot be used for the transportation of
goods in interstate commerce or be sold or used in
domestic commerce without losing their status as “‘in-
struments of international traffic” and becoming sub-
ject to formal entry and the assessment of duties.
19 C.F.R. 10.41a(d).”

In allowing the temporary admission of such arti-
cles under bond and without formal entry into the
commerce of the United States, the national govern-
ment has given to “instruments of international traf-
fic,” and to shipborne containers in particular, the
same status it gives under the customs laws to arti-
cles admitted to a “bonded manufacturing ware-
house.” 19 U.S.C. 1311. Under the analogous “bond-
ed warehouse” provision, articles may be admitted
into the United States under bond, altered by “manu-
facture * * * while in bond * * * and then withdraw[n]
* * * for export * * * free of the import duty
which would otherwise be payable.” * In McGoldrick
v. Gulf Oil Corp., 309 U.S. 414 (1940), this Court

17 Similar treatment is afforded under the customs laws for
the supplies and stores that are retained on vessels arriving
in the United States from foreign ports. 19 U.S.C. 1446.

** McGoldrick v. Gulf Oil Corp., 309 U.S. 414, 422 (1940).

26

held that a state may not impose its general sales
tax on articles brought into the United States pur-
suant to the bonded warehouse provision. The Court
determined that the federal exemption from customs
duties for articles admitted to a bonded warehouse
under 19 U.S.C. 1311 is “tantamount to a declara-
tion that * * * the imported merchandise shall not
become a part of the common mass of taxable prop-
erty within the state * * * and shall not become sub-
ject to the state taxing power.” Jd. at 429. The
Court’s reasoning was based on the fact that the
“obvious tendency of the [federal] exemption” from
duties for articles admitted to a bonded warehouse
“is to encourage” the commerce that would otherwise
be hindered by the imposition of the tax. Jd. at 427;
see id. at 428. As the Court noted, however, (id.
at 429):

It is evident that the purpose of the Con-
gressional regulation of the commerce would fail
if the state were free at any stage of the trans-
action to impose a tax which would lessen the
competitive advantage conferred on the importer
by Congress, and which might equal or exceed
the remitted import duty. See, People v. Com-
pagnie Generale Transatlantique, 107 U.S. 59,

63.
Because the state tax conflicted with the accomplish-
ment of the congressional purpose, the Court con-
cluded that the “state tax in the circumstances must

27

fail as an infringement of the Congressional regula-
tion of the commerce.” 309 U.S. at 429."

The rationale of McGoldrick applies here as well.”
The national government admits containers employed
in foreign commerce to the United States under bond
for exclusive use in such commerce and subject to the
requirement that they be reexported. By admitting
the containers under bond, and subject to reexporta-
tion, the federal regulations implementing the Cus-
toms Convention on Containers prevent the contain-
ers from becoming part of domestic commerce. Be-
cause they are not in United States commerce, the
containers may not be regarded as “a part of the com-
mon mass of taxable property within the state * * *.”
McGoldrick v. Gulf Oil Corp., supra, 309 U.S. at
429; see Ammex Warehouse Co. v. Department of
Alcoholic Beverage Control, 224 F. Supp. 546, 555

®% In McGoldrick, the Court also noted that customs regula-
tions had expressly declared that merchandise in bonded
warehouses “should be free from state taxation.” Jbid. The
Court did not rely on the regulations, however. The Court
held that the regulations state “only what is implicit in the
Congressional regulation” of the commerce. /bid.

* It is not necessary for the Court to decide whether the
Convention establishes the importance of unif»mity and thus
leads to invalidation of the state tax under the Commerce
Clause or whether, instead, the Convention is a law of the
United States leading to preemption of the state tax. The
analysis is much the same. Compare Raymond Motor Trans-
portation, Inc. V. Rice, 434 U.S. 429 (1978), with Douglas v.
Seacoast Products, Inc., 481 U.S. 265 (1977). The dispositive
feature under either analytical approach is that the federal
government has established that disparate state laws offend a
p. reeived need for nationwide uniformity.

28

(S.D. Cal. 1963), and thus are not subject to state
taxation.

