# Amicus Curiae Brief — Wardair Canada Inc. v. Florida Dept. of Revenue

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1986
- **Citation:** 477 U.S. 1

## Text

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2 M SEPI? 1985
Nos. 84-902, 84-922 and 84-1D4J noe seawou. ae

Supreme Court, U.S.

D

In the Supreme Court of the Gnited States

OCTOBER TERM, 1985

W ARDAIR CANADA INC., APPELLANT
VU.
FLORIDA DEPARTMENT OF REVENUE

LINEAS AEREAS COSTARRICENSES, S.A..,
ET AL., APPELLANTS
Vv.
FLORIDA DEPARTMENT OF REVENUE

AIR JAMAICA LIMITED, ET AL., APPELLANTS
vV~.
FLORIDA DEPARTMENT OF REVENUE

ON APPEAL FROM
THE SUPREME COURT OF FLORIDA

BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE

CHARLES FRIED
Acting Solicitor General

ALBERT G. LAUBER, JR.
Assistant to the Solicitor General
Department of Justice
Washington, D.C. 20530
(202) 6383-2217

ABRAHAM D. SOFAER
Legal Adviser
Department of State
Washington, D.C. 20520

JIM J. MARQUEZ
General Counsel
Department of Transportation
Washington, D.C. 20590

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BEST AVAILABLE COPY |

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QUESTION PRESENTED
Whether a Florida sales tax on aviation fuel, as ap-
plied to fuel purchased by foreign airlines for use ex-
clusively in international traffic, unconstitutionally im-
pairs the power of the federal government to regulate
foreign commerce.

Page
Tee eee cg con cncdnevecesoes l
cc i csc ccecccecccccccecces 2
Ne ecco cceanccecsscncecece 2
EE ees cede sees edenccccecccs: y
A. The federal government is committed to a policy of
reciprocal tax exemptions for fuel and supplies used
by foreign airlines in foreign commerce, and this
policy represents the established practice of nations
EES 10
B. A state tax is invalid under the Commerce Clause if it
frustrates attainment of federal uniformity on an
aspect of foreign commerce as to which federal uni-
formity is essential, and thus prevents the federal
government from speaking with one voice when
regulating commercial relations with foreign coun-
ES Sas 6 ks:s PEE EEGs Gave enees caccaccec: 22
C. Florida’s tax on aviation fuel used by foreign airlines
exclusively in foreign commerce is inconsistent with
express federal policy and established international
practice and hence should be invalidated under the .
8 EE 30
EE 35
DSSS Cees ic csceeieccccccccccccs la
TABLE OF AUTHORITIES
Cases:
Air Canada, et al. v. Department of Revenue of the State
of Illinois, No. 85CH-6973 (Cook County Cir. Ct.
eth e6 bu wc béedcscceccecses 33
Complete Auto Transit, Inc. v. Brady, 430 U.S.
EL EEE EE 23
Container Corporation v. Franchise Tax Board, 463
ES SS 26, 27, 28, 29, 31, 32, 33

TABLE OF CONTENTS

Eastern Air Transport, Inc. v. South Carolina Tax

I

Edelman v. Boeing Air Transport, Inc., 289 U.S. 249 ..

(II)

30, 31

30

| |

Cases — Continued Page
Exxon Corp. v. Wisconsin Dep't of Revenue, 447 U.S.

Ds ccclese cies beicdneeeksesaee’: 64 anaes eee 27
Japan Line, Ltd. v. County of Los Angeles, 441 U.S.

OD occa ctececckhseresdeustosccseucass passim
McGoldrick v. Gulf Oil Corp., 309 U.S. 414 ........... 17
Mobil Oil Corp. v. Commissioner of Taxes of Vermont,

ne ed a yp eu ndee Chen enkew 26
South-Central Timber Development, Inc. v. Wunnicke,

Fee, SE Gs, DEED we cc kes ocescsscceonces 26
Southern Pacific Co. v. Arizona, 325 U.S. 761......... 25
Tropical Shipping & Construction Co. v. Askew, 364 So.

SE on ead eb Gee 6 e560 HO b O46 OKS 6 6648s 6 4 5
United Air Lines, Inc. v. Mahin, 410 U.S. 6238....... 30

Constitution, treaties, statutes, and regulations:
U.S. Const.:

Art. 1, § 8, Cl. 3:

EL. cn ceeucdnceseseeses 9, 22, 23, 25
Foreign Commerce Clause .............-. 6, 8, 9, 31
Interstate Commerce Clause ................ 6

Art. 6, Cl. 2 (Supremacy Clause) ............. 6, 8, 9, 25

Amend. XIV:

ed cecsceekeuvecsets 6
Equal Protection Clause ................5.. 6
Air Transport Services Agreement, Feb. 11, 1946,

United States-United Kingdom, art. 3(2), 60 Stat.

PP ey err Fr reer Te ee TUCTEETTEL TTL 14, 15
Air Transport Services Agreement, Dec. 27, 1946,

United States-Peru, 61 Stat. 2586 et seq.:

we 9 bo reer rr rrr eres 14

ee Se a ED oc Cesc ccctecccccseseesens 14
Air Transport Service Agreement, Jan. 8, 1947, United

States-Ecuador, 61 Stat. 2773 et seq.:

— e of t Sf ) PPT rrrrrrrrrri rie 14, 16

& <8. SP rrrrrrrr Terie 14
Air Transport Services Agreement, Oct. 24, 1956,

United States-Colombia, 14 U.S.T. 429 et seq.:

eS) |! ee Serr rrr rr? oc rst 14

" Ss 5. | rere 15

V

Constitution, treaties, statutes, and

regulations — Continued: Page
Air Transport Services Agreement, Aug. 15, 1960,
United States-Mexico, art. 7, 12 U.S.T.65.......... 14,15
Air Transport Services Agreement, Oct. 2, 1969, United
States-Jamaica, art. 8(A), 20 U.S.T. 2966 .......... 14
Air Transport Services Agreement, May 8, 1974, United
States-Canada, art. XII(1), 25 U.S.T. 794 .......... 15
Air Transport Services Agreement, Sept. 22, 1977,
United States-Argentina, art. F(3), 29 U.S.T. 2801 ...16, 19
Air Transport Services Agreement, Apr. 4, 1979,
United States-Jamaica, art. 10(6), T.I.A.S. No. 9613 . 17
Air Transport Services Agreement, Apr. 2, 1982,
United States-El Salvador, art. 9(5), T.I.A.S. No.
OMEN dG OA be Wane n'a 40d w a hack} * Wa-n'piec-e'e 17
Air Transport Services Agreement, Apr. 8, 1982,
United States-Barbados, T.I.A.S. No. 10370:
Sas sees hs oa CECE Shocks tha ens 15
EL £5 bo estrone es 64 os 6006 os ewe on 15
oe kn el ats ap a 16
Air Transport Services Agreement, June 23, 1982,
United States-Brazil:
ee Bn, bps Jaw biwe Cdk hed ale din 15
a 19
Air Transport Services Agreement, Oct. 20, 1983,
United States-Costa Rica:
IE eee 15
ERE Ret A ee a ga 15
ES I a TE 15
I aa Ct ek 17
Convention on International Civil Aviation, opened for
signature Dec. 7, 1944, 61 Stat. 1180 et seg. ....... 3, 10, 13
ee civ ckiwececvdesae ewe 20
arts. 22-28, 61 Stat. 1186-1188 .................. 10
is I oo ice eh cecevebunceeun 20
ant. 2Gfa), Gi Stat. L186... 2... cee 10, 11, 13, 14
Se III 6.6 oc kcb cc cevnccccccticce 20
arts. 43-66, 61 Stat. 1192-1200 .................. 11
IIE ME hv os nv ccrucoececcncedecess ll
Customs Convention on Containers, May 18, 1956, 20
cen ucccuccbeuvaceucns. 25
AE PR es ee 25

VI

Constitution, treaties, statutes, and

regulations — Continued: Page

Nonscheduled Air Service Agreement, May 8, 1974,
United States-Canada, 25 U.S.T. 788 et seq.:

PS, WE vnc cccccocsoveced beens 19

EE, TE ong 6 0 0-o-> ve wes ces ceen<< 14, 19

i EOE cen ccdeececoedéeues 15

Se EE, ED voc o cces sven secesvees 19
16 U.S.C. CIGTS OG.) TOL OE GUE, .. ww ccc ccc ccccceees 18
rr ce cudeeebe coe esiaeunees 25
i ee oe cce eben seekneeeee en 16
a ED oo 6 uke oe 000 06:0:046 60065006808 16
ccc ce cbs bes sesseeeioceaeeens 16
vc vc neces tenes sécagacerty 16
Bik fe 00 LE revereerer rir ee 4
GD UBL. Bam. TRGB) 2 nc ccc cc rc cccccccccecveses: 16
Fla. Stat. Ann.:

§ 212.08(4) (West 1971) ..........0.0cc cece eee: 4

§ 212.08(4\aX2) (West Supp. 1985) .............. 5

§ 212.62(2) (West Supp. 1985) ................-. 4

§ 212.62(3\c) (West Supp. 1985) ..............-. 5
1985 Fla. Laws 85-348:

Oe EEK SCR EEUER SRG CSU S555 Sada bethoonde 5

§ 2 (to be codified at Fla. Stat. § 206.9825) . 5

§ 2 (to be codified at Fla. Stat. § 206.9855) 5

De: Cue keGhetesacbcwsceeerersheuewes 5

| Berane BO eaten 2 os 5
Ill. Admin. Reg. § 130.2080(c) (1984) ......... 33
Mass. Act of July 1, 1985, ch. 145:

§ 7 (to be codified at Mass. Gen. Laws Ann. ch. 46J,

RR Ree Pr Pet re 33, 34

ee ie Or ts tc gr ser ee recat sale Fed 33
19 C.F.R

STE Liven cc doc eabeiens MAUkes Chk eeae cerned 16

Re ae er er, eee ere 16

Miscellaneous

Assembly Bill, Cal. Leg., 1985-1986 Reg. Sess. .......
M. Brenner, J. Leet & E. Schott, Airline Deregulation

ERR Ka ei iene ot
11 Foreign Affairs Manual (Feb. 25, 1985) ...........
ICAO’s Policies on Taxation in the Field of International

Page
34

Air Transport, ICAO Doc. 8632-C/968 (Nov. 1966)... .11,12

U.S. Civil Aeronautics Board, FY 1976 Report to Con-

NT 655 O05 sank 86 da ded eeu dedesinesr ...20, 34
U.S. Civil Aeronautics Board, FY 1977 Report to Con-

TE ee o-oo 20
U.S. Dep't of Energy, Findings and Views Concerning

the Exemption of Kerojet Fuels from the Mandatory

Petroleum Allocation and Price Regulation (1978) ... 19

In the Supreme Court of the Gnited States

OCTOBER TERM, 1985

No. 84-902
W ARDAIR CANADA INC., APPELLANT
v.
FLORIDA DEPARTMENT OF REVENUE

No. 84-922
LINEAS AEREAS COSTARRICENSES, S.A.,
ET AL., APPELLANTS
Vv.
FLORIDA DEPARTMENT OF REVENUE

No. 84-1041
AIR JAMAICA LIMITED, ET AL., APPELLANTS
Vv.
FLORIDA DEPARTMENT OF REVENUE

ON APPEAL FROM
THE SUPREME COURT OF FLORIDA

BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE

This brief is filed in response to the Court’s order in-
viting the Solicitor General to express the views of the
United States.

OPINIONS BELOW

The opinion of the Florida Supreme Court in No.
84-902 (J.S. App. Al-A7) is reported at 455 So. 2d 326.
The opinion of the Florida Supreme Court in No. 84-922
(J.S. App. la-2a) is unreported. The opinion of the
Florida Supreme Court in No. 84-1041 (J.S. App. 28-30)
is reported at 455 So. 2d 324. The opinions of the

(1)

2

Leon County Circuit Court (84-902 J.S. App. A21-A24;
84-922 J.S. App. 38a-50a; 84-1041 J.S. App. 31-36) are
unreported.

JURISDICTION

The judgment of the Florida Supreme Court was
entered in each case on June 14, 1984. Timely motions
for rehearing were denied in each case on September
12, 1984 (84-902 J.S. App. A38; 84-922 J.S. App. 71a;
84-1041 J.S. App. 95). Notices of appeal in the Florida
Supreme Court were filed respectively on November 15,
1984 (84-902 J.S. App. A39-A41), on November 14,
1984 (84-922 J.S. App. 73a-75a), and on November 28,
1984 (84-1041 J.S. App. 98-100). The jurisdictional
statement in No. 84-902 was filed on December 5, 1984,
and the jurisdictional statements in Nos. 84-922 and
84-1041 were filed on December 11, 1984. The jurisdic-
tion of this Court is invoked under 28 U.S.C. 1257(2).
Review lies by way of appeal where, as here, a state
court has held a state tax statute applicable to a par-
ticular set of facts as against the contention that such
application is invalid on federal grounds. Japan Line,
Ltd. v. County of Los Angeles, 441 U.S. 434, 441 (1979).

STATEMENT

1. Appellants in these three cases are 19 airlines
established under the laws of foreign countries and hav-
ing their principal places of business outside the United
States. The nations in which they are domiciled are
located in North America (Canada and Mexico), Central
America (Costa Rica, E] Salvador and Honduras), South
America (Argentina, Brazil, Colombia, Ecuador,
Guyana and Peru), and the Caribbean (Barbados,
Jamaica, and Trinidad & Tobago). Each appellant has
been found by the Civil Aeronautics Board to be owned
and effectively controlled by the government or nationals
of its home country. About half the appellant airlines

3

are wholly owned! or substantially owned? by the
governments of the nations in which they are domiciled.

