441 U.S. 434 (1979), 77-1378, Japan Line, Ltd. v. County of Los Angeles

Docket Nº:No. 77-1378
Citation:441 U.S. 434, 99 S.Ct. 1813, 60 L.Ed.2d 336
Party Name:Japan Line, Ltd. v. County of Los Angeles
Case Date:April 30, 1979
Court:United States Supreme Court

Page 434

441 U.S. 434 (1979)

99 S.Ct. 1813, 60 L.Ed.2d 336

Japan Line, Ltd.


County of Los Angeles

No. 77-1378

United States Supreme Court

April 30, 1979

Argued January 8, 1979



Appellant Japanese shipping companies' vessels carry cargo containers which, like the ships, are owned by appellants, are based, registered, and subjected to property tax in Japan, and are used exclusively in foreign commerce. A number of appellants' containers were temporarily present in appellee county and cities in California, and appellees levied property taxes on the containers. The California Supreme Court upheld the tax as applied.


1. This Court has appellate jurisdiction under 28 U.S.C. § 1257(2), since the California Supreme Court sustained the tax, as applied, as against the contention that such application would violate the Commerce Clause and various treaties. Pp. 440-441.

2. It is unnecessary to decide the broad proposition whether mere use of international routes is enough, under the "home port doctrine," to render an instrumentality immune from tax in a nondomiciliary State. The question here is a more narrow one, namely, whether instrumentalities of commerce that are owned, based, and registered abroad, and that are used exclusively in international commerce, may be subjected to apportioned ad valorem property taxation by a State. Pp. 441-444.

3. While, under Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, no impermissible burden on interstate commerce will be found if a state tax "is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State," id. at 279, a more elaborate inquiry is necessary when a State seeks to tax the instrumentalities of foreign, rather than of interstate, commerce. In addition to answering the nexus, apportionment, and nondiscrimination questions posed in Complete Auto, a court must also inquire, first, whether the tax, notwithstanding 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 relations with foreign governments." Michelin Tire Corp. v. Wages, 423 U.S. 276, 285. If a state tax contravenes either of these precepts, it is unconstitutional under the Commerce Clause. Pp. 444-451.

Page 435

4. The California ad valorem property tax, as applied to appellants' shipping containers, is unconstitutional under the Commerce Clause, since it results in multiple taxation of the instrumentalities of foreign commerce, Moorman Mfg. Co. v. Bair, 437 U.S. 267, distinguished, and prevents this Nation from "speaking with one voice" in regulating [99 S.Ct. 1815] foreign trade, and thus is inconsistent with Congress' power to "regulate Commerce with foreign Nations." Pp. 451-457.

20 Cal.3d 180, 571 P.2d 254, reversed.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, MARSHALL, POWELL, and STEVENS, JJ., joined. REHNQUIST, J., filed a dissenting statement, post, p. 457.

BLACKMUN, J., lead opinion

MR. JUSTICE BLACKMUN delivered the opinion of the Court.

This case presents the question whether a State, consistently with the Commerce Clause of the Constitution, may

Page 436

impose a nondiscriminatory ad valorem property tax on foreign-owned instrumentalities (cargo containers) of international commerce.


The facts were "stipulated on appeal," App. 29, and were found by the trial court, id. at 33-36, as follows:

Appellants are six Japanese shipping companies; they are incorporated under the laws of Japan, and they have their principal places of business and commercial domiciles in that country. Id. at 34. Appellants operate vessels used exclusively in foreign commerce; these vessels are registered in Japan, and have their home ports there. Ibid. The vessels are specifically designed and constructed to accommodate large cargo shipping containers.1 The containers, like the ships, are owned by appellants, have their home ports in Japan, and are used exclusively for hire in the transportation of cargo in foreign commerce. Id. at 35. Each container is in constant transit save for time spent undergoing repair or awaiting loading and unloading of cargo. All appellants' containers are subject to property tax in Japan and, in fact, are taxed there.

Appellees are political subdivisions of the State of California. Appellants' containers, in the course of their international

Page 437

journeys, pass through appellees' jurisdictions intermittently. Although none of appellants' containers stays permanently in California, some are there at any given time; a container's average stay in the State is less than three weeks. Ibid. The containers engage in no intrastate or interstate transportation of cargo except as continuations of international voyages. Id. at 30. Any movements or periods of nonmovement of containers in appellees' jurisdictions are essential to, and inseparable from, the containers' efficient use as instrumentalities of foreign commerce. Id. at 35-36.