A state tax would frustrate accomplishment of the
federal objective in allowing temporary free admis-
sion to containers under bond. The purpose of the
Customs Convention on Containers, as implemented
under 19 U.S.C. 1322, is to “develop and to facilitate
the use of containers in international commerce.”
20 U.S.T. at 304." To achieve this purpose, contain-
ers have been afforded immunity from “not only Cus-
toms duties but also all duties and taxes whatsoever
chargeable by reason of importation.” Customs Con-
vention on Containers, Article 1, 20 U.S.T. at 304.
The substantial general state property tax that has

*! The federal regulatory policy of fostering the unrestricted
use of transportation equipment in international commerce
extends to the treatment of other kinds of transportation
equipment, including vessels and aircraft engaged in inter-
national commerce. See 19 C.F.R. 10.4la. Just as in the case
of containers designated as “instruments of international
traffic,” vessels and aircraft engaged exclusively in interna-
tional commerce normally arrive in and depart from the United
States without formal entry as imported merchandise under
19 U.S.C. 1484, appraisement or assessment of duties. Vessels
are subject to the special entry provisions of 19 U.S.C. 1434
and 1435, and implementing regulations, 19 C.F.R. Part 4.
These provisions also apply to the arrival and departure of air-
craft pursuant to Section 1109(c) of the Federal Aviation Act
of 1958, as amended, 49 U.S.C. 1509(c), and implementing
regulations, 19 C.F.R. Part 6. The federal regulatory scheme
for aircraft implements Article 24 of the Chicago Convention
on International Civil Aviation, 61 Stat. 1186, which obligates
the United States temporarily to admit aircraft in interna-
tional commerce free of duty.

been assessed against the containers involved in this
ease (J.S. App. 16a) conflicts with the spirit and
design of the federal scheme.” It lessens the effec-
tiveness of the federal regulation by burdening for-
eign-owned containers with a multiple tax burden
that hinders the use of such containers in our foreign
commerce.

Moreover, to the extent that the tax may lead to
the imposition of retaliatory taxes by our trading
partners (see page 21, supra), the interference with
the widespread use of containers in international
commerce would be greatly magnified. Thus, in its
“practical operation,” see First Federal Savings &
Loan Association v. Tax Commission, No. 77-334
(June 15, 1978), slip op. 4, the state tax interferes
with the objectives of the federal regulation of this
aspect of foreign commerce. The state tax “stands
as an obstacle to the accomplishment and execution

“The uniform practice of nations has been to exempt
foreign-owned containers from all taxes resulting merely
from the presence of the containers in the receiving nation but
to permit the assessment of “fees” related to services in fact
rendered. The conduct of the parties to this treaty bears
significantly in understanding its proper effect. See Factor v.
Laubenheimer, 290 U.S. 276, 294-295 (1933).

The fact that Japan did not become a signatory of the
Customs Convention on Containers until 1972 (Br. 33 n. 9)—
the last of the three tax years here in question—is not critical
to the resolution of this case. The immunities established
under that Convention were enacted into positive law of the
United States through promulgation of the generally appli-
cable regulations in 19 C.F.R. 10.41a. The significance of the
treaty itself is primarily in demonstrating the federal intent
in adopting the federal regulatory scheme.

30

f the full purposes and objectives” of the federal
regulation of commerce, Hines v. Davidowitz, 312
U.S. 52, 67 (1941), and is thus invalid as an inter-
ference with the exclusive federal authority to regu-
late commerce.” See Ray v. Atlantic Richfield Co.,

28 Although, for the reasons set out in the text, we agree
with appellants that California may not levy a property tax on
appellants’ containers, we do not agree with all of appellants’
arguments. For example, as we indicate in note 13, supra,
the Treaty of Friendship, Commerce and Navigation with
Japan does not apply to taxes levied at equal rates on all
property. We disagree with several of appellants’ other argu-
ments as well. Appellants argue that a federal excise tax, 46
U.S.C. 121, prevents state taxation of their containers (Br.
28). But this statute does not apply to containers admitted
pursuant to the Convention under bond, and the imposition
(or non-imposition) of a particular federal tax would not, in
any part, preclude state taxation of the same property. See
Federalist Papers No. 32-34 (The Fede. alist 240-253 (B.
Wright ed. 1961)).

Appellants argue (Br. 28) that the state taxes violate
“various aviation treatise and agreements” and “the GATT.”
They do not identify any “aviation treaty,” and so it is not
possible to respond to this argument. The GATT—the General
Agreement on Tariffs and Trades, 61 Stat. A3—does not deal
with state taxation of containers, and appellants do not point
to any provision of the GATT that would be relevant to this
case. At all events, the GATT is an executive agreement
rather than a treaty, and we do not argue that it would of its
own force nullify any state law. Cf. Zenith Radio Corp. VY.
United States, No. 77-539 (June 21, 1978), slip op. 13 n. 13.
In some situations the GATT would have persuasive force in
demonstrating a need for national uniformity or in demon-
strating international custom, and thus in establishing that
particular taxes are unconstitutional under the Commerce
Clause, but this argument is not available here.