Each appellant has been designated by its home coun-
try to provide international air transportation to and
from the United States. Aviation relations between the
United States and appellants’ ome countries are
governed inter alia by a multilateral aviation agreement
commonly known as the Chicago Convention (Conven-
tion on International Civil Aviation, opened for signa-
ture Dec. 7, 1944, 61 Stat. 1180 et seq. ). In addition, all
of the appellants’ home countries, except Honduras,
have entered into bilateral executive agreements with
the United States respecting air transportation serv-
ices. Pursuant to these agreements (or, in the case of
Honduras, pursuant to CAB authorization (84-922 J.S.
App. 43a)), appellants fly only on routes between their
home countries and specified cities, called “gateways,”
in the United States (ibid.). Appellants engage in no in-
trastate or interstate flights within this country, and

' Aerolineas Argentinas, for example, is 100% owned by the
Government of Argentina, Aeromexico by the Government of Mex-
ico, Ecuatoriana by the Government of Ecuador, BWIA Interna-
tional by the Government of Trinidad & Tobago, and Varig by the
Government of Brazil (84-922 J.S. App. 76a-79a).

* Mexicana, for example, is substantially owned by the Govern-
ment of Mexico, Air Jamaica by the Government of Jamaica, Carib-
bean Air Cargo by the Government of Barbados, and Guyana Air-
ways by the Government of Guyana (84-922 J.S. App. 77a; 84-1041
J.S. 17).

* After the Florida trial court entered judgment in these cases,
the bilateral aviation agreements with three of appellants’ home
countries—Argentina, Brazil, and Peru—terminated. Negotia-
tions toward new agreements have commenced, and it is not ex-
pected that the tax provisions of the new agreements, if any, will
differ appreciably from those of their predecessors. For the sake of
simplicity, we will in this brief generally refer to the relevant provi-
sions of the bilateral agreements as they existed when the trial
court rendered its decisions.

4

their operations here are thus exclusively in foreign
commerce. See 49 U.S.C. App. 1508(b).

Each appellant operates to and from Miami, Florida,
which is the primary domestic gateway for flights be-
tween the United States and South America, Central
America, and the Caribbean, as well as a major stop for
flights between this country and Europe. Appellants
regularly purchase significant. quantities of aviation jet
fuel at Miami International Airport. This fuel is not pur-
chased for export, but is consumed by appellants’
airplanes in international commerce en route from
Miami. Appellants are exempt from federal taxes on
this aviation fuel by virtue of explicit provisions in the
bilateral aviation agreements between the United
States and their home countries, or, absent such provi-
sions, by virtue of reciprocal tax exemptions provided to
American carriers by appellants’ home country govern-
ments.

2. For many years, Florida has imposed a sales tax on
fuel purchased by common carriers, including airlines,
within that State. This levy is an excise tax, not a user
fee (84-922 J.S. App. 52a). The tax is technically im-
posed on the fuel supplier, but the supplier is required to
pass the tax on to the purchaser (Fla. Stat. Ann.
§ 212.62(2) (West Supp. 1985)). Thus, the carrier bears
the economic incidence of the tax.

Prior to April 1, 1983, Florida’s sales tax on fuel, as it
applied to all carriers, was prorated on a mileage basis.
That is, a carrier paid only that portion of the otherwise-
payable tax that represented the ratio of its Florida
mileage to its worldwide mileage for the previous fiscal
year. Fla. Stat- Ann. § 212.08(4) (West 1971). The
Florida Supreme Court stated some years ago that this
proration formula was designed “to prevent the State
from exceeding its powers to tax interstate and foreign
commerce” by ensuring that “Florida would only tax
that portion of commerce activity that occurred within

\

5

the State.” Tropical Shipping & Construction Co. v.
Askew, 364 So. 2d 433, 435 (1978). Because appellants,
following normal airline routes, travel only briefly in
Florida air space, they and other foreign airlines paid
little or no Florida fuel tax prior to April 1, 1983 (84-922
J.S. 3).

Effective April 1, 1983, the Florida Legislature
substantially amended its fuel tax regime. The amend-
ment most pertinent here was that repealing the
mileage proration formula for airlines, while leaving it
in effect for railroads engaged in interstate commerce
and for vessels engaged in interstate or foreign com-
merce. Fla. Stat. Ann. § 212.08(4\(a\(2) (West Supp.
1985). As a result, airlines, including foreign airlines
like appellants, are now taxed on all aviation fuel they
purchase in Florida, even though that fuel is used ex-
clusively in foreign commerce (84-922 J.S. App. 53a).

* Florida recently enacted, effective July 1, 1985, further amend-
ments to its scheme of aviation fuel taxation. 1985 Fla. Laws
85-348, § 9. While exempting aviation fuel from sales tax, those
amendments impose a new excise tax specifically on aviation fuel.
Id. §§ 2, 3. The amount of the levy (5.7 cents per gallon) is virtually
the same as under the version of the law here challenged (5% of a
deemed price of $1.148 per gallon). Compare 1985 Fla. Laws
85-348, § 2, with Fla. Stat. Ann. § 212.62(3\c) (West Supp. 1985).
However, rather than applying (as did the sales tax) only to avia-
tion fuel purchased in Florida (see Fla. Stat. Ann. § 212.08(4\a\2)
(West Supp. 1985)), the new excise tax applies to “aviation fuel sold
in this state, or brought into this state for use” (1985 Fla. Laws
85-348, § 2 (to be codified at Fla. Stat. § 206.9825) (emphasis
added)). A refund of the new excise tax is to be allowed “not [to] ex-
ceed six-tenths of one percent of the wages paid by the carrier to
employees located or based within this state” (1985 Fla. Laws
85-348, § 2 (to be codified at Fla. Stat. § 206.9855)). This refund pro-
vision, of course, will provide virtually no tax relief to foreign
airlines like appellants, which typically have few if any employees
based in Florida. Enactment of these amendments, which apply only
prospectively (1985 Fla. Laws 85-348, § 9)), does not moot the in-
stant appeals, which continue to present a live controversy concern-
ing appellants’ sales tax liability from April 1, 1983, to July 1, 1985.

6

3. Appellants brought these actions in the Leon Coun-
ty Circuit Court seeking declaratory and injunctive
relief against the application of Florida’s sales tax to
them. Their principal contention was that the tax, as ap-
plied to aviation fuel used by foreign airlines in foreign
commerce, is inconsistent with federal aviation policy,
particularly as that policy is expressed in multinational
and bilateral agreements executed by the United States
and appellants’ home countries. Appellants accordingly
contended that Florida’s tax, as applied, is unconstitu-
tional under the Supremacy Clause and the Foreign
Commerce Clause. See Japan Line, Ltd. v. County of
Los Angeles, 441 U.S. 434 (1979).°

The circuit court did not explicitly declare Florida’s
aviation fuel tax unconstitutional. See 84-902 J.S. App.
A23-A24; 84-922 J.S. App. 47a-48a; 84-1041 J.S. App.
35-36. However, the court found that the tax, as applied
to appellants, was “inconsistent with the undertakings
of the United States government in [its] international
bilateral agreements,” and it accordingly “recognize[d]
an exemption from the fuel tax for [those] foreign

6 A number of domestic airlines likewise brought suits challeng-
ing Florida’s sales tax on aviation fuel, predicating their challenges
chiefly on the Due Process Clause, the Equal Protection Clause,
and the Interstate Commerce Clause. The Florida courts largely
rejected those challenges, and appeals raising those questions are
now pending in this Court. Northeastern International Airways,
Inc. & Arrow Air, Inc. v. Florida Department of Revenue, No.
84-921; Eastern Airlines Inc. v. Florida Department of Revenue,
No. 84-926; Delta Airlines, Inc. v. Florida Department of Revenue,
No. 84-929. The Court has invited our views in those cases, and a
brief expressing those views is being filed contemporaneously
herewith. To the extent that the foreign airlines in the instant ap-
peals replicate arguments made by the domestic airlines—
arguments that the Florida courts rejected, relying on the deci-
sions mentioned above (84-902 J.S. App. A2, A23; 84-922 J.S. App.
2a, 39a; 84-1041 J.S. App. 2, 28-29, 32)—we address those
arguments in our other brief.

7

airlines whose governments have entered into executive
agreements with the United States * * * or who have
been granted Foreign Air Carrier Permits by the
United States on a basis of reciprocity and comity”
(84-922 J.S. App. 48a, 49a-50a; see 84-902 J.S. App. .
A23-A24; 84-1041 J.S. App. 36). On that basis, the court
granted appellants “a permanent injunction against [the
Florida] Department of Revenue from assessing and
collecting fuel taxes pursuant to” the challenged statute
(84-1041 J.S. App. 36; see 84-902 J.S. App. A22; 84-922
J.S. App. 48a).

The court recognized that this Nation’s bilateral avia-
tion agreements, negotiated at various times over a
40-year period, deal with fuel taxes under somewhat dif-
fering rubrics, and that none of those agreements ex-
plicitly interdicts state or local, as opposed to “national”
(viz., federal), taxes on aviation fuel. See 84-902 J.S.
App. A238; 84-922 J.S. App. 41a; 84-1041 J.S. App.
33-34. At the same time, however, the court recognized
that those agreements evidence a well-settled federal
policy favoring “reciprocal tax exemptions” (84-922 J.S.
App. 44a), a policy “designed to establish federal unifor-
mity and prevent retaliatory taxes on U.S. carriers,”
and, by “prevent{ing] any discrimination, * * * to fur-
ther the free flow of international aviation” (84-902 J.S.
App. A22, A23). The court noted that “ ‘the Federal
Government must speak with one voice when regulating
commercial relations with foreign governments’ ”
(84-922 J.S. App. 47a, quoting Japan Line, 441 U.S. at
449), and that federal aviation authorities over the
years have consistently endeavored to persuade foreign
nations to eliminate aviation fuel taxes on the basis of
reciprocity (84-922 J.S. App. 46a). “{A]llowing the fifty
states to impose individual state taxes,” the court con-
cluded, “would thwart the purpose of these federal ef-
forts and infringe on the federal power to regulate
foreign commerce” (ibid. ).

8

Upon cross-appeals from the circuit court's
judgments, the intermediate appellate court certified
the cases directly to the Florida Supreme Court (84-922
J.S. App. 37a), which, in a divided opinion, “reverse{d]
the circuit court’s order to the extent that it recognized
an exemption from the excise tax for the foreign
airlines” (id. at 2a; 84-902 J.S. App. A6; 84-1041 J.S.
App. 30). The Florida Supreme Court initially rejected
appellants’ argument, based on the Supremacy Clause,
that Florida’s tax was preempted by the federal
bilateral agreements. The court believed that those
agreements “clearly express an intent to apply to only
national taxes and duties,” and the court “d[id] not
believe that the scheme cf [those] agreement{s] is so per-
vasive as to permit the reasonable inference that Con-
gress intended to preclude the state’s power to tax”
(84-902 J.S. App. A5; see 94-922 J.S. App. 2a; 84-1041
J.S. App. 28-29).

The court then addressed appellants’ argument that
Florida’s tax, as applied to them, violates the Foreign
Commerce Clause as interpreted by this Court in Japan
Line, Ltd. v. County of Los Angeles, 441 U.S. 434 (1979).
This Court there held that a state tax on the instrumen-
talities of foreign commerce is invalid if it either
“creates a substantial risk of international multiple tax-
ation” or “prevents the Federal Government from
speaking with one voice when regulating commercial
relations with foreign Governments” (441 U.S. at 451
(original quotation marks omitted)). The Florida
Supreme Court noted that “the first requirement of
Japan Line was not a concern [here] because there had
been no de facto showing of multiple taxation or
substantial risk of the same” in the instant cases (84-902
J.S. App. A6). Disagreeing with the trial court,
however, it also held that Florida’s tax satisfies the sec-
ond requirement of Japan Line, emphasizing that the

9

federal bilateral agreements explicitly address only na-
tional duties and charges and “dof ] not provide for ex-
emptions from state excise taxes.” The court “pre-
sume{d] this has been done intentionally” and concluded
that Florida’s tax accordingly does not “prevent{ | our
federal government from speaking with one voice”
(84-902 J.S. App. A6).

Justice Overton, joined by Justice McDonald, dissent-
ed. They contended that “the individual states of this
country are precluded by [the federal bilateral] agree-
ments from taxing fuel used by foreign airlines,” noting
that, under the majority’s holding, “United States
airlines could, in turn, be subject to local government
taxation on fuel in foreign countries” (84-902 J.S. App.
A7). The dissenting justices thus concluded that
Florida’s tax, as applied to appellants, violates the
Supremacy Clause and the Foreign Commerce Clause.

DISCUSSION

This Court held in Japan Line that the Commerce
Clause commits to the exclusive authority of the federal
government the regulation of those aspects of foreign
commerce which by their very nature require uniform
national treatment. In our view, the imposition of levies
and charges on airplane equipment and supplies, in-
cluding aviation fuel, used by foreign airlines exclusive-
ly in international traffic is an aspect of foreign com-
merce that shares this nature. Florida’s tax, as applied
to appellants, is inconsistent with strongly-articulated
federal policy in this area and with accepted interna-
tional practice. ‘I'he tax, as thus applied, should be in-
validated.

10

A. The Federal Government Is Committed To A Policy Of
Reciprocal Tax Exemptions For Fuel And Supplies Used
By Foreign Airlines In Foreign Commerce, And This
Policy Represents The Established Practice Of Nations In
The Aviation Field

This Nation’s aviation relations with foreign govern-
ments are implemented through a comprehensive net-
work of treaties, bilateral executive agreements, infor-
mal arrangements, and federal statutory provisions.
The pattern produced by these varied strands, a pattern
to which the federal government has long been commit-
ted, is one of reciprocal tax exemptions for aircraft,
equipment and supplies, including aviation fuel, that
constitute the instrumentalities of international air traf-
fic. Due in part to our Nation’s advocacy, this pattern
has become the accepted international norm in the avia-
tion field, a consensus that reflects the longstanding
custom of nations in international maritime trade.

