Amicus Curiae Brief — Lineas Aereas Costarricenses, S.A. v. Florida Department of Revenue

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In the Supreme Court of the Gnited States

OCTOBER TERM, 1985

WARDAIR CANADA INC., APPELLANT

Vv.

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) 633-2217

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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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.

(I)

TABLE OF CONTENTS

Page

A al a ed eee are l

a I Se a Pe ee 2

ES te re. ohn oe ae ve be KS 2

EE ee ee ee )

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

ee cure ck was Une 8 os Oo Bie Or 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 federai uni-

formity is essential, and thus prevents the federal

government from speaking with one voice when

regulating commercial relations with foreign coun-

ae Se ae ae in 6 Ca Whee ee > 5 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

ee cewdesae’ 30

i ge wee veel s 35

ERS Oe aa re haere Cee VTS wee es 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.

a Se aia Wc Win aid ow een a cgcelee® «a 33

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

SES ne Peas ee een er ee 23

Container Corporation v. Franchise Tax Board, 463

boca d's. 0% ee Mn es 26, 27, 28, 29, 31, 32, 33

Eastern Air Transport, Inc. v. South Carolina Tax

I A, Bn... we Swie s yup s sivlnw a ewe es 30, 31

Edelman v. Boeing Air Transport, Inc., 289 U.S. 249 .. 30

(III)

Cases — Continued Page

Exxon Corp. v. Wisconsin Dep't of Revenue, 447 U.S.

Bs ie ut yds eR tie 00 oa kee MEER Lee ae 27

Japan Line, Ltd. v. County of Los Angeles, 441 U.S.

me seve ees ACT Ee EOE EERE TELE passim

McGoldrick v. Gulf Oil Corp., 309 U.S. 414 ........... 17

Mobil Oil Corp. v. Commissioner of Taxes of Vermont,

GN 205k so v6 4. oes a eels CR ae OU hee aS 26

South-Central Timber Development, Inc. v. Wunnicke,

oe Se | ee eee eee 26

Southern Pacific Co. v. Arizona, 325 U.S. 761......... 25

Tropical Shipping & Construction Co. v. Askew, 364 So.

Pe eS cos os ctu seh ate ean kee ewiee nse 6 5

United Air Lines, Inc. v. Mahin, 410 U.S. 623......... 30

Constitution, treaties, statutes, and regulations:

U.S. Const.:

Art. 1, § 8, Cl. 3:

Ce CI ees teense recuse ee 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:

i ro alu vsieaey sacs ees 6

Equal Protection Clause .................--- 6

Air Transport Services Agreement, Feb. 11, 1946,

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

| RRO eee Pi pe ye ard eee fe one ae ee 14, 15

Air Transport Services Agreement, Dec. 27, 1946,

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

0G TE, GE ME ods Netde cused seenetses 14

St TE I EE 6 eR os pideceese i veerccseves 14

Air Transport Service Agreement, Jan. 8, 1947, United

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

6: TI Oe I SEED io bee habs dr ee cones eines 14, 16

we en eer tr 14

Air Transport Services Agreement, Oct. 24, 1956,

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

ok FT a x ive cce vo cteven ys plekowes 14

a te gtk Se. Se ee 15

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.1.A.S. No. 9613 . 17

Air Transport Services Agreement, Apr. 2, 1982,

United States-E] Salvador, art. 9(5), T.I.A.S. No.

SOUR 6 5.c0 bas os gan ee ea eee ee eee 17

Air Transport Services Agreement, Apr. 8, 1982,

United States-Barbados, T.I.A.S. No. 10370:

WUE bc eae ven sv eaceea ek en Gee eee 15

UR SD 6. kicds iced ween eae eae eae 15

NR TR. Sue's ico fo eee eee 16

Air Transport Services Agreement, June 23, 1982,

United States-Brazil:

OUR OE 4.665 bons cess ede 15

ONG TE ao a vac aon oes ee ed Ae 19

Air Transport Services Agreement, Oct. 20, 1983,

United States-Costa Rica:

Re io eb ie vos oh ase eee 15

SE, TRI 6 6 vs boson nd beeen ee eae 15

ONE. TD eos ea vn vanen eee eee 15

| tr ee operat > 17

Convention on International Civil Aviation, opened for

signature Dec. 7, 1944, 61 Stat. 1180 et seg. ....... 3, 10, 13

ont... Se, Ge es Gao sea a cee te 20

arts. 22-28, 61 Stat. 1186-1188 .................. 10

NE, Sa ee I Co oa vk oc eee ckee even 20

oe ree 10, 11, 13, 14

0G: Se ee OU woes vaca oes van eenaee 20

arts. 43-66, 61 Stat. 1192-1200 .................. 11

ee epee. ne 11

Customs Convention on Containers, May 18, 1956, 20

eR OF Geer re sn te becca 25

Se OR Os 6 cE oak ee ee eke eae 25

Constitution, treaties, statutes, and

regulations — Continued: Page

Nonscheduled Air Service Agreement, May 8, 1974,

United States-Canada, 25 U.S.T. 788 et seq.:

