JAPAN LINE, LTD. v. COUNTY OF LOS ANGELES
Legal provision: Article 1, Section 8, Paragraph 3: Interstate Commerce Clause
Argument of Peter L. Briger
Chief Justice Warren E. Burger: We will hear arguments first this morning and first this year, in Japan Line Limited against County of Los Angeles.
Mr. Briger, you may proceed whenever you are ready.
Mr. Peter L. Briger: Mr. Chief Justice, may it please the Court.
The precise issue to be decided in this case is whether the existence of situs through the fiction of an assumed average presence, can be relied upon by appellees so as to tax foreign containers which are used exclusively in foreign commerce, are continuously in transit, and which the trial court found had their home port in Japan, so as to justify a conclusion of continuous presence within appellee's jurisdiction.
Such presence is necessary in order to permit the subjection of containers to an apportioned ad valorem California property tax.
Such tax, it is noted, would be in addition to full ad valorem property taxes, which have been levied upon the containers at their home port in Japan.
Unless the decision of the California Supreme Court is reversed, this case undoubtedly will have profound and adverse impacts upon the foreign trade relations of the United States.
Indeed the Court in requesting the Solicitor General to express his views on the case has recognized the important foreign policy and foreign relations questions triggered by California’s unilateral rejection of the home port doctrine in the case of foreign owned instrumentalities used exclusively in foreign commerce.
Justice William H. Rehnquist: Are you arguing both the home port doctrine and the Customs Convention, Mr. Briger?
Mr. Peter L. Briger: Yes I'm.
Justice William H. Rehnquist: I thought perhaps that you intended to blend them together in that last sentence?
Mr. Peter L. Briger: I do indeed.
I believe that the Customs Convention is another indication of the federal interest in this area and that the home port doctrine was a means enunciated by this Court more than a 130 years ago in order to deal with the treatment of the taxation of foreign-owned instrumentalities that the Customs Convention is one of numerous areas of federal expression of its concern in this area.
Justice William H. Rehnquist: But the home port doctrine is constitutionally based, is it not?
Mr. Peter L. Briger: Yes it is.
Justice William H. Rehnquist: And your case would not be as strong, apart from the home port doctrine, without the affirmative adoption of the Customs Convention, would it?
Mr. Peter L. Briger: I think it probably would be.
What we are arguing is that there are long established customs among the trading nations of the world which have been recognized by this Court in its adoption of the Hays versus Pacific Mail Shipping Company case, this was a basic Commerce Clause rule and that there are reliance interests of foreign governments on this long accepted policy.
They have based their trade relations with the United States in connection with the international carriage of goods and passengers.
Chief Justice Warren E. Burger: So what is that they do if they are relying?
Mr. Peter L. Briger: Well, every country Your Honor and this comes out in the Solicitor General's brief, every country with the exception possibly of Afghanistan, in the treatment of the international carriage of goods and persons by aircraft, vessels or containers has followed a policy of reciprocal exemption from local or national taxes upon these instrumentalities and all governments of the world in their trading relations have observed this policy.
Justice William H. Rehnquist: But it's the executive and the legislative branches that speak for this country on foreign policy, isn't it?
Mr. Peter L. Briger: Indeed.
Justice William H. Rehnquist: And Hays Mail didn't -- the Pacific Mail case didn't depend on any action of the executive branch, did it or did it of the legislative branch?
Mr. Peter L. Briger: It did not but there are really two policies that coalesce.
The Court in the Hays decision at that time came to this conclusion in order to eliminate the cumulative burdens of multiple taxation.
There is a clear statement in that case.
Now of course the case was decided before the apportionment rule became the law for the states.
Justice Byron R. White: Hays wasn't an international case, was it?
Mr. Peter L. Briger: It dealt with ocean carriage and it dealt.
Justice Byron R. White: Well, I know, but it is between two ports of the United States?
Mr. Peter L. Briger: Indeed.
Justice Byron R. White: And to and the problem was amongst states of the United States?
Mr. Peter L. Briger: Well, Justice White, while the case did deal with --
Justice Byron R. White: It wasn't one that dealt with an international trade?
Mr. Peter L. Briger: But we are dealing with international trade in this case I would --
Justice Byron R. White: I know, but just give me another one under Hays or any other one that dealt with an international?
Mr. Peter L. Briger: The Court has never dealt with.
Justice Byron R. White: Well, that's what I thought.
So that to the extent that Hays, there was a constitutional rule, it was an interstate commerce, it's a Commerce Clause rule and Congress could change it?
Mr. Peter L. Briger: Those were the specific facts of the Hays case.
Justice Byron R. White: Yes, yes.
Justice Harry A. Blackmun: Was the argument about the container convention presented to the California Courts?
Mr. Peter L. Briger: No I don't believe it was, Your Honor.
Justice Harry A. Blackmun: Well if not, can we mainly consider here?
Mr. Peter L. Briger: There were arguments that various treaties invalidated the imposition of the tax, specifically the Treaty of Friendship, Commerce and Navigation, the General Agreement on Tariffs and Trade, so that the argument was made that in general there were Treaty obligations of the United States which indicated its interest in this area of the international carriage of goods in connection with foreign-owned instrumentalities, but we would argue that the Commerce Clause by itself gives the federal government without the necessity of any specific legislation or Treaty, the exclusive interest because this is an area that impacts upon the foreign relations of the United States and there have been governments which for more than almost two hundred years have relied upon this exemption from taxation.
In fact, we suggest in our brief that the California constitutional provision, exempting domestic-owned vessels from taxation was inserted into the California law in recognition that under the home port doctrine, foreign-owned vessels were quoted that privilege.
It is an area where there has been substantial reliance by foreign governments who find this rule and that fact is --
Justice Byron R. White: Do you think Hays was not the same today --
Mr. Peter L. Briger: I believe.
Justice Byron R. White: -- on traffic between two states?
Mr. Peter L. Briger: Not at all Justice White and that is because the apportionment rule is the law for all of the states.
Justice Byron R. White: You are saying that something like the Hays rule of the Court and everyone thought appropriate for a long time is still appropriate for international trade?
Mr. Peter L. Briger: Yes Your Honor where the apportionment rule cannot be enforced upon foreign governments either by state, local governments or by the federal government.
And it is really the major thrust of our argument and the linchpin of our argument would be Standard Oil versus Peck where this Court confirmed that the apportionment rule was the only means by which state and local governments could impose taxes in connection with interstate commerce.
And once that rule became the law of the land it was possible for this Court to eliminate the burdens of multiple taxation which the Court since the time of Justice Stone has indicated would clearly be a violation of the Commerce Clause, but absent, absent the binding oblique --
Justice Byron R. White: You say that there will be a violation with the Commerce Clause, would you if the international practice had been just to the contrary?
Mr. Peter L. Briger: No Your Honor, not at all and we would argue that if there had been an international practice whether by practice custom, treaty, multilateral agreement that would not then involve the foreign relations of the United States, but the point is that for 200 years this country has followed the practice of not imposing local property taxes upon foreign-owned containers.
Justice William H. Rehnquist: But you say it wouldn't involve the foreign relations of the United States.