1. The United States and 156 other nations, including
all of appellants’ home countries, are parties to the
Chicago Convention on International Civil Aviation,
opened for signature Dec. 7, 1944, 61 Stat. 1180 et seg.
That Convention binds its signatories to implement
various measures to facilitate air transportation (arts.
22-28, 61 Stat. 1186-1188). One of these measures, set
forth in Article 24(a), provides that aircraft engaged in
international traffic, as well as “{fjuel, lubricating oils,
spare parts, regular equipment and aircraft stores on
board [such] an aircraft,” shall, upon arrival in a con-
tracting state, “be exempt from customs duty, inspec-
tion fees or similar national or local duties and charges”
(61 Stat. 1186 (emphasis added)).

Article 24(a) explicitly applies only to aviation fuel and
supplies which are “on board an aircraft * * * on ar-
rival * * * and retained on board on leaving” a given

1]

country (61 Stat. 1186). Consistently with the purposes
of the Chicago Convention, however, Article 24(a)’s
policy of reciprocal exemptions has been accorded much
broader scope. As a party to the Convention, the United
States is a member of the International Civil Aviation
Organization (ICAQ), which was established by the Con-
vention (arts. 43-66, 61 Stat. 1192-1200) to “{a]void
discrimination among contracting States” and to “{p]ro-
mote generally the development of all aspects of inter-
national civil aeronautics” (art. 44, 61 Stat. 1193). Dur-
ing 1948-1951, the Air Transport Committee of ICAO,
recognizing that the Convention “did not attempt to
deal comprehensively with tax matters,” undertook a
“comprehensive study of the various existing and an-
ticipated problems related to taxation in the field of in-
ternational air transport.” JCAO’s Policies on Taxation
in the Field of International Air Transport, ICAO Doc.
8632-C/968, at 1 (Nov. 1966) [hereinafter cited as ICAO
Policies]. Upon completion of that study, the ICAO
Council in 195i adopted resolutions designed “to reduce
to the fullest possible extent all forms of taxation on the
sale or use” of the instrumentalities of air traffic (id. at
2).

During 1965-1966, ICAO exhaustively reviewed the
responses of the Chicago Convention’s contracting
states to the 1951 resolutions. It found that “it is the
common practice of many States with respect to ships
and aircraft engaged in international navigation” not
only “to exempt from taxation all fuel and lubricants on
board on arrival” in a given territory, but also, “on a
basis of reciprocity, to exempt from or refund taxes on
fuel and lubricants taken on board at the final port of
call in that territory.” ICAO Policies 3. And ICAO found
it desirable “to extend such exemptions or refunds to
other consumable technical supplies, which, like fuel
and lubricants, * * * are consumed during flight and
are essential for that purpose” (ibid. (footnote omitted)).

12

Consistently with these findings, the ICAO Council
adopted, on November 14, 1966, the following Resolu-
tion (ICAO Policies 3):

[FJuel, lubricants and other consumable technical
supplies taken on board [an aircraft] for consump-
tion during [an international] flight shall be fur-
nished exempt from all customs and other duties or,

alternatively, any such duties levied shall be re-
funded * * *.

The Resolution defined “customs and other duties” to in-
clude “import, export, excise, sales, consumption and in-
ternal duties and taxes of all kinds levied upon the fuel,
lubricants and other consumable technical supplies by
any taxing authority within a State” (id. at 4 (emphasis
added)).

The ICAO Council explained that this Resolution “en-
dorsed the policy of reciprocal exemption” from taxes
on aviation fuel used in international commerce, and
that it reflected “longstanding maritime practice and
the established policy of many States” (ICAO Policies 5).
It noted that the policy of reciprocal tax exemptions had
been “incorporated in the 1939 London Convention con-
cerning Exemption from Taxation for Liquid Fuel and
Lubricants Used in Air Traffic,” a convention which had
been “signed by representatives of 38 States” but which
“never came into force as many of the signatories short-
ly thereafter found themselves at war” (id. at 1, 5). And
the ICAO noted “the obvious practical difficulties in-
herent in adopting any other course,” concluding that a
policy of reciprocal tax exemptions by all taxing juris-
dictions was “the only [course] available in the fore-
seeable future which would, in a simple and effective
manner, assure equitable treatment for international
aviation” (id. at 5).

Virtually all nations party to the Chicago Convention
have substantially implemented the 1951 and 1966

13

ICAO Resolutions, and, accordingly, grant aviation fuel
purchased by foreign airlines for use in international
traffic a complete exemption from taxes, including
sales, use, and excise taxes, regardless of whether such
taxes are levied by the national government or by its
political subdivisions.6 The nations granting such
across-the-board exemptions include most of our
trading partners (such as Australia, China, Denmark,
the Federal Republic of Germany, Greece, Japan, the
Netherlands, Switzerland, and the United Kingdom),
and most of the nations in which appellants are domi-
ciled. The sole exception appears to be Canada, whose
provinces impose taxes on aviation fuel and, like
Florida, generally do not grant an exemption for fuel
purchased by foreign airlines for use in foreign com-
merce. With that exception, however, the policy of
reciprocal tax exemptions by all taxing authorities
represents uniform international practice,

2. In the 38 years since the Chicago Convention came
into force, the United States has signed bilateral avia-
tion agreements with more than 70 foreign countries.
Whereas the Convention itself is a treaty ratified by the
Senate (see 61 Stat. 1180), these bilateral undertakings
are typically executive agreements. They extend, with
varying degrees of explicitness, a bilateral commitment
parallel to that expressed multilaterally in Article 24(a)
of the Chicago Convention and in ICAO’s implementing
Resolutions.

® A few nations (such as France) appear to limit their reciprocal
exemption policy to commercial aircraft, as opposed to private
airplanes. We are informed by the State Department that political
subdivisions in India have legal authority to impose sales taxes on
aviation fuel. However, in response to a directive from the central
government, all Indian states to which United States airlines fly
currently exempt fuel uplifted by international carriers from sales
tax.

14

Almost all our bilateral agreements obligate the
United States to “exempt the designated * * * airlines
of the other Contracting Party to the fullest extent
possible under [our] national law, on the basis of
reciprocity, from import restrictions, customs duties,
excise taxes, inspection fees, and other national duties
and charges on fuel, lubricants” and other equipment
and supplies used in international air service.’ Severa!
agreements accomplish the same result by binding the
United States to accord airlines of the other contracting
party, with respect to taxes on aviation fuel and sup-
plies, “treatment not less favourable than that granted
to* * * carriers of the most favoured ration.”* Some of
the earlier compacts, like Article 24(#) of the Chicago
Convention, expressly refer only to aviaiv fuel and
supplies “introduced into” the United Staies or “re-
tained on board [the] aircraft * * * upon arriving in or
leaving” this country.* The more modern agreements,

7 Air Transport Services Agreement, Oct. 2, 1969, United
States-Jamaica, art. 8(A), 20 U.S.T. 2966, reprinted at 84-1041 J.S.
App. 101. See, e.g., Nonscheduled Air Service Agreement, May 8,
1974, United States-Canada, art. XII(1), 25 U.S.T. 794, reprinted
at 84-902 J.S. App. A58; Air Transport Services Agreement, Aug.
15, 1960, United States-Mexico, art. 7, 12 U.S.T. 65, reprinted at
84-922 J.S. App. 90a; Air Transport Services Agreement, Oct. 24,
1956, United States-Columbia, art. 7, 14 U.S.T. 432, reprinted at
84-922 J.S. App. 85a.

8 Air Transport Services Agreement, Feb. 11, 1946, United
States-United Kingdom, art. 3(2), 60 Stat. 1500, reprinted at
84-922 J.S. App. 92a (governing aviation relations with Guyana
and Trinidad & Tobago). See, e.g., Air Transport Services Agree-
ment, Jan. 8, 1947, United States-Ecuador, art. 3(b), 61 Stat. 2775,
reprinted at 84-922 J.S. App. 89a; Air Transport Services Agree-
ment, Nec. 27, 1946, United States-Peru, art. 3(b), 61 Stat. 2587,
reprinted at 84-1041 J.S. App. 113.

® Air Transport Services Agreement, Jan. 8, 1947, United
States-Ecuador, art. 3(b) and (c), 61 Stat. 2775, reprinted at 84-922
J.S. App. 89a. See, e.g., Air Transport Services Agreement, Dec.
27, 1946, United States-Peru, art.-3(b) and (c), 61 Stat. 2587,
reprinted at 84-1041 J.S. App. 113.

15

however, follow the 1951 and 1966 ICAO Resolutions by
extending the reciprocal exemption privilege explicitly
to cover items “supplied in” this country,° that is, avia-
tion fuel and supplies “taken on board aircraft of the
carriers of [the other] Contracting Party in the territory
of the [United States] and intended solely for use in in-
ternational air services.”"!

In according reciprocal exemptions for aviation fuel
taken on board foreign aircraft within this country, our
bilateral agreements typically refer to “national duties
and charges,”!* charges “imposed. by the national au-
thorities,"4> or “federal taxes.”'"* Some agreements
refer to duties or charges “imposed by the * * * Con-
tracting Party,”'® others to “national duties or charges

'© Air Transport Services Agreement, Oct. 20, 1983, United
States-Costa Rica, art. 9(2\a) and (c), reprinted at 84-922 J.S. App.
87a-88a. See, e.g., Air Transport Services Agreement, Apr. 8,
1982, United States-Barbados, art. 9(2\a) and (c), T.I.A.S. No.
10370, reprinted at 84-1041 J.S. App. 110.

't Nonscheduled Air Service Agreement, May 8, 1974, United
States-Canada, art. XII(1\(c), 25 U.S.T. 794, reprinted at 84-902
J.S. App. A58. See, e.g., Air Transport Services Agreement, Oct.
24, 1956, United States-Colombia, art. 7(D), 14 U.S.T. 432,
reprinted at 84-922 J.S. App. 85a.

'* E.g., Air Transport Services Agreement, May 8, 1974, United
States-Canada, art. XII(1), 25 U.S.T. 794, reprinted at 84-902 J.S.
App. A58; Air Transport Services Agreement, Aug. 15, 1960,
United States-Mexico, art. 7, 12 U.S.T. 65, reprinted at 84-922 J.S.
App. 90a-9la.

'S F.g., Air Transport Services Agreement, Oct. 20, 1983, United
States-Costa Rica, art. 9(1), reprinted at 84-922 J.S. App. 87a.

'* E.g., Air Transport Services Agreement, June 23, 1982,
United States-Brazil, art. IX, reprinted at 84-922 J.S. App. 83a.

'* .g., Air Transport Services Agreement, Feb. 11, 1946,
United States-United Kingdom, art. 3(2), 60 Stat. 1500, reprinted
at 84-922 J.S. App. 92a.

16

[imposed] by the contracting party,”!® and others simply
to “exemption from taxes,”!? without specifying what
taxing jurisdictions are meant to be covered. Exemp-
tions from federal charges are implemented through a
host of statutory and regulatory provisions, which ac-
cord foreign-owned instrumentalities of air traffic treat-
ment parallel to that accorded foreign-owned in-
strumentalities of maritime trade.'®

Unlike our earlier agreements, our most recent
bilateral aviation compacts—generally, those dating
from 1978 onwards—explicitly address taxes imposed
by political subdivisions as well as by the federal govern-
ment. These agreements typically commit the United
States to “use its best efforts to secure for the
designated airlines of the other Party, on the basis of
reciprocity, an exemption from taxes, duties, charges
and fees imposed by State, regional and local authorities
on [aviation fuel and supplies}, except to the extent that
the charges are based on the actual cost of providing the
service.”!® Such “best efforts” clauses concerning state
and local taxes are contained in agreements recently ex-
ecuted or negotiated with 18 foreign nations, including

16 F.g., Air Transport Services Agreement, Jan. 8, 1947, United
States-Ecuador, art. 3(b), 61 Stat. 2775, reprinted at 84-922 J.S.
App. 89a.

17 F.g., Air Transport Services Agreement, Sept. 22, 1977,
United States-Argentina, art. F(3), 29 U.S.T. 2801, reprinted at
84-922 J.S. App. 82a.

18 See, e.g., 19 U.S.C. 1435 (entry of foreign vessels); 19 C.F.R.
Pt. 4 (same); 49 U.S.C. App. 1509(c) (entry of foreign aircraft); 19
C.F.R. Pt. 6 (same); 26 U.S.C. 4221(aX3), (dX3) and (eX1) (exemp-
tion from federal excise tax on the basis of reciprocity for fuel and
supplies used in international air transport).

19 F.g., Air Transport Services Agreement, Apr. 8, 1982, United
States-Barbados, art. 95), T.I.A.S. No. 10370, reprinted at
84-1041 J.S. App. 110.

17

the home countries of four of the appellants here (Bar-
bados, Costa Rica, El] Salvador and Jamaica)® and such
important trading partners as China, the Federal
Republic of Germany, Israel, and the United Kingdom.

3. As the above discussion reveals, none of our bi-
lateral aviation agreements explicitly interdicts state or
local taxes on aviation fuel used by foreign airlines in in-
ternational traffic. To that extent, the bilateral agree-
ments do not in terms reflect the full scope of our
federal aviation policy, or the full scope of the inter-
national consensus evidenced by the 1951 ‘and 1966
ICAO Resolutions, favoring reciprocal tax exemptions
by all taxing jurisdictions. The reasons for this are
largely of an economic and historical, partly of a legal,
nature.

State taxation of international aviation has only re-
cently become a matter of international concern. The
period immediately following adoption of the Chicago
Convention, when our bilateral agreements were first
negotiated, coincided with the early days of commercial
jet travel, a time when relatively few foreign airlines
served the United States and when those that did serve
it operated to a mere handful of international gateways
here. Most foreign airlines purchased bonded fuel,
which, under this Court’s decisions (McGoldrick v. Gulf
Oil Corp., 309 U.S. 414 (1940)), was exempt from state
taxes, and which, prior to the 1973 OPEC oil embargo,
was both inexpensive and readily available. State taxing
authorities thus had little reason to regard international
aviation as a potential source of revenue. In those

*° See note 19, supra; Air Transport Services Agreement, Oct.
20, 1983, United States-Costa Rica, art. 95), reprinted at 84-922
J.S. App. 88a; Air Transport Services Agreement, Apr. 2, 1982,
United States-E] Salvador, art. 9(5), T.1.A.S. No. 10488, reprinted
at 84-1041 J.S. App. 115; Air Transport Services Agreement, Apr.
4, 1979, United States-Jamaica, art. 10(6), T.I.A.S. No. 9613,
reprinted at 84-1041 J.S. App. 104.