ant. RA SOUT, FOG inci aweveiscenenvweces 19

out, TA x + 6.0 5 kes Kncsaeennns 14, 19

art. XEMMMe}, BO U.S.T. TOE . 05. cc vcccevvcesevss 15

ort, RVG Ses Oe a6 Sh new c en oun senses. 19

15 U.S:C. (1976 ed.) 751 ef 80g. ... 0... ccc ccc cececoes 18

10 U.S. SE so oes se vnc So udp eocieneevecssans 25

BO UZESs. DOE ko tix s 0.5: nb0kbenes cas ecaeenteres see 16

26 U.S.C. GERD «oc cys ccevesvisevseueveses sees 16

BUS0 Ce 2... a ae eee 16

96 U.S.C. GRRE oc ov here de tide wees Wasivenduere 16

49 U.S.C. As, TRGIRD «oie os cen cincseusycersueres 4

US tee OW. «6 eee 16

Fla. Stat. Ann.:

§ 212.0UE) (Wheat 1971)... 2. ne cece cccscncess 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:

| Tey pe reese Pere eer tk eee 5

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

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

68 osha ee eee 5

CD iy cei Eee eee eee 5

Ill. Admin. Reg. § 130. 0 2080(c) (1984) yc gen eae am 33

Mass. Act of July 1, 1985, ch. 145:

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

SW 5. sk ecsechar eee 33, 34

y Ua i 33

19 C.F.R.:

re Fe Oe Be 16

Vil

Miscellaneous Page

Assembly Bill, Cal. Leg., 1985-1986 Reg. Sess. ....... 34

M. Brenner, J. Leet & E. Schott, Airline Deregulation

MRE aay eee ei Nnn Ak ABe TS et Maree 18

11 Foreign Affairs Manual (Feb. 25, 1985) ........... 18

ICAO’s Policies on Taxation in the Field of International

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

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

CE SE Fae ARG la os Weick oes hee ea ener ce ves 20, 34

U.S. Civil Aeronautics Board, FY 1977 Report to Con-

SE. Ghia wa <a 8 Oe os ee ees 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

WARDAIR CANADA INC., APPELLANT

Vv.

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

vz.

FLORIDA DEPARTMENT OF REVENUS

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)

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. A388; 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 owne

and effectively controlled by the government or nationals

of its home country. About half the appellant airlines

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’ home 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 seg. ). 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

ceurt rendered its decisions.

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

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. 58a).4

* 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.

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

5 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.

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. A23; 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. ).

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 of [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

federal bilateral agreements explicitly address only na-

tional duties and charges ana “do[ } not provide for ex-

emptions from state excise taxes.” The court “pre-

sumejdj 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. The tax, as thus applied, should be in-

validated.

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 “[f]uel, 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

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 (ICAO), 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 1951 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)).

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

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.

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.’ Several

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 nation.”* Some of

the earlier compacts, like Article 24(a) of the Chicago

Convention, expressly refer only to aviation fuel and

supplies “introduced into” the United States or “re-

tained on board [the] aircraft * * * upon arriving in or

leaving” this country.? The more modern agreements,

? 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, Dec. 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.

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,”"* 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.

'' Nonscheduled Air Service Agreement, May 8, 1974, United

States-Canada, art. XII(1X(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.

'? F.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.

‘Fg. Air Transport Services Agreement, June 23, 1982,

United States-Brazil, art. IX, reprinted at 84-922 J.S. App. 83a.

'S F.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.

[imposed] by the contracting party,”!® and others simply

to “exemption from taxes,”!7 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.”!9 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 E.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 (eX 1) (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. 9(5), T.I.A.S. No. 10370, reprinted at

84-1041 J.S. App. 110.

the home countries of four of the appellants here (Bar-

bados, Costa Rica, E] 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

20 See note 19, supra; Air Transport Services Agreement, Oct.

20, 1983, United States-Costa Rica, art. 9(5), reprinted at 84-922

J.S. App. 88a; Air Transport Services Agreement, Apr. 2, 1982,

United States-El 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.I1.A.S. No. 9613,

reprinted at 84-1041 J.S. App. 104.

ee | ST NN

relatively rare instances where state tax laws did (at

least theoretically) reach aviation fuel used by foreign

airlines, those taxes (like Florida’s prior co 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 seg.) further

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 federal policy

on the subject. Indeed, many of our bilateral 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,”23 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.?5 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 fel 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.

*S E.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.

** 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 ct 84-902 J.S. App. A58, A60.

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 US.