Appellants also maintain that the state taxes violate the
Duty of Tonnage Clause (Br. 35-37) and the Due Process

31

Clause (Br. 48-49). The former argument fails because the
tax is not based on the weight, amount, or value of the cargo
that may have been in the containers; it is levied on the con-
tainers themselves. Moreover, the tax does not appear to be
a subterfuge for a Duty of Tonnage. The due process argu-
ment is unpersuasive under the standards of Lehnhausen V.
Lake Shorte Auto Parts Co., 410 U.S. 356 (1973).

Appellants’ argument based on the Import-Export Clause
(Br. 37-43), however, is more substantial. Until recently
this Court consistently held “that all [state] taxes on imports
and exports and on the importing and exporting processes were
banned by the Clause.” Washington Stevedoring, supra, slip
op. 16. The tax on containers unquestionably burdens the
“importing and exporting process” and consequently, under
a long line of decisions, would violate the Import-Export
Clause.

Washington Stevedoring and Michelin Tire Corp. v. Wages,
supra, however, have fundamentally altered the approach to
Import-Export Clause cases. The essential inquiry now is not
the burden of the tax, but whether the tax is an “Impost or
Duty.” Those words historically have included only taxes
“directed at imports or commercial activity as such” (423 U.S.
at 292), and it is difficult to contend that the California tax,
levied on the general mass of property within the State, is a
tax “directed at imports or commercial activity as such.”

Nevertheless, we believe that the California tax offends
the purposes of the Import-Export Clause, which the Court
identified in Michelin, supra, 423 U.S. at 285-286. As the Court
pointed out, “the Federal Government must speak with one
voice when regulating commercial relations with foreign gov-
ernments,” and state taxes sometimes could upset foreign trade
or intrude on matters exclusively within the national preroga-
tive. For the reasons discussed in the text, we submit that
the property tax at issue here could disrupt the foreign rela-
tions of the United States, and that it frustrates the ability
of the national government to conduct trade with foreign
nations. The state tax intrudes into an area where the United
States “must speak with one voice” (Michelin, supra, 423
U.S. at 285) and thus violates the Import-Export Clause as
well as the Commerce Clause. Because the arguments under
the two constitutional provisions are so similar in the circum-

32

No. 76-930 (March 6, 1978), slip op. 5; McGoldrick
v. Gulf Oil Corp., supra, 309 U.S. at 429.

CONCLUSION

The judgment of the Supreme Court of California
should be reversed.

Respectfully submitted.

WADE H. McCREE, JR.,
Solicitor General.

BARBARA ALLEN BABCOCK,
M. CARR FERGUSON,
Assistant Attorneys General.

KENT L. JONES,
Assistant to the Solicitor General.

LEONARD SCHAITMAN,
ERNEST J. BROWN,
SEPTEMBER 1978. Attorneys.

stances of this case, however, we have not elaborated on the
Import-Export Clause argument. It is enough to note here
that neither Michelin nor Washington Stevedoring undermines
our submission. In both cases the Court pointed out that the
tax it upheld did not affect the authority of the federal govern-
ment to conduct foreign relations (423 U.S. at 286; Washing-
ton Stevedoring, supra, slip op. 19); in both cases there was
no possibility of a multiple tax on the same property or services
(Washington Stevedoring, supra, slip op. 19); in both cases
the taxes were levied on goods or services fully admitted to the
commerce of the United States and the goods were no longer
in transit (423 U.S. at 289-290; Washington Stevedoring,
supra, slip op. 23). Here, by contrast, the tax affects foreign
relations, causes multiple tax burdens, and is levied on con-
tainers that are still part of foreign commerce and have never
been formally entered into United States commerce.

~ se

la
APPENDIX A

STATE OF CALIFORNIA [SEAL]

STATE BOARD OF EQUALIZATION
1020 N Street, Sacramento, California

(P.O. Box 1799, Sacramento, California 95808)
916/445-6479

March 24, 1978
78/49
TO COUNTY ASSESSORS, COUNTY COUNSELS
AND OTHER INTERESTED PARTIES:

Enclosed is a copy of a notice of public hearing to be
held June 29, 1978, at 10:00 a.m. in Room 102, 1020
N Street, Sacramento, California on a proposed
amendment to property tax Rule 202, Allocation of
Aircraft of Certificated Air Carriers and Scheduled
Air Taxi Operations.