18

relatively rare instances where state tax laws did (at
least theoretically) reach aviation fuel used by foreign
airlines, those taxes (like Florida’s prior to April 1,
1983) were of the “burn-off” variety, 7.e., were prorated
on a mileage basis. Since foreign airlines traveled only
briefly in such states’ air space, they would pay little if
any fuel tax in actual practice. Finally, our early avia-
tion agreements were negotiated at a time when the Ex-
ecutive Branch entertained some doubt about its con-
stitutional authority to enter into such compacts, which
are typically executive agreements rather than treaties,
much less to use them as a vehicle for preempting state
laws. The State Department’s usual practice, in any
event, was to exercise restraint on this score, par-
ticularly where (as was until recently true here) state
taxes were of little practical concern to our trading
partners. See 11 Foreign Affairs Manual § 721.3(b)
(Feb. 25, 1985) (State Department guidelines on treaties
and other international agreements, or “Circular 175”)
(citing potential conflict with state law as a factor to be
considered in deciding whether to enter into a treaty or
an executive agreement).

The field of international aviation has changed
dramatically in recent years. The number of foreign air-
lines serving the United States, and the number of
domestic gateways to which they fly, have increased
geometrically. See M. Brenner, J. Leet & E. Schott,
Airline Deregulation 119 (1985). The price of aviation
fuel has risen about 700% since the OPEC oil embargo.
Id. at 106. Bonded fuel, which was once readily available
at all gateways, is now available at only one or two.”? In

21 Following the OPEC embargo, the price of bonded fuel, which
must be manufactured exclusively from crude oil produced abroad,
rose sharply as compared with the price of fuel manufactured from
domestic supplies. Subsequently-enacted federal price and alloca-
tion regulations (see 15 U.S.C. (1976 ed.) 751 et seq.) further

19

short, the very factors that once made international
aviation an unlikely source of state revenue now make it
a rather tempting target.

It is thus no accident that our most recent bilateral
agreements expressly commit the United States and its
contracting partners to use their “best efforts” to en-
sure exemption from regional and local, as well as na-
tional, taxes on aircraft fuel and supplies. Although
these provisions stop short of explicitly banning such
levies, they are very strong expressions of fed«ral policy
on the subject. Indeed, many of our bilatera! aviation
agreements, in specifying the federal government’s
obligations generally, use similar executory language,
requiring the United States (for example) to grant ex-
emptions from national duties “to the fullest extent
possible,” to make “efforts * * * to provide * * * for
exemption from taxes,”? to “make all possible efforts to
ensure * * * exemption from federal taxes,”24 and to
“exercise [its] best efforts” to ensure the availability of
various privileges.2° The Chicago Convention, similarly,

limited the availability of bonded fuel. Because of its relatively high
price and scarcity, foreign carriers, which in 1968 had derived 90%
of their fuel from bonded stocks, derived only 4% of their supply
therefrom by 1977. See U.S. Dep’t of Energy, Findings and Views
Concerning the Exemption of Kerojet Fuels from the Mandatory
Petroleum Allocation and Price Regulations 38-40 (1978). Owing to
this shrinkage in demand, the elaborate dedicated delivery and
storage systems for bonded fuel, established to meet Customs
Service regulations, were dismantled or combined with non-bonded
fuel supply networks.

*2 F.g., Nonscheduled Air Service Agreement, May 8, 1974,
United States-Canada, art. XII(1), 25 U.S.T. 794, reprinted at
84-902 J.S. App. A58.

*8 f.g., Air Transport Services Agreement, Sept. 22, 1977,
United States-Argentina, art. F(3), 29 U.S.T. 2801, reprinted at
84-922 J.S. App. 82a.

*4 f.g., Air Transport Services Agreement, June 23, 1982,
United States-Brazil, art. 1X(4), reprinted at 84-922 J.S. App. 83a.

*® F.g., Nonscheduled Air Service Agreement, May 8, 1974,
United States-Canada, art. XI(3), XVI(3), 25 U.S.T. 794, 796,
reprinted at 84-902 J.S. App. A58, A60.

20

obligates the United States to implement certain
measures “to the greatest possible extent” (art. 12, 61
Stat. 1183) or “so far as it may find practicable” (arts.
23, 28, 61 Stat. 1186, 1188). The “best efforts” clauses
concerning state and local taxes in our recent bilateral
agreements have equal dignity with these provisions,
and are properly regarded by foreign nations as ex-
pressing a strong federal commitment to the policy of
reciprocal tax exemptions by all taxing jurisdictions.
4. Federal aviation authorities have made aggressive
efforts over the years to implement the policy of re-
ciprocal exemptions both internationally and domesti-
cally. Diplomatic steps have regularly been taken to en-
courage foreign nations to make and, once made, to
honor, commitments to accord tax exemptions for avia-
tion fuel used by United States carriers in foreign com-
merce.2® In 1982, the State Department received com-
munications from the United Kingdom expressing con-
cern about the imposition of aviation fuel taxes by
political subdivisions in this country. The Department
thereupon wrote the tax authorities of various states,
including Florida, noting that “foreign governments
have questioned the appropriateness of imposing [such
levies] on foreign air carriers in view of the generally-
accepted and longstanding international practice of
reciprocally exempting such items” (84-922 J.S. App.
95a). Some nations, the Department noted, “have raised
the possibility that state and local authorities in their
jurisdictions could impose similar taxes on U.S.
airlines,” a result that “would frustrate the inter-

26 See, e.g., U.S. Civil Aeronautics Board, F'Y 1976 Report to Con-
gress 103-104 (1977) (discussing steps taken to protest actions by
Argentina and Colombia respecting aviation fuel taxes); U.S. Civil
Aeronautics Board, FY 1977 Report to Congress 108, 109, 112, 114
(1978) (same, actions by Chile Colombia, Japan, and the Philip-
pines).

21

national system of reciprocal tax exemptions and
thereby significantly increase the cost of international
air transportation” (ibid.). The Department emphasized
that this was “an important matter affecting U.S. inter-
national relations” and urged state revenue authorities
to exempt foreign air carriers, on the basis of reciproci-
ty, “from taxes on aviation fuel and other items for
which the federal government grants an exemption” (id.
at 94a-95a).

Several months later, Florida announced its proposal
to extend its aviation fuel tax, effective April 1, 1983, to
fuel consumed by foreign airlines in foreign commerce.
The State Department again wrote the Florida Depart-
ment of Revenue, noting that it was “surprised and dis-
tressed” to learn of this proposal, and again urging the
State to exempt foreign airlines “based on reciprocity”
(84-922 J.S. App. 99a). The Department warned that
F lorida’s failure to afford such an exemption “will cause
serious foreign relations problems” (ibid. ).

The foreign relations problems predicted by the State
Department quickly materialized. To date, the United
States has received diplomatic notes from 25 foreign
countries (App., infra, 1a-58a) protesting Florida’s tax
on aviation fuel and similar taxes, enacted or proposed,
by Illinois (id. at 25a, 36a, 58a) and New York (id. at
48a). The protesting governments include many of ap-
pellants’ home countries, as well as Belgium, France,
the Federal Republic of Germany, Iceland, Israel, Italy,
Japan, the Netherlands, Norway (on behalf. of itself,
Denmark, and Sweden), Panama, Spain, Switzerland,
the United Kingdom, and Yugoslavia.

The diplomatic notes uniformly point to the “interna-
tional consensus” (App., infra, 10a, 23a, 42a, 44a, 53a)
and the “established international practice” (id. at 2a,
da, 8a, 12a, 35a, 40a, 49a) of according reciprocal tax
exemptions for aviation fuel used in international traf-
fic. They emphasize that this consensus, as evidenced by

22

the 1951 and 1966 ICAO resolutions, entails exemption
from regional and local, as well as from national, levies
(App., infra, 2a, 5a, 6a, 8a, 13a, 20a, 23a, 30a, 35a, 37a,
40a, 46a-47a, 48a, 53a). Several foreign governments
point out that their political subdivisions do not impose
taxes on fuel purchased by United States airlines (id. at
la, 5a, 8a, 13a, 21a, 50a, 53a, 57a), advising that their
restraint in this respect is “based on the assumption that
the United States will provide reciprocal treatment to
(their] carriers” (id. at 1a). Florida’s tax, in their view,
“undermines the basis of reciprocity that has previously
existed” between their nations and ours (id. at 2a, 9a,
21a, 53a), inviting retaliatory measures by local jurisdic-
tions elsewhere (id. at 5a, 9a, 23a, 41a, 48a). The diplo-
matic notes repeatedly stress the damage that a pro-
liferation of such taxes would cause to international
aviation (id. at 9a, 10a, 14a, 23a), and, in several in-
stances, take the position that Florida’s tax is inconsist-
ent with the bilateral aviation compacts that the United
States has executed with their governments (id. at 2a,
5a, 13a, 16a, 3la, 37a, 46a, 53a).

B. A State Tax Is Invalid Under The Commerce Clause If It
Frustrates Attainment Of Federal Uniformity On An
Aspect Of Foreign Commerce As To Which Federal
Uniformity Is Essential, And Thus Prevents The Federal
Government From Speaking With One Voice When
Regulating Commercial Relations With Foreign Coun-
tries

1. In Japan Line, Ltd. v. County of Los Angeles, 441

U.S. 434 (1979), this Court outlined the constitutional
analysis to be employed under the Commerce Clause
where a state seeks to tax the instrumentalities of
foreign commerce. Appellants there were six Japanese
maritime companies whose cargo shipping containers
were subjected to an ad valorem property tax in Cali-

23

fornia (441 U.S. at 436). The containers, like the ships
on which they were carried, were owned by the
Japanese companies, were domiciled and registered in
Japan, and were used exclusively in international traffic
(id. at 436-437).

This Court assumed arguendo that the property tax,
as applied to the Japanese containers, would pass the
nexus, apportionment, and nondiscrimination tests of
Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279
(1977), and hence would be valid under the Commerce
Clause “if the containers at issue * * * were instru-
mentalities of purely interstate commerce” (441 U.S. at
445, 451). However, because the containers were “in-
strumentalities of foreign commerce,” the Court held
that it was necessary to answer two further questions in
assessing the tax’s validity: “first, whether the tax, not-
withstanding apportionment, creates a substantial risk
of international multiple taxation, and, second, whether
the tax prevents the Federal Government from speak-
ing with one voice when regulating commercial rela-
tions with foreign governments” (id. at 451 (original
quotation marks omitted)). “If a state tax contravenes
either of these precepts,” the Court held, “it is unconsti-
tutional under the Commerce Clause” (ibid.).

The Court concluded that California’s tax, as applied,
failed both of these tests (441 U.S. at 451, 453). It noted
that the containers were taxed on their full value in
Japan, so that California’s levy necessarily caused inter-
national multiple taxation (id. at 436, 446-448, 451-452).
And it held that California’s tax would “frustrate attain-
ment of federal uniformity” in an area—the imposition
of charges on cargo containers used exclusively in inter-
national traffic—“where federal uniformity is essential”
(id. at 448, 453).

The Court relied principally on two considerations in
determining that the taxation of cargo containers was a

24

subject “necessitat[ing] a uniform national rule” (441
U.S. at 449). First, the Court noted that California's
levy “create{d] an asymmetry in the international tax
structure” (id. at 450). A state tax on foreign commerce,
the Court said, “must be evaluated in the realistic
framework of the custom of nations” (id. at 454). Under
longstanding international practice, “[o]ceangoing
vessels” and “[ajircraft engaged in international traffic”
were immune from taxation except by the nation of
their registry or domicile (id. at 447 n.11). Cargo ship-
ping containers were likewise regarded by the world
community as “instruments of international traffic” (id.
at 445-446 & n.10), and Japan accordingly taxed ap-
pellants’ containers “consistently with the custom of na-
tions” (id. at 447, 454) with the legitimate expectation
that they would not be taxed elsewhere.”’

A corollary of the “novel{ty]” of California’s tax, when
viewed against the established custom of nations, was
the risk that other countries would retaliate against
American carriers, a result that would plainly “place
* * * impediments before this Nation’s conduct of its
foreign relations and its foreign trade” (441 U.S. at 450,
453). It was stipulated that “American-owned con-
tainers are not taxed in Japan,” so that California’s tax
“create[d] an asymmetry in international maritime taxa-
tion operating to Japan’s disadvantage.” Under these
circumstances, “(t]he risk of retaliation by Japan” was,
in the Court’s words, “acute.” Id. at 453. Indeed, the
Court noted that some nations provide a tax exemption
for foreign-owned instrumentalities of commerce “only
if the owner’s country grants a reciprocal exemption”

27 In our brief amicus curiae in Japan Line (77-1378 Br. at 14a),
we noted the State Department’s findings that “no foreign govern-
ment, 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.”

25

(id. at 453 n.18). Hence, “{rjetaliation by some nations
could be automatic” and “of necessity would be directed
at American transportation equipment in general, not
just that of the taxing State, so that the Nation as a
whole would suffer” (id. at 450, 453 & n.18).