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).

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.S5. 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 (td. 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,

oa, 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

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, 18a, 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 Commercia! 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 Calli-

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 intey-

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, 458).

The Court relied principally on two considerations in

determining that the taxation of cargo containers was a

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 “{alircraft 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, cr containers, with the possible exception of Afghanistan.”

(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 seg., 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.

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. F’ranchise

Tax Board, 463 U.S. 159, 171, 184-197 (1983); Mobil Oil

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-

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 &

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 sovernments 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 te the income of foreign or foreign-

owned corporations (463 U.S. at 189 n.26).8

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.

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).

See

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

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 controlled 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 nota 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” (2d.

at 451). As this Court has noted in sustaining analogous

state taxes on aviation fuel used by doinestic 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).29 These taxable events, ob-

29 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; Edelrian, 289 U.S. at 250-251; Eastern Air Transport,

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.

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 “refiect{ | 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).

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, jfuel 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-

that would accomplish the same result has been in-

troduced in California.22 The diplomatic notes stress

that a proliferation of aviation fuel 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

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).

No. 84-902, which, owing to Canada’s failure to accord

American carriers reciprocal exemptions 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)

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 juris dictions.

The current ‘ir 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

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-

‘ernational 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, 3.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

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 rene ed assurances

of its highest consideration.

Washington, D.C., December 27, 1984

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.

[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”. 7

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.

D) like many other airlines, Brazilian aiviines 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.

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 of 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 Florida

airports for international use.

The Embassy of Colombia wishes to bring to the

attention of the Department of State its conviction

that it is 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 international practice, Colom-

bia does not impose taxes at the national or local level

upon fuel intended for international airline use.

Therefore, all American airlines in Colombia are

RN Ai tes ncatenrrne wx on tee

fully exempt from fuel taxes at all levels or 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 active 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

2 are PE LEA Late as eS Bn acy

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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.

/3/ 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, 1988, 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

Aviacioén (“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 ail

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.

l4a

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 international 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 »f 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 E] 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-

l6a

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 i’évidence

d’étre prise et appliquée dans d’autres Etats en

termes voisins ou comparables, nous parait, pour

l’essentiel, 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 son 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 1966 qui

prévoit a 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 4 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, 4 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 surcodits d’exploitation qui

devraient alors étre inévitablement supportés par les

passagers.

S’agissant de la France, sa pratique est conforme

a la résolution de lOACI précitée, puisque les aéro-

nefs immatriculés aux Etats-Unis, qui partent d’un

aeroport francais a 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 larticle 262-11-6 du code général des

imp6ts, ainsi que de la taxe intérieure sur les pro-

duits pétroliers (TIPP) par l’article 192, section VI,

du code des douanes.

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19a

Dans ces conditions, l’Ambassade de France, d’or-

dre de son Gouvernement, tient 4 appeler |’attention

des Autorités américaines sur l’importance attachée

a une solution rapide +t 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 |’annulation de la

mesure prise par |’Etat de Floride.. Elles leur serai-

ent donc reconnaissantes d’engager toute action adé-

quate dans ce sens.

Les Autorités francaises n’ont pas d’objections 4

ce que le contenu de cette note soit rendu public.

L’Ambassade de France saisit cette occasion pour

renouveler au Département d’Etat l’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

Circuit 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 aircraft

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-Doc. 8362-C/968-1966) provides exemption

from customs and all other duties for foreign air-

craft taking on board fuel and other consumable sup-

plies.

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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 up’ield, the reciprocity in relation to the exemp-

tior. existing in the Federal Republic of Germany

weuld 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.

& 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 Federal Republic of Germany

avails itself of this opportunity to renew to the De-

i aa aera rearara a nii

22a

partment of State the assurance of its highest con-

sideration.

Washington, 29 November 1984

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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 ray know, the established in-

ternational consensus favors reciprocal exemptior

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 produce re-

taliatory measures by other foreign governments.

This action would be detrimental to the overall de-

velopment of international 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 traffic.

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.

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 operations 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.

E] Al Israel Airlines Limited (‘‘E] 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. E] 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 Israei 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

WASHINGTON, 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, 1988, 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 or 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 instruction 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 view of the following

points:

(1) Article 6 of the Civil Air Transportation

Agreement between Japan and the United States

holds that both parties shall be exempted from sales

tax on such goods as fuel and lubricating oils for the

use in international air transportation purchased and

loaded in the other insti territory on the basis of

reciprocity ;

(2) In the resolution of the International Civil

Aviation Organization (ICAO), it is provided that

such a fuel tax as that by the state of Florida should

be eliminated on the basis of reciprocity. Therefore,

the Government of Japan regards such taxation “by

the state of Florida as inconsistent with this Resolu-

tion;

(3) The Government of Japan believes that in en-

couraging development of an international exchange

of people and commerce, it has become an interna-

tionally established practice to exempt [from] tax fuel

used for the purpose of international air transport.