Now supposing that in the interest of the administration's human rights policy, it were determined by the executive here in Washington that a particular state government should release particular prisoners.
Would you say that, that is something that the executive would have power to order the state to do, over and apart from any other substantive grant of authority simply because it furthered the foreign relations of the country?
Mr. Peter L. Briger: It would depend on how significantly Justice Rehnquist it interfered with the foreign relations of the country.
If it were incidental and the states had a co-extensive jurisdiction, it would be a vain process.
Chief Justice Warren E. Burger: Would there be the same reciprocity factor that we have in international trade and in the hypothetical presented by Mr. Justice Rehnquist?
Mr. Peter L. Briger: Well, this was the point I was just going to make, Your Honor, that here we are dealing with a clear situation where in the letter of the State Department where they canvassed, more than a hundred embassies there seems to be a clearly established policy.
I think we would have a very difficult time if roughly 50 percent of the nations were to impose these taxes and 50 percent did not.
Justice William H. Rehnquist: But then the authority of a state to impose the tax depends on head count of what other countries think about it, is that right?
Mr. Peter L. Briger: Not necessarily, Your Honor, but it may.
What I'm saying here is that they are --
Justice Thurgood Marshall: Can you conceive of a country that could say I think I should be taxed?
Mr. Peter L. Briger: I could, Justice Marshall that could be if the governments --
Justice Thurgood Marshall: And you may think that please tax me?
Mr. Peter L. Briger: Yes Your Honor, I could see that if the governments decided that apportionment made more sense and was more rational and they adopted rules through some type of multilateral treaty.
If for instance in connection with the current trade negotiations it were determined by a group of nations that it is a more sensible approach to follow apportionment I could see --
Justice Thurgood Marshall: Well then why not turning it all over to them, let them decided it all, what do you here for?
Mr. Peter L. Briger: It might will be a good idea and it's or -- but since there has been this --
Justice Thurgood Marshall: You have to change the constitution a little bit and --
Mr. Peter L. Briger: I don't think so at all.
I think that the states could urge the federal government indeed to enter into new treaties with foreign governments and this could be done as a matter of the treaty power of the federal government and in that sense it might be a rational way to approach the problem.
Justice Thurgood Marshall: But that's not the way you approached it?
Mr. Peter L. Briger: No Your Honor that that --
Justice Thurgood Marshall: Well, is it?
Mr. Peter L. Briger: We brought it here because there has been this clear custom and where there has been a custom and a reliance interest by foreign governments what we are suggesting is that the states even in their power to tax cannot change a fundamental principle which has been recognized by the international community of nations for more than 200 years, probably longer.
Justice William H. Rehnquist: Well, you are familiar with our Michelin Tire case, are you not?
Mr. Peter L. Briger: Yes I'm indeed.
Justice William H. Rehnquist: What if the State Department had taken a census of foreign nations in that case and they have come out the same way that they objected to this form of taxation.
Do you think Michelin should have come out differently in this Court?
Mr. Peter L. Briger: Well, no I think Michelin is correct and I think that Michelin and the Court was very careful to indicating Michelin by the way that they would not tax under the Import-Export Clause or under the Commerce Clause property that was merely in transit and I believe the Court left that exception there because they were concerned with the burdens of multiple taxation in an area where apportionment was not recognized by our trading partners.
Chief Justice Warren E. Burger: Mr. Briger, your reference to this canvas of the 100 other embassies, I take it is not to suggest that we take a poll of what they think about it, but the implications of their answer and that those implications are that if you tax the components of our vessels, we are going to tax the components of your vessels, isn't that true?
Mr. Peter L. Briger: Indeed that's the sum and substance of it and also it's the perception of that Department of the United States government which is charged with foreign relations.
And whether the report is correct or not, it is the view of that agency which has the responsibility for the foreign relations of United States and it is important because this is the perception of the State Department of the foreign relations question.
It's not a matter of a popularity contest, but it is the view of that agency charged with the foreign affairs of the United States and it is making its comment that it regards the imposition of these taxes as an event which could have an impact upon the foreign relations of the United States.
Justice William J. Brennan: But Mr. Briger, are you making either an Import-Export or Tonnage Clause argument?
Mr. Peter L. Briger: Well, we made in our brief a Tonnage Clause argument and it's there.
I don't really intend to elaborate on that.
Justice William J. Brennan: Because if the Tonnage Clause prohibited this, there will be nothing Congress could do about it, is that right?
Mr. Peter L. Briger: That's correct.
It would be an absolute test.
Chief Justice Warren E. Burger: Are you suggesting none of the Tonnage Clause is a straw in the wind that --
Mr. Peter L. Briger: It is a possible argument which if one looks at the impact of the tax and we find that the tax can apply only because of the repeated events of importation and exportation.
Now, we do think there is an argument there that the Court has said we will not look to the mere label on a tax.
We will look to its effect.
We would argue that even though this is a general property tax, it applies solely because of this transit situation and in that sense we think there is an argument that it could be considered a tonnage duty.
Justice William J. Brennan: Mr. Briger may I get back to the question my brother Blackmun put to you before?
I think he told us that in the California Courts, you argued the Treaty of Friendship, but -- between the United States and Japan, but the United States does not support you in that argument here, does it?
Mr. Peter L. Briger: That's correct, Your Honor.
Justice William J. Brennan: Now it does support you though in the Customs Convention on containers argument, but you never raised that in California Courts?
Mr. Peter L. Briger: No, that was not raised specifically in the California.
Justice William J. Brennan: Well, I think my brother Blackmun asked you before, then how can you be heard on the customs conventional argument here?
Mr. Peter L. Briger: Because it is a law of the country and the fact that –
Justice William J. Brennan: The treaty?
Mr. Peter L. Briger: The Treaty is a law of the country.
Justice William J. Brennan: But it is a Treaty as I recall it, am I --
Mr. Peter L. Briger: Yes, it is a treaty.
Justice William J. Brennan: I mean, but it deals only with import duties and taxes, import prohibitions and that sort of thing, doesn't it?
Mr. Peter L. Briger: Yes.
Justice William J. Brennan: It doesn't deal with the type of tax we are dealing with here?
Mr. Peter L. Briger: Conceivably it does, I'm not – I am not --
Justice William J. Brennan: Under what --
Mr. Peter L. Briger: Well again under this concept that it talks about duties or taxes of any type whatsoever by reason of import and we believe that there is an argument that can be made that the tax applies only by virtue of the repeated import and export of the containers but we would -- we look to the Treaty and --
Justice William J. Brennan: Well, if it is an inapplicable treaty, I take it that should end the case, shouldn't it, in your favor?
Mr. Peter L. Briger: Yes Justice Brennan.
Justice William J. Brennan: If it is inapplicable --
Mr. Peter L. Briger: If it is inapplicable Treaty.
We find more support in the Treaty as a general expression of the federal government's interest in promoting the usage of containers.
We think there is an argument that the language, any taxes whatsoever by reason of export can be extended to the application of this tax in this case, but we find more solace from the Treaty in expressing the views of the federal government to expand and nurture the use of containers as a new technological development in the shipment of cargo.