The second factor which the Court in Japan Line held
to evidence “[t}he desirability of uniform treatment of
containers used exclusively in foreign commerce” was
the Customs Convention on Containers, May 18, 1956,
20 U.S.T. 301 et seq., a multilateral compact ratified by
the Senate to which both this country and Japan were
party (441 U.S. at 452). Under that Convention, con-
tainers temporarily imported into this country are ad-
mitted free of customs duty and of “all duties and taxes
whatsoever chargeable by reason of importation” (id. at
453 (citing 20 U.S.T. 304)). The Court did not hold that
the Container Convention preempted California’s tax
under the Supremacy Clause; indeed, the Convention
does not address state and local taxes, or any taxes
other than those “chargeable by reason of importation.”
But the fact that Congress “ha{d] not pre-empted the
field by affirmative regulation” was not in the Court’s
view dispositive of the Commerce Clause outcome, since
that Clause, “ ‘without the aid of congressional legisla-
tion .. . affords some protection from state legislation
inimical to the national commerce’ ” (id. at 454, quoting
Southern Pacific Co. v. Arizona, 325 U.S. 761, 769
(1945)). The Container Convention, while not necessari-
ly a source of preemption, was relevant to the Court’s
Commerce Clause inquiry because it “reflect{ed] a na-
tional policy to remove impediments to the use of con-
tainers as ‘instruments of international traffic’ ” (441
U.S. at 453, quoting 19 U.S.C. 1322(a)), and hence
showed that it would be inimical to the national com-
merce for California to tax foreign-owned containers as
it sought to do.

26

2. In subsequent decisions, this Court has consistently
reaffirmed the principles of Japan Line, both its
general analytical approach and its particular sensitivi-
ty to state actions that may adversely affect this
Nation’s foreign commerce. See South-Central Timber
Development, Inc. v. Wunnicke, No. 82-1608 (May 22,
1984), slip op. 18; Container Corporation v. Franchise
Tax Board, 463 U.S. 159, 171, 184-197 (1983); Mobil Out
Corp. v. Commissioner of Taxes of Vermont, 445 U.S.
425, 446-449 (1980). With equal consistency, however,
the Court has declined to expand the principles of Japan
Line to invalidate state taxes imposed on the income of
domestically-based multinational corporations. The
Court has reached that result whether the income takes
the form of foreign-source dividends (Mobil Oil Corp.,
445 U.S. at 446-448) or foreign-source operating earn-
ings (Container Corporation, 463 U.S. at 169 n.7).

The Court in Container Corporation noted “a number
of important [similarities]” (463 U.S. at 187) between
that case and Japan Line. The multinational taxpayer
in each case had demonstrated some degree of “actual
double taxation” (463 U.S. at 184, 187 & n.22). And
California in each case had adopted a taxing policy (in
Container Corporation, the “unitary method” of appor-
tioning transnational income) that reflected “a serious
divergence” from the policy adopted by the federal
government (in Container Corporation, the “arm’s-
length method” of allocating intercorporate income), a
federal policy which in turn was “consistent with ac-
cepted international practice” (463 U.S. at 187). But the
Court also noted that there were “a number of ways in
which [Container Corporation was] clearly distinguish-
able from Japan Line” (463 U.S. at 187), and these
distinctions were held to carry the day.

First, the Court noted (463 U.S. at 187-188), as it had
in Mobil Oil Corp. (445 U.S. at 448), that there are sub-

27

stantial differences between taxes on the income of a
domestic taxpayer and “ad valorem property taxes
assessed directly upon instrumentalities of foreign com-
merce.” Taxes on foreign ships and planes, obviously,
burden commerce in a more immediate and concrete
way than taxes on the international cash flows of a
domestic company. The Court emphasized, moreover,
the difficulty of trying to figure out where the income of
a multinational unitary business is really “earned.” Con-
tainer Corporation, 463 U.S. at 164-169, 192. Accord,
e.g., Exxon Corp. v. Wisconsin Dep’t of Revenue, 447
U.S. 207, 222 (1980); Mobil Oil Corp., 445 U.S. at
438-439. Such difficulties, of course, do not attend ef-
forts to ascertain the registry of an airplane or the home
port of a ship. |

A corollary of this difference between taxes on instru-
mentalities and taxes on income was a marked dif-
ference in “the alternatives reasonably available to the
taxing State” (463 U.S. at 189, 192). In Japan Line, the
state could avoid any burden on foreign commerce
“simply by adhering to one bright-line rule: do not tax,
to any extent whatsoever, cargo containers ‘that are
owned, based, and registered abroad and that are used
exclusively in international commerce’” (463 U.S. at
189-190 (quoting 441 U.S. at 444)). To require that the
State in Japan Line adhere to this rule “was by no
means unfair, because the rule did no more than reflect
consistent international practice and express federal
policy” (463 U.S. at 190). In Container Corporation, by
contrast, the state could not reasonably be expected ut-
terly to refrain from taxing the domestic company’s in-
come, some of which was plainly earned within the
state; and the question thus boiled down to a choice be-
tween competing allocation methods, each of which was
concededly imperfect (463 U.S. at 182-184), and each of
which could end up burdening foreign commerce de-
pending on the particular facts involved (id. at 188 &

28

n.25, 190-193). In short, the Court did not believe that
there existed in Container Corporation, as there existed
in Japan Line, any method, at once obvious and fair, by
which the state could ensure that foreign commerce
would be perfectly protected.

Secondly, the Court in Container Corporation em-
phasized that the tax there “ffell], not on the foreign
owners of an instrumentality of foreign commerce, but
on a corporation domiciled and headquartered in the
United States” (463 U.S. at 188). “The most obvious
foreign policy implication of a state tax,” the Court
noted, “is the threat it might pose of offending our
foreign trading partners and leading them to retaliate
against the Nation as a whole“ (id. at 194 (citing Japan
Line, 441 U.S. at 450)). Given the American residency
of the taxpayer in Container Corporation, the risk of
retaliation in that case, relatively speaking, was slight,
for foreign governments generally have little interest
“in reducing the tax burden of domestic corporations”
(463 U.S. at 195). The Court observed that it had
“specifically left open in Japan Line the application of
that case to ‘domestically owned instrumentalities
engaged in foreign commerce’” (463 U.S. at 188-189
(quoting 441 U.S. at 444 n.7)), and, contrariwise, it
specifically left open in Container Corporation the ap-
plication of that case to the income of foreign or foreign-
owned corporations (463 U.S. at 189 n.26).”*

Besides the taxpayer’s American domicile, the Court
in Container Corporation cited other factors suggesting
that the foreign relations impact there, as compared
with Japan Line, would likely be marginal. Whereas in
Japan Line “a convention signed by the United States

28 Since the instant appeals present challenges to a state excise
tax on aviation fuel, the Court in these cases would likewise have
no occasion to address the validity of state income taxes imposed
on foreign or foreign-owned corporations.

29

and Japan made clear * * * that neither National
Government could impose a tax on temporarily im-
ported cargo containers whose home port was in the
other nation” (463 U.S. at 185), no comparable
multilateral treaty existed in the income tax field.
Although the United States had signed bilateral income
tax agreements with many foreign nations, none «ad-
dressed “the taxing activities of subnational govern-
mental units such as States” (463 U.S. at 196 (footnote
omitted)). Whereas the tax in Japan Line had created
an asymmetry in international maritime taxation that
automatically operated to foreign countries disadvan-
tage (463 U.S. at 194-195 (citing Japan Line, 441 U.S.
at 453)), the Court did not believe that the same was
true in Container Corporation, since California’s “unor-
thodox treatment” could on the Court’s view help or
hurt a given taxpayer depending on the particular facts
involved (463 U.S. at 195). Finally, the Court “note[d]
* * * that in [Container Corporation], unlike Japan
Line, the Executive Branch ha[{d] decided not to file an
amicus curiae brief in opposition to the state tax” (463
U.S. at 195 (footnote omitted)). For all these reasons,
the Court concluded that California’s unitary method of
taxing domestic companies’ income, unlike California’s
tax on the instrumentalities of foreign commerce in
Japan Line, neither “implicate[d] foreign policy issues
which must be left to the Federal Government” nor
“violate[d] a clear federal directive,” and hence did not
prevent this Nation from speaking with one voice in
foreign affairs (463 U.S. at 194).

3y

C. Florida’s Tax On Aviation Fuel Used By Foreign Airlines
Exclusively In Foreign Commerce Is Inconsistent With
Express Federal Policy And Established International
Practice And Hence Should Be Invaiidated Under The
Commerce Clause

These cases present a substantial federal question
concerning the power of a state to levy an excise tax on
the instrumentalities of foreign commerce. This ques-
tion is not directly controlied by any of this Court’s prior
decisions. However, we think that the situation here
comes very close indeed to that presented in Japan
Line, and we believe that Florida’s tax should be
declared unconstitutional as applied.

1. We agree with the courts below (see 84-902 J.S.
App. A6, A33) that the “multiple taxation” aspect of
Japan Line is not’a concern in the instant cases. Ap-
pellants have not proved—indeed, they have not
argued—that Florida’s sales tax on aviation fuel “pro-
duces multiple taxation in fact” (Japan Line, 441 U.S. at
452). Nor do we think that Florida’s tax “creates a
substantial risk of international multiple taxation” (id.
at 451). As this Court has noted in sustaining analogous
state taxes on aviation fuel used by domestic carriers on
interstate flights, the “taxable event” is the carrier's
purchase of the fuel or its “withdrawal [of the fuel] from
storage.” United Air Lines, Inc. v. Mahin, 410 U.S. 623,
627 (1973). Accord, Edelman v. Boeing Air Transport,
Inc., 289 U.S. 249, 251-252 (1933); Eastern Air
Transport, Inc. v. South Carolina Tax Comm'n, 285
U.S. 147, 152-153 (1932).2° These taxable events, ob-

28 These cases clearly do not control the outcome here. In each
case, the airline was a domestic rather than a foreign corporation,
and it appears that solely interstate, rather than international,
flights were involved. See United Air Lines, Inc., 410 U.S. at 624,
625, 629; Edelman, 289 U.S. at 250-251; Eastern Air Transport,

dl

viously, take place entirely within the taxing state, and
no foreign government, consistently with the custom of
nations, could undertake to impose a levy upon them. In
fact, far from being able to tax the event of sale, foreign
nations could not purport to tax even the fuel itself,
which typically will be consumed in international air
space en route from the United States.

2. We agree with appellants, however, that Florida’s
tax is invalid under the “federal uniformity” aspect of
Japan Line, which, as the Court there emphasized (441
U.S. at 451), is a separate and independent basis for in-
validating a state tax under the Foreign Commerce
Clause. In our view, the salient features of these cases
put them virtually on a par with Japan Line and
distinguish them in equal measure from Container Cor-
poration. Those features, which we have already
discussed in one way or another, may be briefly
recapitulated:

First, the airlines here, like the shipping companies in
Japan Line, are foreign rather than domestic corpora-
tions. Indeed, besides being domiciled abroad, many of
the airlines are wholly or substantially owned by their
national governments. See page 3, supra.

Second, the state tax here is imposed, as in Japan
Line, not on income, but directly on the instrumen-
talities of foreign commerce. In Japan Line, the Court
noted that the cargo containers sought to be taxed were
associated with the ships that carried them both in our
bilateral and in our multilateral agreements (441 U.S. at
436 n.1, 446 n.10, 452-453). Here, similarly, aviation
fuel taken on board for use in international traffic is
associated with the aircraft that carries it both in the

Inc., 285 U.S. at 150-151. In any event, the cases were decided long
before this Court in Japan Line set forth the constitutional analysis
to be employed when a state seeks to tax the instrumentalities of
foreign commerce.

32

Chicago Convention and the ICAO Resolutions (see
pages 10-13, supra) and in our bilateral aviation com-
pacts (see pages 13-17, supra). These agreements
evidence an international understanding that aviation
fuel, no less than the shipping containers at issue in
Japan Line, is an “instrument{ | of international traffic”
(441 U.S. at 446 n.10, 453).

Third, the state tax here, like the tax in Japan Line,
“creates an asymmetry in the international tax struc-
ture” (441 U.S. at 450) which, unlike the tax in Con-
tainer Corporation, operates automatically to foreign
nations’ disadvantage (see 463 U.S. at 194-195). The
uniform practice of nations, evidenced by the Chicago
Convention, the ICAO Resolutions, and other countries’
implementation of those Resolutions, calls for the in-
strumentalities of international air traffic to be exempt
from all taxes and duties (other than user fees) imposed
either by national governments or by their political sub-
divisions. Indeed, this policy of reciprocal tax exemp-
tions for the instrumentalities of airborne and maritime
trade is the very same “custom of nations” upon which
the Court in Japan Line relied (441 U.S. at 447 & n.11,
453 & n.18) in invalidating the tax there involved.

Fourth, there exists here, as in Japan Line, an “ex-
press federal policy” (Container Corporation, 463 U.S.
at 190), evidenced by multilateral agreements, bilateral
agreements, the federal statutory scheme, and consis-
tent regulatory practice, favoring reciprocal tax exemp-
tions for aviation fuel and supplies used in foreign com-
merce. Our bilateral aviation compacts do not expressly
preempt, any more than the Container Convention in
Japan Line expressly preempted, state taxes on avia-
tion fuel. However, those agreements do “reflect{ | a na-
tional policy to remove impediments to the use of [air-
craft] as instruments of international traffic.” Japan
Line, 441 U.S. at 453 (original quotation marks
omitted).

33

Fifth, it is possible here, as it was possible in Japan
Line, for the state to avoid any burden whatsoever on
foreign commerce by adhering to “a single interna-
tionally accepted bright-line standard” (Container Cor-
poration, 463 U.S. at 193), namely, “do not tax, to any
extent whatsoever, [fuel and supplies used by aircraft]
‘that are owned, based, and registered abroad and that
are used exclusively in international commerce.’ ” Jd. at
189-190 (quoting Japan Line, 441 U.S. at 444). Here, as
in Japan Line, “[t]o require that the State adhere to this
rule [is] by no means unfair, because the rule [does] no
more than reflect consistent international practice and
express federal policy” (Container Corporation, 463
U.S. at 190). The difficulties that might attend state ef-
forts absolutely to avoid burdening foreign commerce
where income taxes are concerned simply do not arise in
these cases.