The amendment extends the situs rule of subdivision
(b) of Rule 202 to aircraft operated solely in foreign
commerce. The Board’s legal staff is of the opinion
that two recent cases, Sea Land Service v. County of
Alameda, 12 Cal. 3d 772, and Japan Line, Ltd. v.
County of Los Angeles, 23 Cal. 3d 180, have over-
turned the former rule that aircraft operated solely
in foreign commerce are protected from state prop-
erty taxation by the Home-Port Doctrine. These two
cases hold that the Home-Port Doctrine does not
shield property with situs in California from taxa-
tion on an apportioned basis. Because our property
tax rules are merely declarative of existing law, we

2a

propose to amend Rule 202 to conform to these court
decisions.

Written comments with respect to the enclosed notice
are welcome and should be directed to me. If you
wish to present testimony pertaining to the amend-
ment at the hearing, please notify me by mail or tele-
phone by June 14, 1978, so that an orderly agenda
can be prepared.

Sincerely,

s/ Janice Masterton
JANICE MASTERTON
Calendar Clerk
JM /se
Enclosure

|

8a

NOTICE OF PROPOSED CHANGES IN THE
REGULATIONS OF THE STATE BOARD
OF EQUALIZATION

Notice is hereby given that the State Board of
Equalization, pursuant to the authority vested by
Section 15606 of the Government Code, and to im-
plement, interpret or make specific Sections 1150
through 1156 of the Revenue and Taxation Code
proposes to amend Section 202(b) of Article 5, Sub-
chapter 2, Chapter 1, Title 18, of the California Ad-
ministrative Code, as follows:

1. Amend Section 202, subsection (b), Article 5,
subchapter 2, chapter 1 to read:

Rule No. 202. (Cal. Adm. Code) ALLOCATION OF
AIRCRAFT OF CERTIFICATED AIR CAR-
RIERS AND SCHEDULED AIR TAXI Op-
ERATORS

(b) SITUS. Aircraft operated by certificated air
carriers (within the meaning of section 1150 of the
Revenue and Taxation Code) or scheduled air taxis
‘within the meaning of subdivisions (a) and (b) of
section 1154 of the Revenue and Taxation Code) and
flown in intrastate, interstate, or foreign commerce
shall be deemed to be situated only in those taxing
agencies (within the meaning of section 404 of the
Revenue and Taxation Code) in which the aircraft
normally make physical contact. The physical con-
tact must be intentional rather than by accident or
as the result of an emergency, and it must involve

4a

embarking or disembarking of crew, passengers, or
freight.

Aireraft flying over the state without landing do
not acquire situs for property tax purposes. Con-
versely, the situs of aircraft that depart from a tax-
ing agency within the state, fly out of the state, and
return to the same or another taxing agency within
the state without landing outside the state is within
the state’s taxing jurisdiction throughout the flight.

Situs for property tax purposes is not affected by
the legal or commercial! domicile of the operator of
the aircraft, nor by the fact that the aircraft is oper-
ated solely in foreign commerce.

Notice is also given that any person interested may
present statements or arguments orally or in writing
relevant to the action proposed, at Room 102, Con-
" sumer Affairs Building, 1020 N Street, Sacramento,
CA 95814 at 10:00 a.m. on June 29, 1978. The State
Board of Equalization upon its own motion or at the
instance of any interested person, may thereafter
adopt the above proposed amendment substantially
as set forth without further notice.

Upon request, copies of the above regulation may
be obtained from:

State Board of Equalization
1020 N Street
Sacramento, California 95814

The State Board of Equalization, has determined
that, pursuant to Section 2231 of the Revenue and

eee ek nen

5a

Taxation Code, no increased costs or new costs to
local government will result from this regulation.