Justice Byron R. White: It certainly would have been sensible if convention addressed itself to containers and to taxes?
I wonder it would have been quiet sensible to deal with property taxes, like that, wouldn't it?
Mr. Peter L. Briger: This is a great, this –
Justice Byron R. White: And then to reflect this international custom?
Mr. Peter L. Briger: Justice White, it is very difficult in dealing a codified world.
The drafters of tax statutes in their attempts to deal with each specific problem is one of the criticisms and that's why the tax --
Justice William J. Brennan: Well, they certainly considered import taxes because they use that expression in the convention, but was there any discussion at all in connection with the convention of the type of tax we are talking about?
Mr. Peter L. Briger: Your Honor, the reason why I believe that there was not, was that the perception at the time the convention was entered into was that these were properly dealt with under the home port doctrine, that would be the our best analysis of the situation.
Justice William J. Brennan: When was it negotiated, this convention?
Mr. Peter L. Briger: Well, the container conventions began to be negotiated in the 1960s as containers began to be used at that time.
The 1962, convention was executed by certain of the Signatory states in the 1960s, I believe the United States became a party to the Treaty in 1972, but we feel that the lack of any specificity in the container is due to the general understanding at the times that the home port doctrine eliminated this type of tax and certainly California in that period by following the SAS case certainly felt that way and it would appear that to the drafters of this type of Treaty that there was no need to put in this provision and I believe the amici, the foreign and domestic airlines make certain points to that affect in their brief that this was the understanding.
Justice William H. Rehnquist: But you agree that the home port doctrine has heretofore never been applied by this Court to anything except domestic commerce, that has been applied to international commerce?
Mr. Peter L. Briger: Indeed.
Justice William H. Rehnquist: But well then – and do other countries have a similar home port doctrine to ours?
Mr. Peter L. Briger: Yes, for instance Japan not only that the trial court find that Japan applied a home port doctrine but we submitted to this Court a translation of the property tax law of Japan.
Now in that law, owners of personal property such as containers, a Japanese company is required to register that property at the place of its principle place of business in Japan and a tax of 1.4% is imposed by Japan upon the value of the property as listed in that register of assets.
So Japan certainly follows a home port doctrine.
Justice William H. Rehnquist: Why would our negotiators be so confident that the home port doctrine would govern property taxes when this Court had never applied it to international trade?
Mr. Peter L. Briger: It seemed to be the practice Your Honor and that --
Justice William H. Rehnquist: When you say it seemed to be the practice, what do you mean by that?
Mr. Peter L. Briger: That for more than 200 years, states have not levied personal property taxes on things such as airplanes.
In the one case where it was attempted in California we have the SAS case.
We find that we feel it, the Michelin case that in Michelin and Washington Stevedores, there was a coalescing of many of the common principles, but they were clear to indicate that property in transit even if a tax was levied on a non-discriminatory basis would be considered to violate both the Import-Export and the Commerce Clause and I think that's the exact situation that we are dealing with here.
Justice William J. Brennan: Are the containers here as handler containers were in Michelin?
As I recall in Michelin, they arrived that the where it was, that state, North Carolina, was it, loaded with tires and were unloaded and stored in a warehouse.
Some of them coming in from Nova Scotia simply took trailers on tax tractors to then ship them to Nova Scotia that way, but overseas they took the wheels off in France, wasn't it?
Mr. Peter L. Briger: In Michelin, these containers are not containers with wheels.
They are just boxes and they are shipped in these vessels which are specifically designed to handle it.
Justice William J. Brennan: And they once get to California, how do they get to the other states?
Mr. Peter L. Briger: By rail or truck Your Honor, they carried flat bed --
Justice William J. Brennan: But not themselves, they are trailers?
Mr. Peter L. Briger: No they are not themselves, they hold on trailers.
But just in response to another question that Judge Rehnquist had raised.
While the Court has never dealt with a situation imposing the property taxes upon foreign-owned instrumentalities, it should be noted that none of the apportionment cases such as Pullman's Palace versus Pennsylvania, Ott versus Mississippi or Braniff dealt with foreign-owned instrumentalities.
The key to our position is that neither this Court, the federal government nor the states have the right to require foreign governments to accept the apportionment approach.
It might be logical if they did and it might well be something that could be done through Treaty.
Justice William H. Rehnquist: You say that Congress couldn't by legislation impose such a tax as this or authorize the states to impose such tax, is it?
Mr. Peter L. Briger: I believe it, I believe it could.
Justice William H. Rehnquist: I thought a minute ago you said that not even the federal government could authorize the imposition of this tax?
Mr. Peter L. Briger: No it could not -- not the imposition of this tax, but it could not require foreign governments to accept apportionment as a means of the international taxation of these containers.
We don't have that right, Your Honor, the federal government.
Justice Byron R. White: You think the Secretary of the Treasury has any regulatory power pursuant to the convention on containers or pursuant to any other statute to affect this tax?
He has issued the regulations to implement the United States duties under the container convention?
Mr. Peter L. Briger: Yes.
Justice Byron R. White: You think that he could reach this question?
Mr. Peter L. Briger: No, I believe that this question can be reached only by the Court.
Justice Thurgood Marshall: Can I ask you a question?
If you are talking about 200 years, how long have you had these containers, about 10, right?
Mr. Peter L. Briger: Yes, Your Honor in.
Justice Thurgood Marshall: They didn't have anything like it before, did they?
Mr. Peter L. Briger: No but in the 200.
Justice Thurgood Marshall: [Inaudible]
Mr. Peter L. Briger: No it has to be, it has to be hold by something or carried by something, but --
Justice Thurgood Marshall: How is that, that is not a vessel?
Mr. Peter L. Briger: There is a great deal of --
Justice Thurgood Marshall: Yeah it is a vessel, like teapots of vessel --
Mr. Peter L. Briger: Well, for want of a better term, Justice Marshall, it is referred to as an instrumentality.
Justice Thurgood Marshall: Like a box?
Mr. Peter L. Briger: Like a box and I suppose an airplane or a vessel is something like a box.
Justice Thurgood Marshall: An airplane moves on its own, this box doesn't?
Mr. Peter L. Briger: No this box has to be hold, but we are analogizing it to vessels or to aircraft from the standpoint that it carries things in commerce and it may not have its own motive power.
Justice Thurgood Marshall: Wouldn't they go to a warehouse?
Mr. Peter L. Briger: The containers Your Honor, it's not my understanding that they are carried to a warehouse --
Justice Thurgood Marshall: [Voice Overlap] between a container sitting down on the ground and a warehouse, if you don't move the container?
Mr. Peter L. Briger: I think that's perhaps a different case because our containers are constantly in transit.
Justice Thurgood Marshall: I agree they are different but there wouldn't be any difference in my case, would there?
Mr. Peter L. Briger: If the container would --
Justice Thurgood Marshall: In a warehouse that holds a 1000 tires and a container that holds a 1000 tires and they both sit there for a year, the difference is what?
Mr. Peter L. Briger: It would depend on the facts of the case and in your illustration the container could be used as a warehouse, the containers that we are dealing with --
Justice Thurgood Marshall: And then you can tax it?