36a

The Government of Japan wishes to point out that

Florida’s sales tax on such fuel impedes the sound

development of international transportation.

Moreover, the Embassy wishes to call to the atten-

tion of the Department of State a similar appeal

made on December 9, 1983, in response to the imposi-

tion of a similar kind of sales tax by the state of

Illinois, and further to the action of Latin American

airlines challenging the right of the state of Flor-

ida to impose such a tax through a lawsuit, which is |

currently under review by the United States Supreme

Court.

The Embassy avails itself of this opportunity to

renew to the Department of State the assurances of

its highest consideration.

37a

[EMBASSY OF MEXICO]

[Unofficial Translation ]

The Embassy of Mexico presents its compliments

to the Department of State and would like to call its

attention to the following matter.

The State of Florida established a tax of 5.7 cents

per gallon on all aviation fuel sold in its territory

from April ist. 1983 onwards. For this reason, a

group of airlines, including Mexicana and Aeroméx-

ico, brought the case to a State court which ruled

that foreign air-freighters operating in the State of

Florida should be exempted from the aforementioned

fuel-tax. However, the administrative State Govern-

ment authorities of Florida appealed this decision to

the State Supreme Court, which reversed the lower

court ruling, endorsing the right to levy taxes on the

fuel used by international airlines. Consequently, the

airlines affected decided to appeal to the Supreme

Court of the United States. The case is known as

“Lineas Aéreas de Costa Rica, S.A. (LACSA) et al.

vs. Department of Revenue, State of Florida.”

This Embassy would like to express the serious

concern of the Government of Mexico over this situa-

tion, since it is of the opinion that the decision made

by the State of Florida is in disagreement with the

contents of article 7 of the Agreement in force be-

tween the Governments of the United Mexican States

and the United States of America on the subject of

air-transportation. This measure is also inconsistent

with the provisions of the Chicago Convention and the

resolutions of the International Civil Aviation Coun-

cil, specifically that of November 4, 1966 (ICAO doc-

ument 8632-C/968). Moreover, this Embassy con-

siders that if the legality of the fuel-tax levied by

38a

the State of Florida were to be sanctioned, this would

result in problems of multiple taxation.

Because of the aforementioned reasons, the Em-

bassy of Mexico request, through the mediation of

the Department of State, the support of the Govern-

ment of the United States for the case of the airlines

in question to be tried by the Supreme Court of Jus-

tice, suggesting for this purpose to use an amicus

curiae procedure. It is the understanding of this

Embassy that the deadline for the Department of

Justice to act as amicus curiae would be January 10,

1985.

The Embassy of Mexico avails itself of this oppor-

tunity to convey to the Department of State the as-

surances of its kind consideration.

Washington, D.C. December 11, 1984.

ee -

39a

[EMBASSY OF THE NETHERLANDS]

EA-14184

The Royal Netherlands Embassy presents its com-

pliments to the Department of State and has the

honour to request the Department’s attention to the

following.

The State of Florida imposed, effective April 1,

1983, a tax of 5.7 cents per gallon on all aviation

fuel sold within its jurisdiction. Under this legisla-

tion, all fuel purchased in Florida is taxable, even if

it is consumed outside of that state or, indeed, out-

side of the United States.

Lineas Aereas Costarricenses, S.A. and other for-

eign air carriers from the Caribbean and Central

and South America filed a lawsuit in the Florida

courts challenging the legality of this Florida state

tax under the United States Constitution. On June 1,

1983, the court before which the initial hearings on

this lawsuit were held issued a decision concluding

that foreign carriers serving Florida must be ex-

empted from this tax. The State of Florida appealed

this decision to the Florida Supreme Court, which on

June 14, 1984 reversed the lower court’s determina-

tion and held that imposition of the tax on inter-

national airlines is proper. The plaintiffs have ap-

pealed the decision of the Florida Supreme Court to

the United States Supreme Court.

The Royal Netherlands Embassy wishes to inform

the Department of State of the grave concern of the

Netherlands Government with regard to the afore

mentioned imposition of an aviation fuel tax by the

State of Florida on international aviation. In this

context, the Government of the Netherlands would

40a

like to observe that said tax is inconsistent with the

Air Transport Agreement between the Government of

the United States of America and the Government of

the Kingdom of the Netherlands of April 3, 1957,

Article 7 (d) of which states that “fuel, lubricating

oils, other consumable technical supplies, spare parts,

regular equipment, and stores taken on board aircraft

of the airlines of one Contracting Party in the tervri-

tory of the other and used in international! services

shall be exempt on a basis of reciprocity from cus-

toms duties, excise taxes, inspection fees and other

similar national duties, taxes and charges, even

though such supplies be used or consumed by such

aircraft on flights in that territory”.