Dated: March 15, 1978

STATE BOARD OF EQUALIZATION

/s/ Gordon P. Adelman
for DouGLAS D. BELL
Executive Secretary

6a

STATE OF CALIFORNIA

BOARD OF EQUALIZATION
PROPERTY TAX DEPARTMENT

PROPERTY TAX RULES AND REGULATIONS

Chapter 1. State Board of Equalization—
Property Tax

Subchapter 2. Assessment
Article 5. Situs

References: Sections 1150-1156, Revenue and Taxa-
ation Code

Rule 202. ALLOCATION OF AIRCRAFT OF CERTIFI-
CATED AIR CARRIERS AND SCHEDULED AIR
TAXI OPERATORS

(a) AIR TAXIS. An aircraft whose owner on the
lien date used it in scheduled air taxi service at any
time during the representative period selected pursu-
ant to subsection (f), or which has been purchased
for scheduled air taxi service but not yet put into
such service and not yet used in any other service,
is assessable under sections 1150 to 1156 of the Reve-
nue and Taxation Code and not under Part 10, Divi-
sion 1, or under other situs provisions of Part 2,
Division 1, of the Revenue and Taxation Code.

(b) SITUS. Aircraft operated by certificated air
carriers (within the meaning of section 1150 of the
Revenue and Taxation Code) or scheduled air taxis
(within the meaning of subdivisions (a) and (b) of

hse ne Ue eel 8 -sens

re ee

7a

section 1154 of the Revenue and Taxation Code) and
flown in intrastate, interstate, or foreign commerce
shall be deemed to be situated only in those taxing
agencies (within the meaning of section 404 of the
Revenue and Taxation Code) in which the aircraft
normally make physical contact. The physical con-
tact must be intentional rather than by accident or
as the result of an emergency, and it must involve
embarking or disembarking of crew, passengers, or
freight.

Aircraft flying over the state without landing do not
acquire situs for property tax purposes. Conversely,
the situs of aircraft that depart from a taxing agency
within the state, fly out of the state, and return to
the same or another taxing agency within the state
without landing outside the state is within the state’s
taxing jurisdiction throughout the flight.

Situs for property tax purposes is not affected by the
legal or commercial domicile of the operator of the
aircraft, nor by the fact that the aircraft is operated
solely in foreign commerce.

(c) ALLOCATION FORMULA. The allocation for-
mula to be used by each assessor is composed of two
factors: (1) ground and flight time and (2) aircraft
arrivals and departures.

Time allocable to an airport is the amount of time
that certificated aircraft and scheduled air taxis are
on the ground at the airport, plus a portion of the
incoming and outgoing flight time computed pursuant

8a

to subsection (d). The ratio of the time allocable to
the airport during a representative period to the sum
of the time allocable to the airport and the time al-
locable elsewhere is the ground and flight time factor.
In computing the ground and flight time factor, the
following shall be excluded:

From the time allocable to the airport—

(1) All ground and flight time prior to the air-
eraft’s first entry into the revenue service of the air
carrier in control of the aircraft on the current lien
date.

(2) All ground time in excess of 12 consecutive
hours at the airport following entry into revenue
service.

From the total time—

(1) All ground and flight time prior to the air-
craft’s first entry into the revenue service of the air
carrier in control of the aircraft on the current lien
date.

This factor shall be multiplied by 75 percent to ob-
tain a weighted ground and flight time factor.

The aircraft arrivals and departures factor is the
ratio of the number of arrivals at and departures
from an airport during a representative period to
the total number of arrivals at and departures from
all airports during the representative period. This
factor shall be multiplied by 25 percent to obtain a
weighted arrivals and departures factor.

at me le

The weighted time factor shall be added to the
weighted arrivals and departures factor. The sum
of the two weighted factors yields the allocation ratio
to be applied to the full cash value of the aircraft to
determine the full cash value allocable to the airport.

(d) ALLOCATION OF FLIGHT TIME. For air-
craft flying from one California airport to another
California airport, the flight time attributable to
each airport is one-half the flight time between the
airports.

For aircraft arriving from an airport outside the
state or leaving for an airport outside the state, the
flight time from or to the state boundary shall be
allocated to the California airport in which the air-
craft first lands or last takes off, as the case may be.
The flight time to the state boundary crossing point
on a great circle flight to the first landing point out-
side the state; (2) divide this mileage by the total
great circle mileage from the airport to the first land-
ing point outside the state; (3) multiply this per-
centage by the total flight time from the airport to
the first landing point outside the state. The same
procedure shall be used for inbound flights from out-
side the state. To allow for differences in take-off,
landing, and cruising speeds and for varying take-off
and landing patterns, the time allocated to an airport
shall not be less than five minutes for an incoming
or an outgoing flight. In lieu of the actual flight time
for a single flight, the average flight time between
two ports, or between a port and the state line, for

10a

two or more flights of a single carrier or of more
than one carrier shall be used when such an average
is promulgated by the board unless the assessor has
documented evidence which justifies departure from
such average time.