Mr. Peter L. Briger: If it were sedentary I suppose --
Justice Thurgood Marshall: If it were used as a warehouse, could California tax it?
Mr. Peter L. Briger: If it were continually there, yes I would think that there are many distinctions.
I mean, it is almost like when an item of personal property becomes affixed to the real estate it becomes real estate under the law and I suppose a container would be no different from any other piece of personality that became affixed to the reality.
It would depend on the usage.
I think that's a different case because in our case the average stay of the containers were stipulated by the parties to be less than three weeks per visit and they were continually in motion.
I don't disagree that if the container were affixed to the real estate, it could be a warehouse or building or anything else.
Justice Byron R. White: Would you think that if you think the -- if the basis for ruling in your favor is the danger of double taxation, is that it – is that really --
Mr. Peter L. Briger: It's part of the danger.
It isn't merely a question of double taxation.
What we have in this case is long and well established reliance interests of foreign governments very similar to what the Court admonished --
Justice Byron R. White: So what should California do about containers from Afghanistan if they are --
Mr. Peter L. Briger: Well what -- we feel that California can do two things.
Number one, there are constitutionally viable means of collecting the value of services, benefits or opportunities that can be imposed within the constraints of this particular situation namely to levy specific user charges or secondly the states are not without the means to attempt to influence the federal government to seek a new rule.
Justice Byron R. White: And now you are talking about all containers, not just containers from Afghanistan.
What about -- how about this property tax was on containers from Afghanistan?
Mr. Peter L. Briger: Well, we think because of the foreign relations aspects of it, whether there is going to be retaliatory taxes imposed is something better left to the State Department and not to be determined by any number of local governments.
The question of retaliation or reciprocity is the manner in which this international carriage of goods and cargo has been dealt with.
So that if we are going to have either reciprocal exemptions or retaliatory taxes with our foreign trading partners that clearly seems to be a matter of exclusive federal concern.
Argument of Kent L. Jones
Chief Justice Warren E. Burger: Mr. Jones?
Mr. Kent L. Jones: Mr. Chief Justice and may it please the Court.
Concern has been expressed so far on the question whether this Court has ever applied the home port doctrine in the international context.
Of course every time the Court has distinguished Hays it is done so with express recognition that the rule may be different for international transport and in the first case that distinguished Hays, the Pullman Palace Car Company case, the Court expressly stated that the rule with regard to instruments for intercommunication with other nations may require national treatment.
But at least since this Court's decision in Hays and until the imposition of the tax by appellees in this case, the consistent domestic practice of the United States has been to exempt foreign-owned and domiciled instruments of foreign commerce from local property taxation.
Our domestic practice in this regard is confirmed to the international custom that affords an immunity from local property taxation to other nations' instruments of world commerce.
Justice William H. Rehnquist: Mr. Jones, what if this container had been used not only to ship material from Japan to Long Beach, but in inland from Long Beach say to Sacramento, but then a separate trip had been made in the container shipping goods from Sacramento down to the Imperial Valley and then it had gone back to Long Beach?
Mr. Kent L. Jones: Yes, if all -- as I understand your question, at least part of that commerce was domestic commerce?
Justice William H. Rehnquist: Right.
Mr. Kent L. Jones: Well in that context the international custom wouldn't apply because the international rule would not purport to intervene with the regulation of the domestic commerce between points within in the nation.
Justice William H. Rehnquist: So the container could, a prorate tax could be levied on the container based on the portion of the time that it spent making the journey from Sacramento to another point in California carrying cargo?
Mr. Kent L. Jones: If that journey were in domestic commerce as opposed to simply carrying imported goods further along and bringing exported goods out that would not be in consistent with our understanding of the international practice.
Justice William J. Brennan: Well Mr. Jones, your footnote 14 suggests another answer.
It is under Article 11 of the Customs Convention on Containers.
Containers are used even occasionally for domestic traffic may be taxed.
Mr. Kent L. Jones: Article 11 deals with the question of – no, I think that Article 11 is exactly consistent with what I have said.
Justice William J. Brennan: Well I would suggest may be another answer to Mr. Justice Rehnquist, is it?
Mr. Kent L. Jones: Well, but our position with regard to the Customs Convention on Containers is that by its terms, it only restricts the imposition of duties.
I intend to discuss at the close of my argument why we think it also has relevance.
Justice William J. Brennan: What does your footnote 14 mean? It is yours, isn't it?
Mr. Kent L. Jones: Yes it is.
Justice William J. Brennan: And you say that the Customs Convention, 11 says containers used even occasionally for domestic traffic may be subjected to duties and taxes even in that nation?
Mr. Kent L. Jones: Well, I don't see, I'm having trouble seeing --
Justice Potter Stewart: But it's not another answer, it's a different ground for the same answer?
Mr. Kent L. Jones: Yes, I wouldn't argue with that.
Then immunity conferred by the international custom is not simply a commercial favor granted by nations to foreign co-operations.
Instead it is based on a recognition of the special interest that each nation posses in the development and utilization of its instruments for world trade.
And is in this sense an expression of difference and mutual accommodation among commercial nations.
The tax imposed by appellees in this case in the similar tax on foreign aircraft that the state has proposed to asses is a direct departure from the excepted international practice.
Appellees claim that because the tax is an apportion tax it does not unconstitutionally burden commerce.
But this argument we submit is made with an parochial and unrealistic framework.
It is true that is recently as the Washington Stevedoring case, this Court has stated that when a tax on commerce within the United States is apportioned among the states, multiple burdens on such commerce “logically cannot occur.”
But the logic of that conclusion depends on the fact that in cases involving domestic or interstate commerce such as the Standard Oil and the Braniff cases, this Court can require the state of domicile as well as the non-domiciliary state to apportion the tax with the result that the property in aggregate is subject to only one tax on its full value.
Justice William J. Brennan: Tell me Mr. Jones, the government makes neither a tonnage nor Import-Export Clause, are not they?
Mr. Kent L. Jones: That's correct.
Justice William J. Brennan: You rely exclusively on the Commerce Clause right now?
Mr. Kent L. Jones: Well, we rely exclusively on the Commerce Clause that we think the Import-Export Clause argument could be investigated, but it is wholly subsidiary to the Commerce Clause argument.
If we loose on the Commerce Clause argument we would definitely loose on the Import-Export clause argument.
Justice Byron R. White: Your Customs Convention argument isn't an independent one either?
Mr. Kent L. Jones: It is an independent argument which, I --
Justice Byron R. White: That isn't necessarily common?
Mr. Kent L. Jones: No I would say it's a Supremacy Clause argument.
The logic of the domestic cases however has not and cannot realistically be applied to foreign domiciled instruments of foreign commerce.
The international custom that exempts these instruments from local property taxation also recognizes as this Court recognized in Hays that the nation of domicile may impose a full tax on the value of its instruments of foreign trade.
The practical, logical consequence of appellees' unilateral imposition of its tax in conflict with the international practice is to inflict a multiple tax burden on foreign domiciled instruments of commerce and specially disadvantage this commerce because of its origin.