The Netherlands Government is of the opinion, fur-

thermore, that the referred Florida state tax is con-

trary to the established international standard of rec-

iprocity. More specifically, reference may be made to

the Resolution of the Council of the International

Civil Aviation Organization of No mber 14, 1966,

in particular Section I, paras. 1 and 4 thereof, which

stipulate 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 of for the territory of any other

State, the fuel, lubricants and other consumable tech-

nical supplies taken on board for consumption during

the flight shall be furnished exempt from all customs

and other duties’. “The expression ‘customs and du-

ties’ shall include 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’’.

The Netherlands Government has consistently

manifested its opposition to any infringement of the

A4la

principle that international aviation should be ex-

empted from taxes or other impositions. The Florida

state tax under reference, if maintained, would not

only be highly undesirable in itself from this point

of view, but would, moreover, constitute a precedent

for possible similar action by other foreign govern-

ments.

The Netherlands Government has been informed

that the aforementioned plaintiffs will soon present

their case to the United States Supreme Court. For

the reasons set out above, the Netherlands Govern-

ment urges the Government of the United States to

give formal! support to the position of the plaintiffs

in this litigation by filing an amicus curiae brief to

that effect with the United States Supreme Court.

It is the understanding of the Netherlands Govern-

ment that the deadline for submission of said brief in

this case is presently set at January 10, 1985.

The Royal Netherlands Embassy, whilst thanking

the Department of State for its attention to this im-

portant matter, avails itself of this opportunity to

renew to the Department of State the assurances of

its highest consideration.

Washington, D.C.

December 3, 1984

42a

ROYAL NORWEGIAN EMBASSY

WASHINGTON, D.C.

The Royal Norwegian Embassy, acting also on be-

half of the Royal Danish Embassy and the Swedish

Embassy, presents its compliments to the Department

of State, and has the honour to draw the attention

of the Department to the following matter:

The State of Florida on 1 April 1983 imposed a

5.7 per cent sales tax within the territory of its ju-

risdiction on jet fuel purchased by foreign airlines

for international transport. The legality of this deci-

sion has since been challenged by a number of for-

eign airlines serving the US market, and the matter

has been appealed to the United States Supreme

Court with a request to review and reverse the deci-

sion of the State Government.

Already the action taken by the State of Florida

has been referred to as a precedent by other local

jurisdictions within the United States, contemplating

similar measures with regard to taxation of foreign -

airlines.

The Governments of Denmark, Norway and Sweden

have noted these developments with a growing con-

cern. The three governments would in this context

like to underline that American-owned airlines, as

well as other foreign owned airlines, operating routes

to and from Denmark, Norway and Sweden are in

these countries granted full exemption from taxes

and duties on similar purchases of fuel for interna-

tional transport.

Such measures as taken by the State of Florida

will not only be detrimental to the overall develop-

ment of international aviation, but would also jeop-

ardize the international consensus and standards of

43a

reciprocity in this field, as well as the equilibrium of

the taxation regime for civil aviation as now applied

between our respective countries.

A further reason for the concern of the Scandi-

navian Governments is the possible effect such an ac-

tion might have on other countries which might fol-

low suit, with the ensuing apparent risk of seriously

damaging the fundamental principles of avoidance of

double taxation of air transport companies.

The Governments of Denmark, Norway and Swe-

den would therefore like to express their strong con-

cern with regard to these measures, and urge the

Government of the United States to use its good offices

in order that the appropriate authorities will rectify

the situation.

The Royal Norwegian Embassy avails itself of this

opportunity to renew to the Department of State the

assurances of its highest consideration.

Washington, D.C., 11 December, 1984.

No. 106/84

44a

EMBAJADA DE PANAMA

WASHINGTON, D.C. 20008

E.P.E.A.U. - 507 D

December 12, 1984

The Embassy of Panama presents its compliments

to the Honorable Department of State and has the

honor to refer to the aviation fuel taxes that have

been imposed on international airlines by the State

of Florida through its Senate Bill 8A, which was

made effective on April 1, 1983.

The Government of Panama is deeply concerned

with this matter, as the proposed taxes fall within

Article III, Paragraph C of the Agreement on Air

Transport Services Between the United States of

America and the Republic of Panama, which was

signed at Panama on March 31, 1949, which clearly

indicates the following:

“The fuel, lubricating oils, spare parts, regular

equipment and aircraft stores retained on board

civil aircraft of the airlines of one contracting

party authorized to operate the routes and serv-

ices described in the annex shall, upon arriving

in or leaving the areas with respect to which the

other contracting party has jurisdiction, be ex-

empt from customs, inspection fees or similar

duties or charges, even though such supplies be

used or consumed by such aircrafts on flights in

those areas.”