Finally, the tax involved here, like the tax involved in
Japan Line, clearly “implicate[s] foreign affairs” (Con-
tainer Corporation, 463 U.S. at 194). The State Depart-
ment has received diplomatic notes from 25 foreign na-
tions protesting Florida’s tax in the strongest terms.
These notes reflect concern, not only about the instant
tax, but about the possibility that “other States [will]
follow[ ] the taxing State’s example” (Japan Line, 441
U.S. at 450-451). See App., infra, 3a, 6a, 21a, 42a, 52a.
Foreign nations’ concerns in this respect have proven
justified, since Florida’s example has already been
followed by Illinois?® and Massachusetts,*! and a bill

%° See Ill. Admin. Reg. § 130.2080(c) (1984) (repealing exemption
from sales tax on purchases of aviation fuel previously granted to
companies whose stock was “owned exclusively or in part by
foreign governments”). A lawsuit challenging this action was
recently filed in Illinois trial court by ten foreign airlines. Air
Canada, et al. v. Department of Revenue of the State of Illinois, No.
85CH-6973 (Cook County Cir. Ct. July 12, 1985).

*! See Mass. Act of July 1, 1985, ch. 145, §§ 7, 9 (enacting new
5¢-per-gallon excise tax on aviation fuel and affording no exemp-

34

that would accomplish the same result has been in-
troduced in California.*? The diplomatic notes stress
that a proliferation of aviation fuei taxes would prevent
this country from offering “true reciprocity” to our
trading partners (App., infra, 23a), provoking the
threat of foreign retaliation that would jeopardize the
reciprocal exemption policy.**

3. For these reasons, we believe that the Court should
note probable jurisdiction in the instant three appeals.
The cases involve airlines from 14 different countries,
whose bilateral agreements with the United States dif-
fer in subtle ways. Although the outcome in our view
should generally be dictated by overriding federal policy
and established international practice rather than by
the idiosyncratic provisions of particular compacts, we
think the Court would benefit from having all the rele-
vant fact patterns before it. Particularly might this be
true in the case of the Canadian airline, appellant in

3

tion for fuel purchased by foreign airlines for use in foreign com-
merce). The Massachusetts law provides that the new tax shall not
be construed “to apply to foreign or interstate commerce, except
insofar as the same may be permitted under the provisions of the
constitution and laws of the United States.” Jd. § 7 (to be codified
at Mass. Gen. Laws Ann. ch. 64J, § 10).

32 Assembly Bill 2341, Cal. Leg., 1985-1986 Reg. Sess. § 5 (as
amended May 24, 1985) (repealing fuel tax exemption previously
granted to airlines holding common carrier certificates under the
laws of the United States “or of any foreign government”).

33 Besides the possibility of imposing taxes, foreign governments
have at their disposal numerous other techniques for
discriminating against United States airlines. They can levy
artificially-inflated “user fees”; impose obstacles to repatriation of
foreign earnings; route airlines to less desirable airports; refuse to
let carriers use baggage handlers of choice; give local airlines
preference in carrying air cargo; restrict United States airlines’
local advertising; or impose excessively complicated customs pro-
cedures or other delays and inconveniences. See U.S. Civil
Aeronautics Board, FY 1976 Report to Congress 103-108 (1977).

35

No. 84-902, which, owing to Canada’s failure to accord
American carriers reciprocal exemptious from provin-
cial taxes on aviation fuel (see page 13, supra), could
conceivably be situated differently from the other ap-
pellants.

CONCLUSION

Probable jurisdiction should be noted in No. 84-902; in
No. 84-922, limited to the first question presented
therein; and in No. 84-1041, limited to the first two
questions presented therein.*4 For the reasons stated in
our companion brief in Nos. 84-921, 84-926 and 84-929,
the other questions presented here are insubstantial.

Respectfully submitted.

CHARLES FRIED
Acting Solicitor General
ALBERT G. LAUBER, JR.
Assistant to the Solicitor General
ABRAHAM D. SOFAER
Legal Adviser
Department of State
JIM J. MARQUEZ
General Counsel
Department of Transportation

SEPTEMBER 1985

** The Court may wish to consolidate the cases for oral
argument.

APPENDIX

EMBASSY
OF THE
ARGENTINE REPUBLIC

D.E. No. 910

The Embassy of the Argentine Republic presents
its compliments to the Department of State and has
the honor to refer to the lawsuit Lineas Aereas
Costarricenses, S.A. v. State of Florida, which it un-
derstands is currently pending before the Supreme
Court of the United States. The Embassy of the
Argentine Republic wishes to request that the United
States support the position taken by the Argentine
carrier and many other South American airlines in
that case by making a formal presentation before the
Court.

It is the policy of Argentina to exempt United
States airlines from taxes on aviation fuel purchased
by them in Argentine territory. As a result, United
States airlines pay no fuel taxes to any governmental
authority at any level in Argentina. This policy is
based on the assumption that the United States will
provide reciprocal treatment to Argentine carriers.
Recent events in the State of Florida have called that
assumption into question.

The Embassy understands that the State of Florida
has imposed a 5.7¢ per gallon tax on aviation fuel
purchased in that jurisdiction. We also understand
that this tax applies to all fuel purchased by inter-
national airlines whether or not it is consumed with-
in United States territory. The Embassy of the
Argentine Republic is concerned that this tax, if
allowed to stand, will place the United States in con-
flict with provisions of a number of international

(la)

2a

agreements and the established international practice
of providing exemptions from fuel taxes. They may,
in turn, undermine the basis of reciprocity that has
previously existed between the United States and
Argentina.

The Embassy of the Argentine Republic would call
the attention of the Department of State to Article 24
of the Chicago Convention and, in particular, to res-
olutions adopted by the Council of the International
Civil Aviation Organization on November 14, 1966.
These documents make clear the established inter-
national practice that airlines should not be required
to pay taxes on items such as fuel. They also make
it clear that this policy extends not only to taxes im-
posed by the Central Government, but also those es-
tablished by local jurisdictions.

The current Air Tansport Services Agreement be-
tween the United States and Argentina applies this
principle in the United States-Argentina markets.
Article F of that agreement requires both parties to
provide for exemption from taxes. The Embassy of
the Argentine Republic notes that this provision is
not limited to taxes imposed at any particular level of
government and is clearly intended to cover all taxes
and similar governmental charges. On the basis of
this provision, Argentina has provided tax exemp-
tions to United States airlines. The Embassy of the
Argentine Republic respectfully submits that consist-
ent with this agreement, the Government of the
United States should do the same. This would re-
quire exemption of Argentine carriers from the Flor-
ida tax.

The Embassy of the Argentine Republic also notes
that there are strong policy reasons supporting the
rule against taxation of airline fuel. Many airlines

3a

presently face serious economic challenges and cannot
afford the additional burden that fuel taxes would
impose on them. These airlines would be compelled to
pass this tax onto their passengers and shippers.
This would adversely affect the development of in-
ternational aviation. Additionally, the Embassy of
the Argentine Republic would note that if the Flor-
ida tax is found acceptable under United States law,
other jurisdictions in the United States are likely to
impose similar taxes. Indeed, the Embassy of the
Argentine Republic understands that the State of
Illinois has already taken such action in reliance upon
the recent decision of the Florida Supreme Court up-
holding this tax. The Embassy of the Aregntine Re-
public is concerned that the establishment of such
taxes would not only increase the expenses that air-
lines and their customers must bear, but would also
pose difficult administrative problems. The Embassy
of the Argentine Republic believes this would be in-
consistent with the many international agreements
calling for the establishment of uniform practices af-
fecting international aviation. In view of all of these
factors, if the Florida tax is permitted to be imposed,
the Embassy of the Argentine Republic believes that
foreign countries would feel compelled to re-examine
critically whether the United States is, in fact, pro-
viding a satisfactory degree of reciprocity regarding
fuel taxes.

The Embassy of the Argentine Republic under-
stands that the validity of this tax is now under re-
view in the Supreme Court of the United States in
the Lineas Aereas Costarricenses, S.A. lawsuit previ-
ously mentioned. The Embassy of the Argentine Re-
public respectfully requests the United States to sup-
port the position of the foreign airlines challenging

4a

this tax through the submission of an amicus curiae
brief to the United States Supreme Court and to
bring to the attention of that Court the implications
that this tax has for the established system of inter-
national aviation.

The Embassy of the Argentine Republic wishes to
advise the Department of State that this note should
not be considered confidential and that it may be re-
leased to the public.

The Embassy of the Argentine Republic avails it-
self of this opportunity to express renewed assurances
of its highest consideration.

Washington, D.C., December 27, 1984

5a

AMBASSADE DE BELGIQUE

The Belgian Embassy presents its compliments to
the State Department and wishes to draw its kind at-
tention to the subject of fuel taxes imposed by States
of the United States on international aviation.

Belgium exempts at all levels of its government
fuel used in international airline operations by
United States carriers. This exemption is based on
reciprocity.

Belgium emphasizes the established international
consensus favoring reciprocal exemption from taxes
on the basis of Article 24 of the Chicago Convention
as well as the resolutions of the ICAO Council of
November 14, 1966 (ICAO Document 8632-C/968).

It is well known that many airlines are facing at
the present time serious economic challenges and can
ill afford the extra financial burden these taxes im-
pose. Under these circumstances, similar taxes could
be imposed by other governments including the gov-
ernment of Belgium.

Finally, State fuel taxes are incompatible with
Article 9 of the bilateral aviation agreement between
the United States and Belgium which specifically
commits the United States Federal Government to use
its “best efforts” to obtain exemption of taxes at all
levels including the state and local level.

The Embassy of Belgium welcomes the opportunity
to renew to the Department of State the assurances
of its highest consideration.

Washington D.C., November 30, 1984.

6a

[EMBASSY OF THE FEDERATIVE
REPUBLIC OF BRAZIL]

No. 9

The Embassy of the Federative Republic of Brazil
presents its compliments to the Department of State
and has the honor to refer to the imposition of fuel
taxes on foreign airlines by the State of Florida.

Such legislation, effective April 1, 1983, imposes
a 5.7 cents per gallon tax on all aviation fuel pur-
chased in the State of Florida, regardless of whether
it is to be consumed in Florida or outside the United
States.

This matter is of the greatest concern to the
Brazilian Government for the following reasons:

A) a state fuel tax on international airlines appears
to be incompatible with the spirit of paragraph VII of
the Memorandum of Consultation of June 14, 1984,
regulating bilateral civil aviation relations. In it
each party agreed to the commitment “to make all
possible efforts to ensure that the airlines of each
country can operate at the maximum efficiency with
a fair and equal opportunity”.

B) the imposition of such state fuel tax may be
deemed to be contrary to Article 24 of the Conven-
tion on International Civil Aviation (Chicago Con-
vention), which provides that fuel on board an air-
craft of a Contracting State shall be exempt from
customs duty, inspection fees or similar national or
local duties and charges. Further resolutions by the
ICAO Council also provide for exemption from cus-
toms and all duties from fuel taken by foreign air-
lines.

C) other states in this country appear to be encour-
aged by the Florida fuel tax and seem to be inclined
to impose similar taxes of their own.

ee

Ta

D) like many other airlines, Brazilian airlines serv-
ing the US-Brazil market are currently facing seri-
ous economic challenges for which the Florida fuel
tax would represent an additional financial burden.

The Brazilian Embassy is informed that a number
of foreign airlines, ‘[including] the Brazilian carrier
| VARIG S.A., will soon appeal to the United States
Supreme Court the decision of the Florida Supreme
Court of June 14, 1984, which reversed a lower State
Court judgment exempting foreign airlines [from] the
aforementioned tax. The Brazilian Embassy would
appreciate it if the United States Government would
extend formal support to the position of the plaintiffs
through an amicus curiae brief to the Supreme Court,
or any other means deemed appropriate.

The Embassy of the Federative Republic of Brazil
avails itself of this opportunity to renew to Depart-
ment of State the assurances of its highest considera-
tion. .

Washington, D.C., January 8, 1985.

8a

EMBAJADA DE COLOMBIA
WASHINGTON

No. 1679/E-375

The Embassy of Colombia presents its compliments
to the Department of State and has the honor to refer
to the legal action instituted by a group o* South
American airlines entitled Lineas Aereas Costarricen-
ses, S.A., et al. v. State of Florida Department of
Revenue. The Colombian airline AVIANCA is one
of the plaintiffs in this suit, which is now before the
Supreme Court of the United States. This lawsuit
challenges the validity of a law of the State of Flor-
ida imposing a tax of nearly six cents per gallon upon
fuel taken aboard by the foreign airlines at Florica
airports for international use.

The Embassy of Colombia wishes to bring to the
attention of the Department of State its conviction
that it ic totally inappropriate for local jurisdictions
to impose taxes upon fuel intended for use by inter-
national airlines. For many years there has been
an established practice among nations of exempting
fuel purchased by international airlines from tax.
This practice is demonstrated in Article 24 of the
Convention on International Civil Aviation and. res-
olutions on this subject adopted by the Council of the
International Civil Aviation Organization on Novem-
ber 14, 1966. This policy has played an important
role in the healthy growth of international aviation
by preventing an inappropriate financial burden on
airlines and their customers.

Consistent with this internaticnal practice, Colom-
bia does not impose taxes ac the national or local level
upon fuel intended for international airline use.
Therefore, all American airlines in Colombia are

9a

fully exempt from fuel taxes at all levels of govern-
ment. This exemption is based upon effective reci-
procity from the United States, including taxing au-
thorities in state and local governments. The Em-
bassy of Colombia views the imposition by the State
of Florida of a tax upon fuel intended for use by
Colombian carriers as an infringement upon the rec-
iprocity that had previously been established.

The Embassy of Colombia also wishes to point out
that the example of Florida could set a precedent to
be followed by other governments. If the United
States allows its states to impose taxes upon fuel pur-
chased by international airlines, the airlines of the
United States could very soon see the initiation of
local or national taxes by other nations. The develop-
ment of such a pattern would surely be detrimental
to the interests of all concerned and harmful to the
development of aviation.