The burden cannot simply be removed by international agreement as the state court suggested.
Even assuming that a rule of apportion taxation is desirable in the international context, such a rule cannot be dictated to the world by the United States, much less by a single state.
The State Department has noted that there is no realistic likelihood that other nations will be willing to alter the international practice merely to confirm to the states' contrary rule.
Retaliation rather than accommodation appears the more likely response to any unilateral domestic action.
Unless foreign commerce is to suffer, the tax treatment of foreign domiciled instruments of foreign commerce, necessarily requires a uniform national rule that is based either on the accepted international practice or results from reciprocal negotiations, rather than unilateral fiat.
Justice William H. Rehnquist: Well, would you say that was consistent with the Bob-Lo case which you just said?
Mr. Kent L. Jones: Yes, I would.
Justice William H. Rehnquist: There had been either reciprocal negotiations or uniform practice?
Mr. Kent L. Jones: No I would say that the Court's conclusion in that case was that there was no need for a uniform national rule or in any event that the states rule didn't conflict with any such need.
Justice William H. Rehnquist: But that isn't quite what you said in the sentence before that, is it, that it has to depend either on uniform international practice or negotiations reciprocal?
Mr. Kent L. Jones: The uniform rule that we think is needed in this case would have to come either from the accepted international practice or a revision of that practice that could only be obtained by reciprocal negotiations.
Justice William H. Rehnquist: But you say in some cases, international commerce does not “need” a uniform rule?
Mr. Kent L. Jones: I would say that that's correct.
The states interjection of its single voice on a matter that's previously been characterized by and we think requires international accommodation as occasion substantial expressions have concerned by our major trading partners.
The principle of mutual accommodation that underlies the home port rule and the desire to avoid multiple burdens on foreign trade has consistently been reflected in our foreign policy as in our adoption of international conventions to provide temporary free admission to this country or foreign containers and aircraft employed in foreign commerce.
The state's independent action threatens the national interest in conducting foreign commercial relations on a basis of international mutuality and reciprocity.
We submit that the action of a single state cannot, consistent with the Commerce Clause, be allowed to define the appropriate foreign commercial policy for the entire union.
As we noted in our brief, we think there is an additional reason that appellees tax is invalid based on the rationale of the McGoldrick case.
In McGoldrick, this Court had before the provisions of the customs laws that permit imported articles to be admitted free of duty for manufacture and re-exportation.
The Court held that the objectives of this federal immunity was to provide a competitive advantage to the trade and that would be injured if the state were allowed to impose its general sales tax on the merchandise, thereby lessening the competitive advantage that Congress had created.
The Court concluded that the state tax was invalid because in this practical operation, it tended to frustrate the federal objective.
In our brief, we note that the Customs Convention on containers provide similar treatment to foreign owned containers in that the containers are to be admitted free of duty for exclusive using foreign commerce.
Justice William H. Rehnquist: Do you agree this wasn't raised before the Supreme Court of California?
Mr. Kent L. Jones: My understanding of the record is that the effect of the container, the possibility that the state tax was inconsistent with the container convention was raised now the way in which the argument was framed below was different than the way it is framed here.
Below it was framed simply as a question as I understand it of whether the state had -- whether the state tax was a prohibited duty.
Here it is raised on a different basis, but it's our understanding that the container convention was discussed by the Court below.
Justice Byron R. White: But another Treaty was presented I take it, and the treaty Clause or the Supremacy Clause was -- that kind of an argument was presented?
Mr. Kent L. Jones: That's true.
In this sense, the cause of action was stated.
It was certainly claimed that the container convention as a Treaty, but there was [Voice Overlap]
Justice Byron R. White: Wasn't it a Treaty of Friendship --
Mr. Kent L. Jones: Yes it was raised also.
Justice Byron R. White: -- relied up on too, which was another Supremacy Clause argument?
Mr. Kent L. Jones: Yes.
Justice Byron R. White: Well, do you think it would be sufficient in a State Court for a party to rely on the Equal Protection Clause of the Fourteenth Amendment and come up here and say I abandoned my Equal Protection Clause argument, I am now relying on the Due Process Clause and say I talked about the Fourteenth Amendment in the state Supreme Court?
Mr. Kent L. Jones: Well, with the last caveat that you added I would say that yes he could raise it, if he talked about it in the state Supreme Court?
Justice Thurgood Marshall: Is it in the briefs?
Mr. Kent L. Jones: Oh, yes sir.
Justice Thurgood Marshall: In the state court.
I thought that's how you talked?
Mr. Kent L. Jones: I would have to defer to counsel on that, I can't say for certain.
Justice Thurgood Marshall: Well, how can we be sure that it was raised, if we can't find it in the brief?
Mr. Kent L. Jones: Well, my understanding was that it was --
Justice Thurgood Marshall: If you want to say that it is raised, wouldn't it be more helpful if we get to show on the briefs?
Mr. Kent L. Jones: As I recall the decision of the State Supreme Court, which of course incorporated the decision of the appellate court, the container convention argument had been rejected in the case that Court had previously considered the Sea-Land case and it's my recollection which may be incorrect and I cannot find the source at this point that there was reference made in the opinion in this Court to the fact that the Customs Convention had been held to be inapplicable in its prior decision.
The issue has been presented to the state court.
Justice Thurgood Marshall: [Voice Overlap] for us to look it up?
Mr. Kent L. Jones: I don't want you to look it up.
I wish I knew where it were, but I regret that I do not.
I can if time permits I will attempt to.
The objective of the container convention is to facilitate the use of the containers in world trade by avoiding the imposition of multiple burdens on the containers as they move from nation to nation.
The tax imposed in this case could under appellees' theory be assessed also by other states and other nations and thus create a multiple barrier to the use of containers in the -- as instruments in world trade, a barrier that would frustrate the objective of the container convention.
I should note in one limited regard the regulations implementing the container convention go beyond the convention substantive requirement that containers be exempted from duties only while they are engaged exclusively in foreign commerce.
Sub-section F of the regulations allows a narrow exception for domestic use of foreign containers, if the domestic traffic is only incidental to the foreign commerce and is along the containers route in international trade.
If any foreign containers travel under that exception, state taxation of the incidental domestic use would not conflict with the objective of the [Inaudible] convention, which affords an immunity only when the container moves exclusively in foreign commerce.
Justice William H. Rehnquist: Where does the secretary's authority come from the issue of regulations?
Mr. Kent L. Jones: We don't think that the regulations themselves here in this case control our analysis under the McGoldrick theory any more than the regulations we thought relevant by the Court in McGoldrick.
We think that the substantive scheme is established by the Treaty as it was established by the statute in McGoldrick.
Justice William H. Rehnquist: So you rely only on the treaty and not on the rights?
Mr. Kent L. Jones: That's correct.
Justice Byron R. White: The regulatory authority rises under a separate statute?
Mr. Kent L. Jones: The regulatory authority -- there is regulatory authority to amplify the substantive scheme and we wouldn't contend that the incidental domestic use exception was inconsistent with the container convention, but we would say that it is not supported by the container convention and that it is only the objectives of the container convention to protect the use the use of instruments in exclusively as they are used exclusively in foreign commerce.
