Japan Line, Ltd. v. County of Los Angeles


The state of California imposed an ad valorem property tax on cargo containers owned by Japanese companies and temporarily located in California ports. The containers were used exclusively for transporting goods in international commerce. They were based, registered, and subjected to property taxes in Japan. The containers spent, on average, only three weeks a year in California. Japan Lines contended that the tax was invalid because it subjected the containers to multiple taxation in Japan and the United States. The California Supreme Court upheld the statute and the ship owners appealed.

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now


This case presents the question whether a state, consistently with the Commerce Clause of the Constitution, may impose a nondiscriminatory ad valorem property tax on foreign-owned instrumentalities (cargo containers) of international commerce . . .
In order to prevent multiple taxation of commerce, this Court has required that taxes be apportioned among taxing jurisdictions, so that no instrumentality of commerce is subjected to more than one tax on its full value. The corollary of the apportionment principle, of course, is that no jurisdiction may tax the instrumentality in full. “The rule which permits taxation by two or more states on an apportionment basis precludes taxation of all of the property by the state of the domicile . . . Otherwise there would be multiple taxation of interstate operations.” The basis for this Court’s approval of apportioned property taxation, in other words, has been its ability to enforce full apportionment by all potential taxing bodies.
Yet neither this Court nor this Nation can ensure full apportionment when one of the taxing entities is a foreign sovereign. If an instrumentality of commerce is domiciled abroad, the country of domicile may have the right, consistently with the custom of nations, to impose a tax on its full value. If a state should seek to tax the same instrumentality on an apportioned basis, multiple taxation inevitably results. Hence, whereas the fact of apportionment in interstate commerce means that “multiple burdens” logically cannot occur, the same conclusion, as to foreign commerce, logically cannot be drawn. Due to the absence of an authoritative tribunal capable of ensuring that the aggregation of taxes is computed on no more than one full value, a state tax, even though “fairly apportioned” to reflect an instrumentality’s presence within the state, may subject foreign commerce “to the risk of a double tax burden to which [domestic] commerce is not exposed, and which the commerce clause forbids.”
Second, a state tax on the instrumentalities of foreign commerce may impair federal uniformity in an area where federal uniformity is essential. Foreign commerce is preeminently a matter of national concern. “In international relations and with respect to foreign intercourse and trade the people of the United States act through a single government with unified and adequate national power.” Board of Trustees v. United States, 289 U.S. 48 (1933). Although the Constitution, Art. I, §8, cl. 3, grants Congress power to regulate commerce “with foreign Nations” and “among the several States” in parallel phrases, there is evidence that the Founders intended the scope of the foreign commerce power to be the greater. Cases of this Court, stressing the need for uniformity in treating with other nations, echo this distinction. * * *
A state tax on instrumentalities of foreign commerce may frustrate the achievement of federal uniformity in several ways. If the State imposes an apportioned tax, international disputes over reconciling apportionment formulae may arise. If a novel state tax creates an asymmetry in the international tax structure, foreign nations disadvantaged by the levy may retaliate against American-owned instrumentalities present in their jurisdictions. Such retaliation 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 . . .
It is stipulated that American-owned containers are not taxed in Japan. California’s tax thus creates an asymmetry in international maritime taxation operating to Japan’s disadvantage. The risk of retaliation by Japan, under these circumstances, is acute, and such retaliation of necessity would be felt by the Nation as a whole . . .
We hold the tax, as applied, unconstitutional under the Commerce Clause.

Decision. The Supreme Court reversed, holding that the tax was unconstitutional. The Court ruled that an ad valorem property tax applied to cargo containers used exclusively in foreign commerce violates the Commerce Clause because it resulted in multiple taxation of instrumentalities of foreign commerce.

Case Questions

1. What rule does the Court espouse for the state taxation of cargo containers and other instrumentalities of foreign commerce?

2. How does this case affect taxation by foreign countries?

3. What effect would multiple taxation have on international commerce?

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"