The Embassy of Colombia understands that the
LACSA lawsuit is now pending before the Supreme
Court of the United States and strongly urges the
United States to formally support the position of the
international airlines by submitting to the Supreme
Court a brief as amicus curiae. The aetive involve-
ment of the United States in the Supreme Court pro-
ceedings would be viewed by Colombia as an appro-
priate action by the United States in fulfillment of
its commitment to provide reciprocal tax exemption
in matters regarding international aviation.

The Embassy of Colombia informs the Department
of State that the contents of this note are not classi-
fied and can be disclosed.

The Embassy of Colombia avails itself of this op-
portunity to renew to the Department of State the
assurance of its highest consideration.

10a

EMBAJADA DE COSTA RICA
WASHINGTON, D.C. 20008

No. 893
October 24, 1984

Dear Mr. Secretary:

I have the honor to address your Excellency with
respect to the matter of the imposition of fuel taxes
by the State of Florida on international aviation, as
well as similar taxes imposed by other local jurisdic-
tions in the United States.

As your Excellency may know, reciprocal tax ex-
emption treatment has been the practice worldwide
to aircraft serving international routes. There is an
international consensus expressed in Article 24 of the
Chicago Convention as well as in ICAO resolution
Document 8632-C/968.

Furthermore, the unilateral imposition of fuel
taxes on international aviation on the part of the
State of Florida is contrary to and violates the spirit
of bilateral aviation agreements which provide for
exemptions on the basis of reciprocity from national
duties and charges.

In addition, the imposition of such aviation fuel
taxes, on the part of state tax authorities, is un-
desirable as a matter of policy. It is not only detri-
mental to the overall development of international
aviation, but could result in a confusing administra-
tive situation and the possibility of widespread avia-
tion fuel taxes worldwide.

Excellency, as a group of international airlines are
presenting this matter to the United States Supreme
Court in the very near future, on behalf of my Gov-
ernment I would kindly request your good offices to

lla

obtain the support of the Government of the United
States before said Court in favor of the principle of
the reciprocal fuel tax exemption treatment which is
embodied in the letter and the spirit of international
aviation relations.
Accept, Excellency, the assurances of my highest
consideration.
/8/ Claudio A. Volio
CLAUDIO A. VOLIO
Ambassador

12a

EMBAJADA DEL ECUADOR
WASHINGTON, D.C.

No. -4-2- 185/84

The Embassy of Ecuador presents its compliments
to the Department of State and has the honor to re-
quest the Department’s attention to the following
matter.

The State of Florida has imposed a tax of 5.7 cents
per gallon on all aviation fuel sold in the State. This
tax, which became effective April 1, 1983, is applica-
ble even if the fuel is consumed outside the state or
even outside the United States. The tax is thus im-
posed on fuel purchased by Empresa Ecuatoriana de
Aviacion (“Ecuatoriana”), the flag carrier of Ecua-
dor, and other Ecuadorean cargo airlines that op-
erate in the State of Florida.

Numerous South American air carriers, including
Ecuatoriana, have filed a lawsuit in the Florida state
courts (Lineas Aéreas Costarricenses, S.A. et al. v.
State of Florida Department of Revenue) to chal-
lenge this law as being in violation of the United
States Constitution. In 1983 the trial court held that
foreign air carriers must be exempted from the tax.
This decision was reversed by the Florida Supreme
Court in June 1984. The carriers have appealed the
case to the United States Supreme Court.

The Embassy of Ecuador wishes to inform the
Department of State of the grave concern of the Gov-
ernment of Ecuador concerning the imposition of this
tax on international air carriers such as Ecuatoriana.
It is inappropriate for local jurisdictions such as the
State of Florida to impose taxes on fuel used by in-
ternational air carriers. Under the established prac-
tice of nations such fuel purchases are exempt from

13a

tax. Consistent with this practice Ecuador does not
impose taxes at the national or local level on fuel
used by international air carriers. The Florida tax
is inconsistent with this international standard of
reciprocity.

This established practice of nations is also demon-
strated by Article 24 of the Convention on Interna-
tional Civil Aviation (“Chicago Convention”) and
resolutions adopted by the Council of the Interna-
tional Civil Aviation Organization on November 14,
1966 (ICAO Document 8632-C/968). The Council
resolved that “when an aircraft registered in one
State departs from an international airport of an-
other State either for another customs territory of
that latter State or for the territory of any other
State, the fuel, lubricants and other consumable tech-
nical supplies taken on board for consumption dur-
ing the flight shall be furnished exempt from all
customs and other duties.” The term “customs and
duties” includes “import, export, excise, sales, con-
sumption and internal duties of all kinds levied upon
fuel, lubricants and other consumable technical sup-
plies by any taxing authority within a State.” (Sec.
1, paras. 1 and 4).

The Embassy of Ecuador further regards the
Florida tax on fuel to be used by Ecuatoriana as
being inconsistent with the Air Transport Services
Agreement between the Governments of the United
States and Ecuador (TIAS 1606), which provides for
exemption of fuel from “customs, inspection fees or
similar duties or charges.” (Art. 3 (c) ). Consistent
with the Agreement, as indicated above, Ecuador
does not impose taxes at the national or local level on
fuel used by international air carriers.

14a

The imposition of Florida’s tax could set a prece-
dent for similar action by other governments. If that
were to happen international air carriers—including
those of the United States—would be substantially
burdened by taxes imposed by national or local ‘[au-
thorities] of other nations. This would be detrimental
to the maintenance and development of international
aviation.

The Embassy of Ecuador understands that partici-
pation by the United States Government in the liti-
gation before the Supreme Court in support of the
position of the in rnational air carriers would be
important in protecting their interests. It further
understands that the United States has presented
amicus curiae briefs in similar circumstances. There-
fore, the Embassy of Ecuador urges that the Govern-
ment of the United States file an amicus curiae brief
with the Supreme Court supporting the position of
the international air carriers.

The Embassy of Ecuador avails itself of this op-
portunity to renew to the Department of State the
assurances of its highest consideration.

Washington, D.C., December 14, 1984

15a

[EMBASSY OF EL SALVADOR]

1. Following is an informal translation of the text
of Diplomatic Note 14139 dated December 3, 1984
from the government of El Salvador. Original is be-
ing pouched to department

2. I have the honor of addressing your Excellency
with regard to air transport relations between the
government of the United States of America and the
government of E] Salvador.

In particular allow me to call to the attention of
Your Excellency a tax ruling regarding a tax on
aviation fuel, established by the State of Florida and
entered into force the first of April 1983, applying to
airlines which do not have their principal offices in
Florida, as is the case of the Salvadoran Air Line,
Taca International Airlines, S.A.

Allow me to make known to Your Excellency, so that
you can bring to the attention of the competent au-
thorities of your government, that said ruling is not
in accord with Article 9(2)(C) of the Air Transpor-
tation Agreement between the government of El Sal-
vador and the government of the United States of
America by virtue of which, on a reciprocal basis, are
exempted from taxes “fuel, lubricants and the con-~
sumable technical supplies introduced into or supplied
in the territory of a party for use in an aircraft of a
designated airline of the other party engaged in in-
ternational air transportation, even when these sup-
plies are to be used on a part of the journey per-
formed over the territory of the party in which they
are taken on board.” In this case, the principle estab-
lished in this article, based on reciprocity, is not be-

16a
ing applied by Your Excellency’s government, while
the North American Airlines enjoy this exemption.

On the other hand, based on Articles 9(5) and 11
(1, 2) of the Referenced Agreement, each party shall
try to secure for the designated airlines of the other
party, on the basis of reciprocity, an exemption from
taxes imposed by state, regional and local authorities,
with the objective of allowing a fair and equal op-
portunity for said airlines, using all appropriate
methods within its jurisdiction to eliminate all forms
of discrimination which adversely affect the competi-
tive position of the airlines of the other party.

As a consequence of the fact that the action taken by
the State of Florida contravenes Article 9(2) (C)
and based on Article 9(5) and Article 11 (1, 2) the
government of El Salvador urges your illustrious gov-
ernment to take the necessary actions to avoid appli-
cation to the airline designated by El Salvador of this
measure imposed contrary to the principles estab-
lished in the air transportation agreement.

I take this opportunity to renew to Your Excellency
the assurances of my highest and most distinguished
consideration.

17a

AMBASSADE DE FRANCE
AUX ETATS-UNIS

Washington, D.C.
30 novembre 1984

L’Ambassade de France présente ses compliments
au Département d’Etat et a l’honneur de lui faire
savoir ce qui suit:

La taxation sur les carburants des aeronefs in-
staurée par |’Etat de Florida a la suite d’une décision,
en date du 11 avril 1983, préoccupe vivement les
Autorités francaises.

1. En effet, cette mesure, susceptible A l’évidence
d’étre prise et appliquée dans d’autres Etats en
termes voisins ou comparables, nous parait, pour
lessentiel, en opposition avec l’esprit de notre accord
bilatéral de services aériens du 27 mars 1946, notam-
ment avec son article 3-C.

De méme est-elle en opposition avec l’article 24
(A) de la Convention de Chicago en date du 7 dé-
cembre 1944.

Les autorités francaises croient done devoir re-
lever que le maintien d’une telle mesure risquerait de
porter atteinte, du point de vue des responsabilités
internationales, 4 la notion méme d’accords bilatér-
aux de services aériens qui pourraient ainsi étre mod-
ifiés de maniére unilatérale et contrairement aux en-
gagements formels souscrits par le gouvernement des
Etats-Unis. ,

Cette constatation avait déja été faite par la note
adressée le 5 mars 1984 par l’Ambassade A propos de
l’affaire—analogue dans sor esprit—de la suppres-
sion, dans ]’Etat d’Illinois, de l’exonération de la taxe
sur les achats effectués dans les aéroports.

18a

2. En outre, cette mesure est contraire a la réso-
lution ad hoe du Conseil de |’Organisation de |’ Avia-
tion Civile Internationale du 14 novembre 166 qui
prévoit 4 la section 1, paragraphes 2 et 4, que:

“lorsqu’un aéronef immatriculé dans un Etat part
d’un aéroport international d’un autre Etat, soit a
destination d’un autre territoire douanier de celui-ci,
soit a destination du territoire d’un autre Etat, le
carburant, les lubrifiants et autres produits consom-
mables embarqués pour étre consummés en vol doi-
vent étre fournis en franchise de tous droits de dou-
ane et autres, ou que les droits percus doivent étre
remboursés, A condition qu’avant de quitter le terri-
toire douanier considéré, l’aéronef ait rempli toutes
les formalités douaniéres et autres formalités de
congé prescrites sur ce territoire.”

Or, cette résolution, fondée sur la notion de récip-
rocité, est admise par tous les pays. Sa remise en
cause porterait atteinte au climat des échanges inter-
nationaux; et elle constituerait une entrave certaine
au développement des transports aériens internation-
aux, leur infligeant des surcoiits d’exploitation qui
devraient alors étre inévitablement supportés par les
passagers.

S’agissant de la France, sa pratique est conforme
4 la résolution de ’OACI précitée, puisque les aéro-
nefs immatriculés aux Etats-Unis, qui partent d’un
aéroport francais 4 destination de n’importe quel
autre Etat, sont exonérés, 4 raison du carburant et de
produits embarqués, de la taxe sur la valeur ajoutée
(TVA) par l'article 262-11-6 du code général des
impéts, ainsi que de la taxe intérieure sur les pro-
duits pétroliers (TIPP) par l’article 192, section VI,
du code des douanes.

19a

Dans ces conditions, l’Ambassade de France, d’or-
dre de son Gouvernement, tient a appeler |’attention
des Autorités américaines sur importance attachée
a une solution rapide et heureuse de ce contentieux.
Pour leur part, les Autorités francaises sont con-
vaincues de la nécessité, pour les Autorités améri-
caines, d’appuyer auprés de la Cour Supréme des
Etats-Unis, la procédure engagée par un groupe de
compagnies aériennes pour obtenir l’annulation de la
mesure prise par |’Etat de Floride. Elles leur serai-
ent done reconnaissantes d’engager toute action adé-
quate dans ce sens.

Les Autorités francaises n’ont pas d’objections a
ce que le contenu de cette note-soit rendu public.

L’Ambassade de France saisit cette occasion pour
renouveler au Département d’Etat |’assurance de sa
trés haute considération.

20a

EMBASSY OF THE
FEDERAL REPUBLIC OF GERMANY
WASHINGTON, D.C.

The Embassy of the Federal Republic of Germany
presents its compliments to the Department of State
and has the honor to refer to the following:

By law effective April 1983, the State of Florida
imposed a tax of 5.7 cents per gallon on all aviation
fuel sold in Florida, regardless where the fuel is
consumed. A group of airlines challenged the legality
of the tax in the courts. On June 1, 1983, the Second
Cireuit Court in and for Leon County, Florida, de-
cided that foreign carriers serving Florida must be
exempted from the tax. On appeal by the State of
Florida, however, the Florida Supreme Court, on
June 14, 1984, reversed the lower court’s judgment
and held that the imposition of the tax on foreign
airlines is legal. The airlines have appealed this deci-
sion to the United States Supreme Court.

For the reasons set forth below, the Embassy of
the Federal Republic of Germany would appreciate
it if the Department of State would support the
position of the airlines by an amicus curiae brief to
the United States Supreme Court:

1. Article 24 of the Convention on International
Civil Aviation provides that fuel on board an aireraft
of a Contracting State shall be exempt from customs
duty, inspection fees or similar national or local
duties and charges. Furthermore, a_ resolution
adopted by the ICAO council on November 14, 1966
(ICAO-Doe. 8362-C/968-1966) provides exemption
from customs and all other duties for foreign air-
eraft taking on board fuel and other consumabie sup-
plies.

2la

.2. During the still pending negotiations on a new
bilateral air transport agreement both delegations
achieved consensus on a new article 9, which, in
extension of Article 7 of the bilateral air transport
agreement of 1955, would grant reciprocal exemp-
tions from national taxes for all purchases of aviation
fuel. Both Contracting Parties would use their best
effort to secure exemption of the said taxes imposed
by state, regional or local authorities.