The state taxation of the incidental domestic use would not conflict with the container convention.
It is only where the tax is applied as in this case to containers that are involved exclusively in foreign commerce that the tax is in conflict with the international practice and also tends to frustrate the objectives of the container convention.
Argument of James Dexter Clark
Chief Justice Warren E. Burger: Mr. Clark?
Mr. James Dexter Clark: Mr. Chief Justice, may it please the Court.
I would like to get right down to the nature of the home port doctrine if I may.
The home port doctrine in essence says that there will be no taxation of a movable piece of property by a state which is visited unless actual situs is acquired there.
In actual fact the dispute between the appellants and the appellees in this case does not involve the existence or non-existence of the home port doctrine, but only the exception thereto and that is whether or not there will be indeed an exception created by continuous presence by means of rotation or whether each piece of property must exist in the taxing jurisdiction all year long, that is the nub of the real home port doctrine, that is the nub of the dispute in this case and it is also the nub of the enactment, that is the treaty dispute in this case.
I would like to proceed directly to the treaties involving friendship commerce and navigation and specifically that one involving Japan.
The first, Mr. --
Justice John Paul Stevens: Before you do that --
Mr. James Dexter Clark: Mr. Justice Stevens, yes sir.
Justice John Paul Stevens: -- the points you just made about the home port doctrine, would it apply -- would there be any difference if in this case involved the taxation on the vessel itself rather than the containers?
Mr. James Dexter Clark: Quite frankly --
Justice John Paul Stevens: And vessels where there are you know 10 or 15 days at a time?
Mr. James Dexter Clark: Quite frankly Mr. Justice Stevens it would depend upon whether that presence was created there.
If a vessel came into the tax I'm sorry it depends upon two things not only the presence, but it also depends upon the benefits and protections conferred by the taxing jurisdiction.
Justice John Paul Stevens: Suppose they are precisely as the same as your same amount of time in the port and exactly the same protection?
Mr. James Dexter Clark: If those vessels came in and stayed there for an average of three weeks and came in on a rotated basis, as far as the Constitution is concerned I believe there is no difference whatsoever.
Justice Potter Stewart: That will be the same if the average were three days, wouldn't it?
Mr. James Dexter Clark: Yes, that is correct Mr. Justice Stewart if the continuous presence were there and if the benefits --
Justice Potter Stewart: On average, three days per annum.
Mr. James Dexter Clark: Per individual ship is that correct Mr. Justice Stewart, that would be the case I think.
Justice Potter Stewart: And that was the case, wasn't it in the Hays case the – that was a New York Corporation with New York shareholders and but their ships rightly went to San Francisco and said the opinion states I don't have in front of me that the ships were in San Francisco regularly and spent enough time in San Francisco to unload and get new stores aboard and so on, and presumably they were there for an average length of time each ship for each year.
Mr. James Dexter Clark: Mr. Justice Stewart, the problem in the Hays of course not only had it not considered the apportioned idea, but in addition there was no continues presence cited in that case.
There was no year long presence cited in that case.
Chief Justice Warren E. Burger: There was in fact an average person per ship obviously, wasn't there?
Mr. James Dexter Clark: That's correct Your Honor, but the tax was a full ad valorem tax and the tax dealt with not an apportion tax, but a tax on each ship as it's full value and that is I think the real distinction in terms of Hays' factual situation and this one, that we do not pretend that we can tax each container on a full ad valorem basis.
We contend that we can tax the continuous presence of all of those containers in the taxing jurisdiction and I think that's a key difference because when Pullman's Palace Car went to that difference, it said when it involved the situation of foreign versus domestic carriers or international versus non-international carriers it was looking at a time I believe when there were very few fleets of ships under one ownership and it was looking at a single presence or a single item at a time and the opinion in Pullman's Palace Car said that while those instrumentalities of foreign commerce in no way maintained themselves as a continuous presence in the taxing jurisdiction, that is totally different.
While at the same time of course Pullman's did recognize the idea that instrumentalities of foreign commerce as well as instrumentalities of interstate commerce may be taxed.
Justice Thurgood Marshall: Mr. Clark, I understand you are right that in the good old days when Queen Mary and Queen Elizabeth were coming every week that [Inaudible] could be taxed, because if so, we wouldn't have all this financing problem?
Mr. James Dexter Clark: Mr. Justice Marshall, if that can --
Justice Thurgood Marshall: If you can tax a ship that came back and forth and say you are not tax the government?
Mr. James Dexter Clark: Mr. Justice Marshall.
Justice Thurgood Marshall: Oh, [Inaudible] ship that is in commerce.
Mr. James Dexter Clark: I think the logical extension of that is if you take it, if you say that the railroad cars in Pullman's Palace Cars may be taxed then I believe that if the benefits and protections are there, you are not taxing commerce as such.
You are recouping the return on the benefits and protections conferred and the burdens on the local government, distinction yes Mr. Justice Marshall.
Justice Thurgood Marshall: What benefits do you give a ship?
Mr. James Dexter Clark: Mr. Justice Marshall --
Justice Thurgood Marshall: Don't the ship have its own firefighting equipment?
Mr. James Dexter Clark: It may have and it may have a separate port authority.
Justice Thurgood Marshall: Yeah, but it require they have [Inaudible]
Mr. James Dexter Clark: Yes Mr. Justice Marshall that is true too and also ports have their own fire fighting equipment as the appellants pointed out as far as Long Beach is concerned whether or not the fee imposed by the port would negate the idea of a benefits and protections test as applied to a vessel, I don't know because I have not looked into the question of a local jurisdictions benefits and protections as applied to a vessel.
I do know that if the benefits and protections are there then I believe that it is the local government's right to recoup that particular burden on them.
I admit that the containers I think are quite distinguishable from vessels in that they more clearly supply those burdens on local government.
They go through our roads, they stay here for at least there for an average of three weeks, they entail polite lease and fire protection by the municipalities as well as the county throughout their state.
Chief Justice Warren E. Burger: Any more of them truck itself that bears them?
Mr. James Dexter Clark: Mr. Chief Justice, that is in more probability, no, as long as that truck has the same kind of existence in the taxing jurisdiction.
Chief Justice Warren E. Burger: The carrier, the container here does not wear the highway out any more than the truck would if they had taken everything out of the container and --
Mr. James Dexter Clark: Yes it would, Your Honor, quite frankly it would with the added weight.
There would be a substantial difference in --
Chief Justice Warren E. Burger: Does the record show what the added weight is?
Mr. James Dexter Clark: No, it is not Your Honor, that is absolutely true.
But Mr. Chief justice when we arrive at the particular point in question I think we have all of those benefits and protections which we have logically cited in our brief and it is that the appellant's burden to dispute that and to reject the fact that the services to which the tax is put does not apply to them and I think we have logically shown that they do apply to them that fire and police protection applies to them, that the flood control applies to them, that all of the other services which aid the appellants in coming into our taxing jurisdiction as an enterprise and earning profit should be recouped by the local government.