On the other hand, the established international

consensus favors reciprocal exemption from taxes,

which is expressed in Article 24 of the Chicago Con-

vention. Also, aviation fuel taxes such as those im-

45a

posed by the State of Florida create a substantial

risk of international multiple taxation, and par-

ticularly, retaliatory measures by other nations. At

the present time many international airlines are

facing severe financial difficulties, and the fuel taxes

will represent a serious economic burden for them.

Being that many airlines have appealed this deci-

sion to the United States Supreme Court, the Em-

bassy of Panama would appreciate very much if the ~

Honorable Department of State would support the

position of these airlines by an “Amicus Curiae”

brief to the United States Supreme Court.

The Embassy of Panama avails itself of this op-

portunity to renew to the Honorable Department of

State the assurances of its highest consideration.

46a

SPANISH EMBASSY

WASHINGTON, D.C.

No. 301

The Embassy of Spain presents its compliments to

the Department of State and has the honor to refer

to the State of Florida Senate Bill 8A, about the

introduction of a Tax concerning fuel purchased by

airlines.

The Government of Spain considers that the pro-

posed taxes fall within Article 7 of the Air Transport

Agreement between the Government of the United

States of America and the Government of Spain of

August 3rd, 1973. In particular Article 7(d) states

that “Fuel, lubricating oils, other consumable tech-

nical supplies, spare parts, regular equipment, and

stores taken on board aircraft of the airlines of one

contracting party in the territory of the other and

used in international services shall be exempt on a

basis of reciprocity from customs duties, excise taxes,

inspection fees and other similar national duties,

taxes or charges, even though such supplies be used

or consumed by such aircraft on flights in that

territory”. This paragraph covers the taxes listed

in the Notice of Proposed Amendment—which ac-

cordingly are not consistent with the Air Transport

Agreement.

The Government of Spain may also refer to the

Resolution of November 14, 1966 of the Council of

the International Civil Aviation Organization. In

particular Section 1, paragraphs 1 and 4 state that:

“When an aircraft registered in one State de-

parts from an international airport of another

State either for another customs territory of that

latter State or for the territory of any other

47a

State, the fuel, lubricants and other consumable

technical supplies taken on board for consump-

tion during the flight shall be furnished exempt

from all custcms and other duties”.

“The expression ‘customs and other duties’ shall

include import, export, excise, sales, consumption and

internal duties of all kinds levied upon the fuel,

lubricants and other consumable technical supplies by

any taxing authority within a State”. Consequently,

the proposals of the State of Florida are inconsistent

with the aforementioned Resolution.

The Government of Spain therefore request that

the Department of State urge the State of Florida

to reconsider its proposals in the light of the United

States obligations and commitments.

The Embassy of Spain avails itself of this oppor-

tunity to renew to the Department of State the ex-

pression of its highest consideration.

Washington, D.C., November 30th, 1984

48a

[EMBASSY OF SWITZERLAND]

The Embassy of Switzerland presents its compli-

ments to the Department of State and has the honor

to refer to the recent amendment of the tax law of

the State of New York about franchise taxes on

transportation corporations.

This new legislation, amending the tax law, will

impose on airlines serving the State of New York

a tax on capital stock and gross earnings, thus re-

moving the long-standing exemption from such tax

granted to foreign airlines as Swissair. The Swiss

authorities are concerned about such taxation of

Swissair which would be a considerable departure

from the worldwide accepted principle that enter-

prises should be taxed only by the State in which the

management of the enterprise actually is located. It

would aiso be contradictory to the ICAO policies on

taxation in the field of international air transport

stated in the Resolution on taxation of the income of

international air transport enterprises and on taxa-

tion of aircraft adopted by the Council of ICAO on

November 14, 1966 (ICAO Doc 8632-C/968 Section

III). Clause No. 1 of this Resolution provides that

Contracting States shall, to the fullest possible extent,

grant reciprocally exemptions from taxation on the

income, property taxes and capital levies or other

similar taxes.

The introduction of the new tax would be likely

to cause serious problems for the aviation industry

and set off a chain reaction around the world which

would but add to the present difficulties of the in-

dustry.

Finally, the Swiss authorities wish to draw the

attention of U.S. authorities te the fact that the fran-

49a

chise tax of the State of New York could have the

effect that different Cantons (States) of Switzerland

may take the necessary steps to introduce a similar

tax to counter-balance the New York legislation.

In view of the foregoing, the Swiss authorities

appreciate the consideration the Department of State

will give to this matter. They ask the Department of

State to kindly transmit the content of this note to

the competent authorities of the State of New York.

The Swiss authorities trust that the tax exemption

for air carriers will be restored as was done for the

shipping companies.

The Embassy of Switzerland avails itself of this

opportunity to renew to the Department of State the

assurances of its highest consideration.