Property present in California on March 1 (the "lien date" under California law) of any year is subject to ad valorem property tax. Cal.Rev. & Tax. Code Ann. §§ 117, 405, 2192 (West 1970 and Supp. 1979). A number of appellants' containers were physically present in appellees' jurisdictions on the lien dates in 1970, 1971, and 1972; this number was fairly representative of the containers' "average presence" during each year. App. 35. Appellees levied property taxes in excess of $550,000 on the assessed value of the containers present on March 1 of the three years in question. Id. at 36. During the same period, similar containers [99 S.Ct. 1816] owned or controlled by steamship companies domiciled in the United States, that appeared from time to time in Japan during the course of international commerce were not subject to property taxation in Japan, and therefore were not, in fact, taxed in that country. Id. at 35.

Appellants paid the taxes so levied under protest, and sued for their refund in the Superior Court for the County of Los Angeles. That court awarded judgment in appellants' favor.2 Id. at 39-40. The court found that appellants' containers were instrumentalities of foreign commerce that had their home ports in Japan, where they were taxed. The federal courts, however, in the trial court's view, had

consistently held that vessels which are instrumentalities of foreign commerce

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and engaged in foreign commerce can be taxed in their home port only.

Id. at 24. This rule, said the court, was necessary to avoid multiple taxation, id. at 23; whereas apportionment of taxes can be used to prevent duplicative taxation in interstate commerce, apportionment is "not practical" when one of the taxing entities is a foreign sovereign. In such cases,

[t]here is no tribunal that can adjudicate [competing] rights unless it be the International Court, and to invoke its services, jurisdiction must be consented to by all parties.

Id. at 24. The application of appellees' taxes in derogation of the "home port doctrine," the court concluded, subjected international commerce to multiple taxation, and thus was unconstitutional under the Commerce Clause. In so holding, the court followed Scandinavian Airlines System., Inc. v. County of Los Angeles, 56 Cal.2d 11, 363 P.2d 25, cert. denied, 368 U.S. 899 (1961) (hereinafter SAS) (ruling that ad valorem property tax levied by California upon aircraft owned, based, and registered abroad and used exclusively in international commerce, was unconstitutional under the Commerce Clause).

The Court of Appeal reversed. 132 Cal.Rptr. 531 (1976). The court appeared to conclude that SAS had been effectively overruled by Sea-Land Service, Inc. v. County of Alameda, 12 Cal.3d 772, 528 P.2d 56 (1974). In Sea-Land, the Supreme Court of California had criticized the home port doctrine and labeled it "anachronistic," and had upheld apportioned property taxation of containers owned by a domestic corporation and used in both intercoastal and foreign commerce. Id. at 787, 528 P.2d at 66. The Court of Appeal rejected appellants' arguments that a different result was required here in view of their containers' foreign ownership and exclusively international use. The court likewise dismissed any argument as to multiple taxation. "[T]he possibility of international double taxation of instrumentalities of foreign commerce," it concluded, is "no reason to limit the local power to

Page 439

tax them upon a nondiscriminatory apportioned basis." 132 Cal.Rptr. at 533.3

The [99 S.Ct. 1817] California Supreme Court granted a hearing of the case, and it, too, reversed the judgment of the Superior Court, essentially adopting the opinion of the Court of Appeal. 20 Cal.3d 180, 571 P.2d 254 (1977). It concluded that

the threat of double taxation from foreign taxing authorities has no role in commerce clause considerations of multiple burdens, since burdens in international commerce are not attributable to discrimination by the taxing state, and are matters for international agreement.

Id. at 185, 571 P.2d at 257. Deeming the containers' foreign ownership and use irrelevant for purposes of constitutional analysis, id. at 186, 571 P.2d at 257-258, the court rejected appellants' Commerce Clause challenge and sustained the validity of the tax as applied.4

Page 440

Appellants appealed. We postponed consideration of our jurisdiction to the hearing on the merits. 436 U.S. 955 (1978) .


This Court has appellate jurisdiction to review a final judgment rendered by the highest court of a State in which a decision could be had

where is drawn in question the validity of a statute of any...

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