Once you get beyond that point and we look into the treaties itself to determine whether or not the federal government has indeed enacted a particular point in order to disturb that relationship, I think it is wise to look at the federal, the friendship commerce and navigation treaties, and the start of that inquiry of course is Article 22 paragraph 4 where a national treatment is defined differently for states and territories than it is for the United States itself and by treaty national treatment does not say no less than treatment you will give other people.
It says that national treatment equals the same treatment you give enterprises from other states and relating that national treatment to the articles which are key in this particular case we run up against the import export provision in Article 14, paragraph 5 which says you will give national treatment in all respects to import and export.
In Article 19, paragraph 3 you will give national treatment and equal treatment to vessels coming into your territory and in Article 16, paragraph 1 you will give national treatment with regard to internal taxes.
I believe that the friendship commerce and navigation treaties thereby show that the states that the federal government even if we admit the federal power to exist to exempt from the state taxation without taking the responsibility for the services provided even if we say that power exists in the federal government we have problem with regard to the FCN treaties and one would believe that in light of the apportionment statements in the FCN treaties, in light of the particular statements with regard to the import export and vessels and internal taxes that some demonstrable showing with regard to the container convention would be present.
If the container convention is cited as apparent overruling, the FCN treaties that some positive showing and as a matter of fact the Secretary's authority under 19 U.S.C. 1322 (a) sheds even additional light beyond that and that is that the secretary has the authority with regard to all the instrumentalities of commerce which come from foreign countries to say that they will be exempt from the ordinary customs laws.
Now, if we say that this non-discriminatory uniform property tax is indeed a customs law then I think we say that practically every general tax in the country is a customs law.
I find no illusion to property taxes in 19 U.S.C. whatsoever.
I find no illusion to property taxes in the Customs Convention or the Container Convention, which I believe ought to be present, if we are going to have such an impact which was acknowledged in the FCN treaties to be the other way.
We would have something explicit in the Container Convention and to simply say that property is taxed by reason of importation, simply because it comes into the taxing jurisdiction, is to say that every tax on very piece of foreign property is immune.
Now, the idea is that in essence what the appellants are really -- the logic of the appellant's position is that because there is a danger of multiple taxation we should not tax this property, which has exactly the same kind of benefits and burden relationship as any other property continuously existing in the taxing jurisdiction that is not shown to be wrong by the appellants of the United States or anyone.
The United States relies on a custom of international law and they prove half of it.
They say that some countries do not tax our property going into their jurisdiction, but they do not prove the other half.
They do not say that they have personal property tax structure in their country and therefore they made some kind of exception.
They do not say that they do not recoup these matters by other kinds of fees or taxes.
They simply say that when it gets down to personal property taxes, most of the countries don't impose them and then they fight a few exceptions and that is the 30-day rule, the 90-day rule in Afghanistan.
One would therefore that since we have a 30-day rule on the customs laws of other countries that therefore California could tax as the containers were here over 30 days.
Now, we do have a question mark in the factual stipulation, the average is 3 weeks no less than 6 months.
It is quite possible that many of those containers over here over 30 days, we don't know, but the very idea is that if they are then California would be going along reciprocity with those nations who imposed -- which impose a 30-day rule.
Justice William J. Brennan: And tell me Mr. Clark, if you prevail, could Congress constitutionally prohibit this tax?
Mr. James Dexter Clark: Mr. Justice Brennan, it is not simply the power to prohibit that the United States or the Solicitor General seeks.
Justice William J. Brennan: No, no, my question is if you prevail?
Mr. James Dexter Clark: Yes sir.
Justice William J. Brennan: If you prevail --
Mr. James Dexter Clark: Right.
Justice William J. Brennan: -- could Congress nevertheless prohibit the county from imposing this tax?
Mr. James Dexter Clark: Right Mr. Justice Brennan what I believe it goes two ways.
Justice William J. Brennan: I see.
Mr. James Dexter Clark: I think that Congress can prohibit perhaps.
This particular levy in the national interest, if it also doesn't take – if it also takes responsibilities for the benefits and protections conferred.
What the --
Justice William J. Brennan: How does it do that?
Mr. James Dexter Clark: Well, the Solicitor General is urging this Court to adopt a position that would say in essence Congress can exempt a piece of property from state taxation whereas at the same time it leaves the state holding the bag for providing the benefits and protections to that particular piece of property.
Now, if it does that in the name of reciprocity, it means in essence saying well, do this business man in Virginia need some help there and he is operating in Japan therefore we are going to confer a benefit on a Japanese company operating in California.
Justice William H. Rehnquist: But isn't the state of California perfectly free of the judgment the Supreme Court of California has reversed here to say the hell with these containers, we are not going to provide any protection to them because they don't contribute -- we are not allowed to exact an aliquot share of their tax burden?
Mr. James Dexter Clark: I have -- that may be true Mr. Justice Rehnquist.
I have a rough time saying that a state that provides general benefits and protections can suddenly say that for --
Justice Thurgood Marshall: If you don't [Inaudible] there are containers next to them?
Mr. James Dexter Clark: I think that's true Mr. Justice Marshall, we have both sides to that question that I believe that number -- I do not know that a state could simply say for one specific person, we are not going to protect you because you don't pay.
On the other hand, I think that there would be a danger physically of saying that for foreign cargo containers, we are not going to protect them, when on actual fact, if a fire breaks out it imperils other structures and of course there are the other indirect public health versions which we simply have to provide in order to keep our population at work.
I think that what the Solicitor General is an essence saying though Mr. Justice Rehnquist is the idea that they don't have do that, that they can benefit the man in Virginia ultimately by this reciprocal thing without underwriting the California expense and leave the California tax payers holding the bag.
Justice Potter Stewart: What Article 1 power would that be, the power over international commerce?
Mr. James Dexter Clark: I believe that it would either be the Commerce Clause power over commerce or perhaps the treaty power.
I quite frankly has a very personal problem.
Justice Potter Stewart: The President of United States negotiates treaties and then only one house of Congress gets involved in those, that's the senate, but I am telling you my brother Brennan's question to you had to do with what Congress could do, not what the President and, if there is a Senate --
Mr. James Dexter Clark: Well, I think Mr. Justice Stewart if -- I hope that I have answered the question with regard to Congress.
I believe that under its power to regulate foreign commerce, regulation and taxation for benefits and protections conferred --
Justice Potter Stewart: Therefore, they couldn't, Congress under that explicitly conferred power totally exempt these things from taxation, local, state or national and why wouldn't that be preemptive of any county or state?
Mr. James Dexter Clark: Because number one regulation and taxation are two entirely different things.
Mr. Justice Stewart we exist, at least I hope, we exist in the federal system.
It involves that the people who are in local to that jurisdiction, I myself can go to my city counsel and say I would like to ask a question about fire protection.
Now, if the United States or Congress or I would like a tax ask a question about my property tax, why am I paying more than somebody else?
If the city council tells me that the United States Congress has said that guy is going to be exempted and you have to pay his bill, that I think is right at the heart of the federal system.
If we have that federal system --
Justice Potter Stewart: We must talk and see that of course we have a federal system, but we must talk and see it further than the Framers chose to confer a great deal of power upon the Congress of the United States in the area of interstate and international commerce, that's correct isn't it?