(e) SOURCES. OF ALLOCATION DATA. For
scheduled operations, arrivals and departures and
ground and flight time shall be derived from the car-
rier’s operating schedules. For nonscheduled opera-
tions, including but not limited to, overhaul, pilot
training, charter, military contract flights, and stand-
by services, ground and flight time and arrivals and
departures shall be derived from the carrier’s re-
corded operations.

(f) REPRESENTATIVE PERIOD. Annually, on
or before February 15, the board shall consult with
the assessors of the counties in which air carriers’
aircraft normally make physical contact. On or be-
fore March 1, the board shall designate a representa-
tive period to be used by all assessors in assessing the
aireraft of each carrier for the forthcoming fiscal
year.

(g) APPLICATION OF ALLOCATION FORMU-
LA. The aircraft of certificated air carriers and
scheduled air taxi operators shall be segregated by
type, and a separate allocation ratio shall be com-
puted for each type which has established a tax situs
within the state, excluding those makes within a type
which have not established a tax situs within the
state. Each allocation ratio shall then be applied to

lla

the total value of the carrier’s aircraft of each type
to which the allocation ratio applies, excluding those

makes within a type which have not established a
tax situs within the state.

The types are as follows:

(1) Piston-powered

(2) Turboprop-powered

(3) Helicopter

(4) Turbojet and Turbofan powered

(A) Two engine

(B) Three engine

(C) Four engine

(D) DC-8-60 series
(E) Boeing 747

(F) DC-10 and L 1011

History: Adopted March 9, 1967, effective March 10, 1967.
Amended January 8, 1969, effective February 12,

1969.

Amended December 12, 1969, effective January 11,
1970.

Amended February 16, 1970, effective March 26,
1970.

Amended December 20, 1971, effective January 19,
1972.

Amended February 21, 1974, effective February 26,
1974.

Amended December 17, 1975, effective January 25,
1976.

12a
APPENDIX B

STATE OF CALIFORNIA [SEAL]

STATE BOARD OF EQUALIZATION
1020 N Street, Sacramento, California
(P.O. Box 1799, Sacramento, California 95808)

916/445-6479
June i6, 1978
78/104

TO COUNTY ASSESSORS, COUNTY COUNSELS
AND OTHER INTERESTED PARTIES:

CANCELLATION OF PUBLIC HEARING—
RULE 202

This is to inform you of the cancellation of public
hearing of proposed amendments to Rule 202, Allo-
cation of Aircraft of Certificated Air Carriers and
Scheduled Air Taxi Operators, originally scheduled
for June 29, 1978, at 10:00 a.m. A copy of the no-
tice of cancellation is printed on the reverse.

The purpose of the proposed amendments was to
conform to the California Supreme Court decision in
the case of Japan Line, Ltd. v. County of Los An-
geles, 20 Cal. 3d 180. This case is now before the
U.S. Supreme Court.

If the hearing is rescheduled, the time and place of
hearing will be announced.

Sincerely,
s/ Janice Masterton

JANICE MASTERTON
JM/k Calendar Clerk

13a

NOTICE OF CANCELLATION OF PUBLIC
HEARING OF THE BOARD
OF EQUALIZATION

By published notice dated March 24, 1978, the
State Board of Equalization gave notice of its in-
tention to hold a public hearing to consider revision
of the Property Tax Rule 202, Allocation of Aircraft
of Certificated Air Carriers And Scheduled Air Taxi
Operators. This hearing was originally scheduled to
be held on June 29, 1978, begininng at 10:00 a.m. in
Room 102 at 1020 N Street, Sacramento, California,
95814.

Notice is hereby given that the hearing on the
above matter has been cancelled, and mey or may
not be rescheduled. In the event of rescheduling, the
exact time and place of the hearing will be announced
in a subsequent notice.

Dated: June 16, 1978

STATE BOARD OF EQUALIZATION

/s/ Gordon P. Adelman
for DOUGLAS D. BELL
Executive Secretary

14a

APPENDIX C

[SEAL]
DEPARTMENT OF STATE
Washington, D.C. 20520

September 7, 1978

The Honorable Wade H. McCree, Jr.
Solicitor General

U.S. Department of Justice
Washington, D.C. 20530

Dear Mr. Solicitor General:

This is in response to your office’s request in the
ease of Japan Lines, Ltd. v. County of Los Angeles,
20 Cal. 3d 180, appeal docketed, No. 77-1378 (March
28, 1978) for certain information concerning tax
practices of foreign countries and for views of the
Department of State concerning the case.