Washington, D.C.,

March 3, 1982

50a

EMBASSY OF SWITZERLAND

The Embassy of Switzerland presents its compli-

ments to the Department of State and has the honor

to transmit the following:

The Swiss authorities have been informed of a law-

suit currently pending before the United States Su-

preme Court which involves the legality under the

United States Constitution of a tax imposed by the

State of Florida on aviation fuel purchased by foreign

airlines. In this context the Embassy of Switzerland

would like to refer to its note of December 19, 1983,

and make the following statement: The Air Transport

Agreement of August 3, 1945, between the United

States and Switzerland includes in Article 3 tax ex-

emption clauses for introduced and retained fuel.

This regulation was consistent with the practice exer-

cised shortly after World War II. Today it is gener-

ally recognized that tax exemption is also granted for

uplifted fuel. Accordingly, this established practice

was enrolled in the newer bilateral air agreements as

concluded by the United States and also by Switzer-

land. :

Furthermore, the Swiss authorities wish to point

out that U.S. carriers operating to and from Switzer-

land have never had, up to now, to pay such taxes and

duties. In order to prevent discriminatory practices

and to assure equality of treatment of U.S. carriers

in Switzerland and of Swiss airlines in the United

States, the Swiss authorities consider it necessary

that reciprocal tax exemption be granted to Swiss

airlines.

The Swiss authorities are concerned about the pos-

sibility of creating a precedent by confirming the

legality of the Florida Aviation Tax Decision by the

United States Supreme Court.

5la

For these reasons the Swiss authorities are opposed

to such taxes and would be grateful :f the Depart-

ment of State would submit an amicus curiae brief to

the United States Supreme Court in the sense of the

foregoing statement.

The Embassy of Switzerland avails itself of this

opportunity to renew to the Department of State the

assurances of its highest consideration.

Washington, D.C.,

November 30, 1984

52a

EMBASSY OF THE REPUBLIC OF TRINIDAD

AND TOBAGO

1708 MASSACHUSETTS AVENUE, N.W.

WASHINGTON, D.C. 20036

The Embassy of the Republic of Trinidad and

Tobago presents its compliments to the Department

of State of the United States of America and has the

honor to refer to the Air Transport Services Agree-

ment dated February 11, 1946 between the United

States and the United Kingdom, an Agreement dated

November 22, 1961 between the United States and

the United Kingdom providing for air routes between

the West Indies and the United States, and an Ex-

change of Notes dated September 27, 1962 and Oc-

tober 8, 1962 between the United States and Trini-

dad and Tobago to continue the application of certain

agreements (referenced above) to scheduled services

between the United States and the Caribbean area

by United States and Trinidad and Tobago airlines.

Particular attention is called to Article 3(2), (3) of

the first document which concerns the reciprocal ex-

emption of each party’s air carriers from the pay-

ment of fuel and certain other taxes.

It has come to the attention of the Government of

the Republic of Trinidad and Tobago that the State

of Florida has enacted an aviation fuel tax which is

applicable te fuel purchased by both domestic and

international air carriers, including Trinidad and

Tobago Airways Corporation (“BWIA”), the flag

carrier of Trinidad and Tobago. It is also under-

stood that similar taxes either have been enacted or

are being considered for enactment by a number of

other states.

eee ee ee ee ee ae Le oS eee ee

53a

The Government of the Republic of Trinidad and

Tobago wishes to express its grave concern over the

application of such taxes to fuel purchased in the

United States by international air carriers such as

BWIA. The Government of the Republic of Trinidad

and Tobago exempts United States air carriers serv-

ing Trinidad and Tobago from aviation fuel taxes

and other taxes imposed at all levels of government.

This exemption is premised upon reciprocal tax ex-

emption granted by the United States to the flag air

carrier of Trinidad and Tobago. Moreover, the ex-

emption is consistent with the well-established interna-

tional consensus favoring reciprocal exemption from

taxes which is expressed, for example, in Article 24

of the Chicago Convention and the resolutions of the

ICAO Council on this subject, dated November 14,

1966. The Government of the Republic of Trinidad

and Tobago believes that the taxation of international

airlines by states within the United States is incon-

sistent with this international standard of reciproc-

ity as well as the standard of reciprocity which ex-

ists between Trinidad and Tobago and the United

States.

The Government of the Republic of Trinidad and

Tobago believes further that the taxation of BWIA

by states within the United States violates the spirit

if not the letter of Article 3(2), (3) of the Air

Transport Agreement dated February 11, 1946 be-

tween the United States and the United Kingdom

which governs air transport relations between the

United States and Trinidad and Tobago. In addition

to the specific exemptions set forth in Article 3(2),

(3), a more general policy of reciprocal exemption

from taxes of all sorts has been established between

the two governments. The tax enacted by the State

54a

of Florida constitutes a serious threat to this estab-

lished pattern of reciprocal exemption.