3. In the Federal Republic of Germany, foreign
airlines are exempt from taxes on the purchase of
fuel. Should the tax imposed by the State of Florida
be upheld, the reciprocity in relation to the exemp-
tion existing in the Federal Republic of Germany
would be jeopardized.

4. The State of Illinois, apparently encouraged by
the judgment of the Florida Supreme Court, already
imposed a similar “Retailers’ Occupation Tax”.
Should the judgment of the Florida Supreme Court
be confirmed, numerous States of the Union might
follow suit. This would disrupt a longstanding
worldwide practice established to prevent discrim-
ination and to facilitate the operation of interna-
tional air services.

5. State taxes on international aviation would pre-
vent the United States to speak with one voice in
an important are of foreign trade. This would im-
pede international trade and may be contradictory
to the Import-Export Clause of the Constitution of
the United States.

The Embassy of the Federa] Republic of Germany
avails itself of this opportunity to renew to the De-

22a

partment of State the assurance of its highest con-
sideration.
Washington, 29 November 1984

23a

EMBAJADA DE LA REPUBLICA DE
HONDURAS
WASHINGTON, D.C. 20008

November 7, 1984
No. 118-84 EHW/DE

Excellency :

I have the honor to address Your Excellency with
respect to the matter of the aviation fuel taxes that
have been imposed on international airlines by the
State of Florida.

As Your Excellency may know, the established in-
ternational consensus favors reciprocal exemption
from taxes, which is expressed in Article 24 of the
Chicago Convention, as well as in ICAO resolution
document 8632-C/968.

The Honduran Civil Aeronautic Code contemplates
that foreign airlines may introduce, for their own
use, duty free fuel and lubricants providing that
the Honduran airlines are treated in a reciprocal
manner abroad. Since the Republic of Honduras does
not have a federal structure, a true reciprocity on the
part of the United States would require exemption
from taxes at both federal and state levels.

The imposition of fuel taxes by the State of Flor-
ida, as well as similar taxes imposed by other local
jurisdictions in the United States, could prodvce re-
taliatory measures by other foreign governments.
This action would be detrimental to the overall de-
velopment of internati nal aviation and at the same
time create administrative, legal, and economic prob-
lems.

At the present time, many airlines are facing
financial difficulties and these fuel taxes represent a

24a

serious economic challenge for them, which could
provide an extra burden on passengers and shippers
who use their services.

Excellency, as it is understood that this case will
soon be presented to the United States Supreme Court
by a group of international airlines, on behalf of my
Government I kindly request your cooperation in ob-
taining the support of the United States Government
before the Supreme Court in favor of the principle
of reciprocal fuel tax exemption treatment.

Accept, Excellency, the assurances of my highest
consideration.

/s/ Juan Agurcia
JUAN AGURCIA
Ambassador

25a

EMBASSY OF ICELAND
2022 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20008

The Embassy of Iceland presents its compliments
to the Department of State and has the honor to re-
quest assistance in the following matter.

On several occasions the Embassy of Iceland has
had the opportunity to express to you Iceland’s con-
cern over the continuing failure of the Illinois De-
partment of Revenue to grant to Icelandair (the
designated flag carrier of Iceland, partially owned
by the government of Iceland) an exemption from
Illinois sales and use taxes. Illinois legislation ex-
empts sales to governmental bodies, and the Depart-
ment of Revenue Rule 40 had confirmed that exemp-
tion. Recently, the Illinois Department of Revenue
proposed to eliminate such exemption with respect to
those foreign air carriers enjoying its benefit, and
Iceland again objected. The Illinois Department of
Revenue has now in fact eliminated the Rule 40
exemption and is now assessing its sales and use tax
against foreign air carriers, regardless of the level
of governmental ownership. The City of Chicago
continues to levy its local taxes as well. As we have
expressed to you, this local taxation is contrary to
the tax treaties between the United States of Amer-
ica and Iceland, and is not in the best interest of
foreign commerce between our nations.

We have learned that a recent State of Florida
Supreme Court decision upheld that state’s fuel tax
on international aviation. We understand that the
carriers involved have appealed to the United States
Supreme Court in the case entitled “Lineas Aereas
Costarricenses, S.A. (LACSA), et al. v. Department

26a

of Revenue, State of Florida”. Although the Republic
of Iceland is not directly involved as a litigant, we
have noted with great interest that the Illinois De-
partment of Revenue, in support of its successful
proposal to eliminate the Rule 40 exemption, relied
heavily on this Florida decision. In addition, because
Icelandair recently has inaugurated a service into
Orlando, Florida, Iceland considers it appropriate to
express to you, and to request your assistance in
presenting, The Republic of Iceland's support of ap-
pellant LACSA and its opposition to the imposition
of local taxes on international air traific.

The history of agreements and treaties between
The Republic of Iceland and the United States of
America relating to the commerce between our two
nations has been characterized by mutual coopera-
tion toward a common goal, a stable economic en-
vironment:

(a) The Air Transport Agreement of 1945, based
on the International Civil Air Conference held in
Chicago, Illinois of 1944, exempted aircraft fuel from
import custom duties and use or consumption duties
for flights into or over our respective nations.

(b) In 1962, an Agreement was entered into grant-
ing relief for double income taxation on the earnings
from the operation of ships and aircraft operated un-
der the laws of our respective nations.

(c) In 1975, a Convention was entered into for
the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and
capital of our citizens and the businesses of our re-
spective nations. Article 10 of the Convention specif-
ically exempted from income taxation the “operation
in international traffic of ship or aircraft” regis-

27a

tered in our respective nations. In addition, pursu-
ant to Article 17, Iceland agreed that its national
capital tax, which has no counterpart in the United
States Federal Tax Codes, would not be levied against
ships, aircraft and other assets pertaining to the
operation of such ships and aircraft.

(d) Lastly, on November 6, 1984, the United States
Treasury Department certified the Iceland’s ex-
change of information program for the new For-
eign Sales Corporation provisions of The United
States of America Tax Reform Act of 1984. We
understand that these provisions may further
strengthen the economic ties between our two nations.

The Republic of Iceland is concerned that its abil-
ity to function economically under its international
tax and trade agreements with the United States of

America has been, and may continue to be, threat-
ened by the actions taken by local taxing author-
ities in the United States of America:

(1) Both The Republic of Iceland and the United
States of America intended that the Agreements and
Treaties would promote trade and commerce. How-
ever, as long as individual States and other local
authorities assess taxes on the international com-
mercial operatio: of Icelandair and other foreign
carriers, such operations become more expensive.
Indeed, if international air carriers such as Iceland-
air are forced to seek destinations in the United
States of America based in any way upon considera-
tions of local taxation of operational essentials such
as aviation fuel, the States imposing such taxes,
such as Florida and Illinois, may lose the sizeable
financial benefits to local, state and regional com-

merce which naturally result from such international
traffic.

28a

(2) Local taxation of international commerce is
inconsistent with and violates the reciprocity in-
tended by our Agreements and Treaties. Local taxa-
tion prevents the Government of the United States
of America from uniformly conducting its relation-
ships with foreign governments. This lack of con-
tinuity undermines those relationships.

The Republic of Iceland hereby formally requests
that The United States of America consider filing
an amicus curiae brief in opposition to the State of
Florida taxation of aviation fuel used in interna-
tional aviation. We understand that such brief must
be filed prior to January 10, 1985, which we under-
stand is the current deadline.

The Embassy of Iceland avails itself of this op-
portunity to renew to the Department of State the
assurances of its highest consideration.

Washington, D.C.
December 18, 1984.

29a

EMBASSY OF ISRAEL
WASHINGTON, D.C.

The Embassy of Israel presents its compliments to
the Department of State and has the honor to request
its assistance in the following matter.

In June 1984, the Supreme Court of the State of
Florida held in a lawsuit involving Lineas Aereas
Costarricenses and eleven other foreign carriers
(“LACSA litigation”) that the State’s 5.7 cents per
gallon sales tax on aviation fuel is valid. According
to information given to the Embassy of Israel, the
decision of the Florida Supreme Court is being ap-
pealed to the United States Supreme Court.

The Government of Israel wishes to express its
strong concern with respect to the decision of the
Florida Supreme Court. In addition, the Government
of Israel wishes to express its interest in the out-
come of the LACSA litigation in the United States
Supreme Court.

El] Al Israel Airlines Limited (“El Al’) is the
flag carrier of the State of Israel and is over 99%
owned by the Government of Israel. E] Al has been
designated in accordance with the terms of the Air
Transport Agreement between the U.S.A. and Israel,
13.6.1950, and the Protocol relating to the said
Agreement of 16.8.1978, and foreign air carrier per-
mits issued by the United States Civil Aeronautics
Board, to conduct international flight operations be-
tween Miami and foreign points. El Al has in the
past engaged and may in the future engage in opera-
tions into and from Miami. While the LACSA liti-
gation directly concerns only aviation fuel taxes im-
posed by the State of Florida, it also has wider im-

30a

plications for international airlines, such as El Al,
that serve the United States.

It is the view of the Government of Israel that
taxes such as the Florida aviation fuel tax on for-
eign carriers are in conflict with the principle that
international air carriers should be exempt, [a] prin-
ciple [that] has, for many years, been well established
by international treaties and agreements to which
the United States is a party.

The United States and the State of Israel are
signatories to the Convention on International Civil
Aviation (Chicago Convention). Article 24 of the
Chicago Convention provides that fuel and aircraft
stores on board an aircraft of a contracting state
shall be exempt from customs duty, inspection fees
or similar national or local duties and charges in the
contracting states.

In addition, the International Civil Aviation Or-
ganization (“ICAO”), adopted on November 14,
1966, a Council Resolution, in furtherance of Article
24 of the Chicago Convention, which enunciates
ICAO’s policies on taxation in the field of interna-
tional air transport and which provides, in part, that
when an aircraft registered in one state departs
from an international airport of another state, the
fuel and other consumable technical supplies taken
on board for consumption during the flight shall be
exempt from all customs and other duties. The defi-
nition of “customs and other duties” set forth in that
Council Resolution includes sales, consumption and
internal duties and taxes of all kinds levied upon
fuel by any taxing authority within a state. The
United States has in general accepted the principles
enumerated in the ICAO Council Resolution and does
not itself impose any such charges. However, some
states in the United States, for example, Florida, do

3la

impose such charges. The Government of Israel con-
siders taxes such as the Florida aviation fuel tax
to be inconsistent with the aforementioned Resolution.

Moreover, paragraph (c) of Article IV of the Air
Transport Agreement of June 13, 1950, between the
United States and Israel provides that fuel and air-
craft stores retained on board civil aircraft of the
designated airline of one contracting party shall
be exempt from customs, inspection fees or similar
duties or charges in the territory of the other con-
tracting party. This provision is not confined to
national charges. It demonstrates the understanding
as [between] our two countries of the need for recipro-
cal exemption from taxes on civil aviation, which
would be seriously undermined by the imposition of
local fuel taxes by any state of the United States.

Pursuant to paragraph (g) of Article 10 of the
1978 Protocol to the Air Transport Agreement, each
party agrees to use its best efforts to secure for the
designated airlines of the other party, on a reciprocal
basis, an exemption from taxes, charges and fees
imposed by state, regional and local authorities on,
among other things, aircraft fuel and stores. The
State of Israel has no taxes similar to taxes such as
the Florida aviation fuel tax. Thus, American-owned
airlines operating to and from Israel are granted
full exemption from purchase-taxes similar to those
imposed by the State of Florida.

The Government of Israel wishes to affirm its posi-
tion that exemption from taxation on aviation fuel
is granted on a basis of reciprocity and would con-
sider the Florida sales tax a deviation from that
principle.

It is, therefore appropriate for the State of Israel
to request that the United States support the posi-

32a

tion of the international airlines in the LACSA liti-
gation and that the Department of State undertake
to transmit the concerns of the State of Israel to the
United States Supreme Court.

Dec. 5, 1984

33a

AMBASCIATA. D'ITALIA
WASHING’ ON, D. C.

The Italian Embassy presents its compliments to
the Department of State and wishes to draw its kind
attention on the following matter.

Since April 1, 1983, the State of Florida has been
applying a five percent sales tax on jet fuel pur-
chased within the State, even by foreign carriers. It
seems that the State of Illinois is also about to im-
pose the same amount of tax on fuel purchases, even
though foreign carriers have made juridical appeal
against the Florida decision and are awaiting the
decision of the Supreme Court of the U.S.

Article 3 of the current Civil Aviation Agreement,
[like] those signed with many other European coun-
tries and Japan, guarantees on the basis of reciproc-
ity the total exemption from import duties, charges
and any other tax applied on fuels.

The Italian Embassy understands that the above
agreement has not been ratified by the U.S. Senate
and that, consequently, the single States maintain
their right to autonomously apply such sales taxes in
their territories. However, the Memorandum of Un-
derstanding, signed by the U.S. Government with
various countries aimed at rectifying the conflict of
interests between the Federal Government and the
States of the Union, guarantee to the countries which
signed the Memorandum the U.S. government’s sup-
port and the application of the non-discriminatory
clause (Most Favorite Nation).

In view of the above, and since Italy does not ap-
ply any sales taxes to U.S. aircraft re-fueling in
Italy, the Italian Government would appreciate it if
the Department of State would use its good offices in

34a

order that the appropriate U.S. authorities will rec-
tify the situation as soon as possible.

The Italian Embassy welcomes the opportunity to
renew to the Department of State the expressions of
its highest esteem and consideration.

Washington, D.C.
October 2, 1984

35a

EMBASSY OF JAPAN
WASHINGTON

January 11, 1985

The Embassy of Japan presents its compliments
to the Department of State and, with regard to the
recent development in the state of Florida in impos-
ing a tax of 5.7 cents per gallon on aviation fuel sold
and loaded in the state for the purpose of interna-
tional air transportation from April 1983, wishes un-
der ‘nstruction from its home Government, to request
the Government of the United States to take appro-
priate measures so that the fuel for use in inter-
national air transportation in the state of Florida
will be exempted from tax in vie

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0154%3A05. Public record. Not legal advice.