We have queried all U.S. embassies as to tax prac-
tices in their host countries toward foreign flag car-
riers and other instruments of foreign commerce. We
have received responses from our posts in more than
one hundred and twenty countries. According to in-
formation developed by our posts, largely from dis-
cussions with the pertinent foreign officials and pri-
vate U.S. flag carriers operating in each country, no
foreign government, or political subdivision such as
a province, state or municipality, imposes property
taxes on foreign flag vessels, airlines, or containers,
with the possible exception of Afghanistan. Certain
foreign jurisdictions impose use taxes, e.g., road

a ee ee

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15a

taxes on trucks and harbor use or aircraft landing
fees. Afghanistan imposes a tax on containers; we
are asking our Embassy to provide further informa-
tion as to whether this tax applies regardless of
whether the container is imported and regardless of
ownership by foreign flag carriers. It should be noted
that several countries impose taxes or import duties
on containers which are not re-exported within a
minimum time period (30 days to a year). Some
embassies have not yet responded or have indicated
that the desired information was not yet available
to them. We will notify you promptly should further
information come to our attention.

Six foreign governments, including some of our
most important trading partners, have written to the
Department expressing concern about the California
container tax. In addition, twelve countries have sent
diplomatic notes objecting to proposed personal prop-
erty taxation by the State of California of foreign
flag aircraft flown to and from California in foreign
commerce.

The Department believes that the home-port doc-
trine, originally announced by the Supreme Court in
Hays v. Pacific Mail Steamship Co., 58 U.S. (17
How.) 596 (1855), should be dispositive of the in-
stant case. It precludes the application of ad valorem
property taxes to an instrumentality of interstate or
foreign commerce by all jurisdictions except for the
home or domiciliary of the instrumentality. Jd. at
597-99. Since appellant’s cargo containers are mobile
equipment used in foreign commerce by foreign flag

16a

vessels domiciled in Japan, the home-port doctrine
would prevent California from imposing a property
tax on the containers.

Respondents argue that the Court has repudiated
the home-port doctrine in favor of an apportionment
scheme, whereby each taxing authority having suffi-
cient contacts with the instrumentality of commerce
is entitled to levy a tax reflecting the time spent by
the instrumentality in its own jurisdiction. Respond-
ents’ brief at 9. Whatever the merits of respondents’
argument in the context of interstate commerce,* the
Court has not abandoned the home-port doctrine for
foreign commerce, see Braniff Airways, Inc. v. Ne-
braska Board of Equalization and Assessment, 347
U.S. 590, 599-600 (1954); Ott v. Mississippi Valley
Barge Line Co., 336 U.S. 169, 173 (1949). See also,
Harvard Int’l. Program in Taxation, World Tax
Series: Taxation in the United States 173 (1963).
Indeed, on several occasions the Court has emphasized
that non-domiciliary property taxation is permissible
under the Commerce Clause of the Federal Constitu-
tion only where it is possible to prevent multiple
taxation exceecing one ad valorem value of the taxed

* The Court has never overruled the home-port doctrine
announced in Hays with regard to all facets of interstate
commerce. For example, the Court in Ott v. Mississippi Valley
RParge Line Co., 366 U.S. 169 (1949), while upholding appor-
tioned taxation of river barges, expressly did not reach the
question of ocean-going interstate commerce. Jd. at 173. See
“Developments in the Law-Federal Limitations on State Tax-
ation of Interstate Business,” 75 Harv. L. Rev. 978, 986-87
(1962).

site eesti AE

i a oe Oe OR ad

17a

item, Central Railroad Co. v. Pennsylvania, 370 U.S.
607, 611 (1962); Standard Oil Co. v. Peck, 342 U.S.
382, 385 (1952); Ott v. Mississippi Valley, supra, at
174. Cf. Department of Revenue of Washington v.
Association of Washington Stevedoring Companies,
46 U.S.L.W. 4363 (April 26, 1978); Complete Auto
Transit, Inc. v. Brady, 430 U.S. 274, 288-89, n. 15
(1977).