The Government of the Republic of Trinidad and

Tobago believes that true reciprocity on the part of

the United States requires air carrier tax exemptions

at both the federal and local levels. The failure of the

United States to ensure such complete exemptions

may be considered a failure of reciprocity under ap-

plicable bilateral agreements, and could moreover

constitute a precedent for similar action by other for-

eign governments.

The Government of the Republic of Trinidad and

Tobago understands that the issue of state taxation

of aviation fuel will shortly be presented to the

United States Supreme Court by a group of interna-

tional air carriers, including BWIA. The Govern-

ment of the Republic of Trinidad and Tobago is ad-

vised that participation by the United States Govern-

ment in this litigation in support of the position ad-

vanced by the international air carriers will be very

important, perhaps essential, in the interest of the

air carrier appellants. The Government of the Re-

public of Trinidad and Tobago understands further

that it is not uncommon for the United States Gov-

ernent to join, as amicus curiae, the effort of private

litigants in similar situations. The Government of

Trinidad and Tobago urges the Department of State

of the United States to give formal support to the

position of the international air carriers in this liti-

gation through the filing of a brief amicus curiae

with the court.

The Government of the Republic of Trinidad and

Tobago has no objection to the public release of this

Note.

55a

The Embassy of the Republic of Trinidad and To-

bago avails itself of this opportunity to renew to the

Department of State of the United States of America

the assurances of its highest consideration.

10th December, 1984

WASHINGTON, D.C.

56a

EMBASSY OF THE UNITED KINGDOM

NOTE NO 190

Her Britannic Majesty’s Embassy presents its com-

pliments to the Department of State and has the

honour to refer to the sales tax on aviation fuel for

use in international air transportation which has

been imposed by the state of Florida. This tax was

challenged by a group of international airlines in the

Leon County Circuit Court which decided, on 1 June

1983, that the tax was inconsistent with the obliga-

tions of the United States Government contained in

its bilateral air transport agreements, and concluded

that foreign carriers were entitled to an exemption

from the tax. The decision of the Circuit Court was

reversed by the Florida Supreme Court without that

court having had an opportunity to consider a letter

from the Deputy Assistant Secretary of State for

Transportation and Telecommunications expressing

concern about the serious foreign relations problems

that the tax would cause unless provision was made

to exempt foreign airlines from it. The plaintiff air-

lines are appealing the decision to the United States

Supreme Court. .

Article 8(5) of the United Kingdom/United States

Air Services Agreement provides that each contract-

ing party shall use its best efforts to secure for the

designated airlines of the other contracting party on

a reciprocal basis an exemption from taxes, charges

57a

and fees imposed by state, regional and local author-

ities on, inter alia, fuel supplied in the territory of

the first contracting party for use in the aircraft of

those airlines engaged in international air services.

The United States Government will also be aware

that fuel purchased in the United Kingdom and used

in international transportation by the designated air-

lines of the United States are not assessed by United

Kingdom regional or local authorities for taxation

purposes. In view of these considerations, and be-

cause the Florida Supreme Court did not have the

opportunity to consider the policy of the federal au-

thorities before it reversed the Circuit Court decision,

Her Majesty’s Government requests the United States

Government to present their views to the United

States Supreme Court in the form of an amicus

curiae brief, the deadline for the filing of which is

believed to be 10 January 1984.

The Embassy avails itself of this opportunity to re-

new the assurance of its highest consideration.

British Embassy

Washington DC

10 December 1984

58a

[EMBASSY OF YUGOSLAVIA]

No. 109

The Federal Secretariat for Foreign Affairs of the

Socialist Federal Republic of Yugoslavia presents its

compliments to the Embassy of the United States of

America and notes with interest and great concern

the information received about the intention of the

State of Illinois to remove sales tax exemption on fuel

and food sold to foreign air carriers on its territory.

In the simplest terms, the Yugoslav authorities ob-

ject in principle to a proposal stemming from a uni-

lateral action, which could well be in conflict with

ICAO Council Recommendation as well as with the

letter and the spirit of Article 7, paragraph C of the

existing bilateral Air Transport Agreement between

our twe countries, significantly affecting financial op-

erations of the Yugoslav-designated air carrier which

currently enjoys the aforesaid exemption.

Therefore, the Federal Secretariat for Foreign Af-

fairs urges the Department of State to take neces-

sary steps for the mentioned intention to be with-

drawn, in conformity with the international comity,

and avails itself of this opportunity to renew to the

Embassy of the United States of America the assur-

ances of its highest consideration.

Belgrade, January 20, 1984

EMBASSY OF THE UNITED

STATES OF AMERICA

BELGRADE

xv U. S. GOVERNMENT PRINTING OFFICE; 1985 461531 10279

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.