For instruments of foreign commerce, the Court
cannot effectively prevent multiple taxation in excess
of one full ad valorem tax, except by upholding the
home-port doctrine. While in domestic commerce the
Court can supervise and correct inequities in the ap-
portionment of interstate tax burdens, the Court has
no power to ensure that there is a reasonable alloca-
tion of taxing power between states and foreign
countries. Under the home-port doctrine, in contrast,
the Court is able to maintain American practice in
accordance with the internationally accepted rule of
domiciliary taxation designed to prevent multiple
burdens on foreign commerce. The danger of per-
mitting state taxation of instruments of foreign com-
merce on an apportioned basis in contravention of
the home-port doctrine is evident in circumstances
like this case; Japan taxes containers of Japan Lines
at their full value under a home-port theory, yet
California is seeking to impose additional taxes for
time spent in California. It is our view that the
risk of pyramiding taxation of instruments of for-
eign commerce imposed by the taxing authorities of

. :

18a

separate nations can be effectively avoided only by
continued adherence to the home-port doctrine in
such cases.

The policy underlying Hays has been consistently
followed in the conduct of our foreign policy. It is
reflected, for example, in the 1956 Customs Conven-
tion on Containers, 20 U.S.T. 301, T.LA.S. 6634, 338
U.N.T.S. 103, which provides for temporary admis-
sion of containers free of import duties, taxes, pro-
hibitions and restrictions, see Articles 1{a) and 2-6,
see also the 1972 Customs Convention on Containers,*
Articles 1(a) and 3-11, and in the Convention on
International Civil Aviation, 61 Stat. 1180, T.I.A.S.
1591, 15 U.N.T.S. 295, in which contracting parties
undertake to establish uniform customs procedures
affecting international air navigation (Article 23)
and to admit aircraft and aircraft stores and equip-
ment free of duty, fees and similar national or local
duties and charges (Article 24). Our adherence to
the home-port doctrine is consistent with nearly uni-
versal international practice.

There are important reasons of foreign policy for
not disturbing the home-port rule in foreign com-
merce. While foreign countries, and their political
subdivisions, do not now impose property taxes on

* Customs Convention on Containers, 1972, signed at Geneva
on Dec. 5, 1972, reprinted in [1973] Customs Convention on
Containers, 1972, and International Convention for Safe Con-
tainers, Senate Doc. Exec. X, 93rd Cong. Ist Sess. 1. Instru-
ment of ratification signed by the President on Oct. 8, 1976.
Entry into ferce for the United States is pending deposit of
the instrument of ratification.

19a

U.S. containers or flag carriers, we cannot discount
the possibility that such taxes will be imposed in re-
taliation if the California tax is upheld. Such re-
taliation would not necessarily be limited to the same
degree and kind of taxation imposed by California.
The extensive U.S. flag ship, air carrier, and con-
tainer operations throughout the world could become
subject to tax theories of more than a hundred sover-
eign governments and their countless subdivisions.
Retaliation, moreover, may not be restricted to tax-
ation. The United States, for example, now owns a
substantial portion of the containers used in foreign
commerce. Retaliation could take the form of meas- .
ures to decrease use of U.S.-owned containers.

It is most unlikely that other countries would alter
their approach to taxation to conform to the appor-
tionment theory of property taxation of California.
The home-port rule has long been sanctioned by in-
ternational custom, and nations are unlikely to mod-
ify their taxing power over their own containers,
vessels, and aircraft because one or more localities
of the United States assert a broader power than
the international custom.

Conceivably, the United States could seek interna-
tional agreement on an apportionment rule. However,
achieving such agreement as a replacement for the
home-port rule would not be practicable, even if the
United States were not alone in advocating a new
standard. Taxing practices with respect to home-
flag carriers vary widely among countries, and rules
of reasonable apportionment affecting those practices

ee

;

20a

would require far more difficult accommodations
among sovereign nations than apportionment among
states of the United States. A process of bilateral
negotiations, either in response to requests of for-
eign governments as a consequence of a local prop-
erty tax levy in the United States, or requested by
the United States as a consequence of retaliatory |
foreign action, would likewise be extraordinarily |
complicated and difficult.
In sum, adherence by the United States to the

home-port doctrine with respect to instrumentalities
of foreign commerce is consistent with long-standing |
international practice followed by virtually all gov-
ernments, and refiects our view that it is the only
practical rule to assure that such instrumentalities
are not excessively burdened by multiple taxation.

5 Ane rGhlir res ete

Sincerely,

EA AI BIO. co RAEN ene od CORE HN Het ee et eee

/s/ Lee R. Marks
LEE R. MARKS
Deputy Legal Adviser

Ve eee ee

W ov. S. GOVERNMENT PRINTING orrice; 1978 273542 123

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0896%3A18. Public record. Not legal advice.