Mr. James Dexter Clark: That is correct, Mr. Justice Stewart.
Justice Potter Stewart: And if Congress would -- if these things or these instrumentalities as they have been called are in the international commerce then why wouldn't Congress have complete power to exempt them from taxation?
Mr. James Dexter Clark: Because the regulation of commerce is different from the taxation of the property within the taxing jurisdiction.
The regulation of commerce deals with giving up toward -- giving somebody a benefit and not giving other people a benefit.
The taxation of commerce was treated separately in the Constitution and Gibbons versus Ogden recognizes the difference between taxation and regulation and we exist in terms of the states as narrow as their ambit has become, we exist in terms of a uniform non-discriminatory tax levied in return for benefits and protections conferred.
Justice Potter Stewart: Then I -- did I misunderstand your answer to my brother Brennan's question?
I thought you said yes Congress could do it.
Mr. James Dexter Clark: Oh!
I am sorry Mr. Justice Stewart my feeling is that if they can, if they can do it then they must take the responsibility as long as well with as the benefits.
In other words, if the Commerce Clause says that pursuant to a regulation you can disturb that relationship and take off a tax, you have to take the benefits and protections along with it otherwise what you have --
Chief Justice Warren E. Burger: What your answer you are talking about now?
You mean federal government can't come in and furnish police escort, and the fire departments --
Mr. James Dexter Clark: Mr. Justice Burger if, I am sorry, Mr. Chief Justice, the very idea of a tax or a piece of property being imposed, my envision would be perhaps that if the federal government decided that all foreign goods would remain immune from state taxation that in order to proceed in the national interest with national resources as was done in Missouri versus Holland.
They didn't use state troopers to go out and protect the birds, they used in there federal officers, it become a federal law that if they use those national resources in the national interest, they have to take both the benefits and protections along with along with the benefit of tax.
Justice William J. Brennan: While you mean Mr. Clark, the federal government, if it were to exempt these containers would have at least provide the county is the same -- with the amount that it losses in taxes in order to help support the police and fire?
Mr. James Dexter Clark: I believe Mr. Justice Brennan if there is anything to be said about that particular point, if we go so far as to say that federal government can make a non-discriminatory tax into a federal regulation, then I believe they have to take the burdens with the benefits.
Justice William J. Brennan: Well then, you didn't answer my question.
Mr. James Dexter Clark: Yes sir, it is.
Justice Thurgood Marshall: What would be duration of mandamus [Inaudible]
Mr. James Dexter Clark: No, Mr. Justice Marshall.
Justice Thurgood Marshall: How would you get this equipment out there that the federal government asked to, how would you get it?
Mr. James Dexter Clark: Oh!
I am sorry Mr. Justice Marshall, I believe that the idea if for instance customs had sealed off an area had bought a federal enclave and as they do in federal enclaves Mr. Justice Marshall, as at least in theory --
Justice Thurgood Marshall: But it is no federal enclave?
Mr. James Dexter Clark: No, it is not Mr. Justice Marshall.
Justice Thurgood Marshall: We are speaking about Long Beach.
Mr. James Dexter Clark: That's right.
Justice Thurgood Marshall: Do you want Congress to take over Long Beach?
Mr. James Dexter Clark: No Mr. Justice Marshall, I do not. [Attempt to Laughter]
The very idea though I think that if what I believe is --
Justice Thurgood Marshall: I don't know what you are talking about.
Mr. James Dexter Clark: I am sorry Mr. Justice Marshall.
Justice Thurgood Marshall: Do you say this federal government has to give fire protection to Japanese containers in Long Beach.
Mr. James Dexter Clark: Mr. Justice Marshall.
Justice Thurgood Marshall: Is that what you say?
Mr. James Dexter Clark: What I am saying is this sir.
Justice Thurgood Marshall: Is that what you said?
Mr. James Dexter Clark: I think I said that if the federal -- it is logical to do that if the federal government claims the privilege of immunizing a piece of property from tax which is the recoupment for those benefits and protections.
Justice Thurgood Marshall: Well, can't we rule against you without all of that?
Mr. James Dexter Clark: You have to reach I believe Mr. Justice.
Justice Thurgood Marshall: Can't we?
Mr. James Dexter Clark: You have to reach the congressional power, you have to at least say that Congress can.
Justice Thurgood Marshall: Do we have to?
Mr. James Dexter Clark: If you rely on the enactments of the treaties.
Justice Thurgood Marshall: We don't have to, can't you say so?
Mr. James Dexter Clark: No sir, no sir of course not.
Justice Thurgood Marshall: But, for you.
Mr. James Dexter Clark: I am sorry, Mr. Justice Marshall.
I did not mean to anyway say that the Court had --
Justice Thurgood Marshall: You said Congress had to.
You said Congress enforce the constitution and say that Long Beach cannot enforce this tax, but Congress will have to give the police fire and other protection.
Mr. James Dexter Clark: I think under the --
Justice Thurgood Marshall: Don't you say it?
Mr. James Dexter Clark: Logically under the federal system, yes sir.
Justice Thurgood Marshall: That's what you said.M
Mr. James Dexter Clark: Yes sir.
Chief Justice Warren E. Burger: Let's assume that someone in New Jersey starts a steamboat line running up or a diesel would be today I suppose, a diesel running up the Hudson River and then it obviously make stops at Hudson River ports, can New York tax the diesel barges and vessels that are going from New Jersey up the Hudson.
Mr. James Dexter Clark: I think only.
Chief Justice Warren E. Burger: Let's say they have exactly what we have got here can –
Mr. James Dexter Clark: If they have a continuous presence in the taxing jurisdiction and I think that those benefits and protections are there then the tax I think automatically follows.
Chief Justice Warren E. Burger: Well, now Gibbons against Ogden didn't involve the tax.
Mr. James Dexter Clark: No sir, it did not.
Chief Justice Warren E. Burger: It involved the licensing, but you suggest that New York could tax New Jersey's diesel barges going up to Hudson, Pullman's Palace Cars.
Mr. James Dexter Clark: Assuming what Pullman's Palace Car says Mr. Chief Justice, then the other side though too is that the regulation that's what Gibbons versus Ogden I think is all about.
It says first of all that you cannot regulate, you cannot prohibit that man from going up that river, but that you can tax it.
You can go out there and get a return for the benefits and protections conferred.
And I think that's true as long as the continuous presence and those benefits and protections are there.
I believe that in this case the continuous presence and the fact situation that we have here fully support and the appellants have not refuted that the benefits and protections are there.
Justice William H. Rehnquist: Mr. Clark, supposing that we were -- the President were to negotiate a treaty with Japan confirmed by the -- ratified by the Senate and Congress has implementing legislation under the interstate commerce power saying exactly what the treaty said that no property imported from Japan should ever be subjected to any state property tax so long as it was in existence, no matter how long it had been in this country, do you think it will be constitutional for Congress to do?
Mr. James Dexter Clark: Mr. Justice Rehnquist, I have gotten into trouble with the Court on this.
I do not believe that that would be proper under the federal system.
I think --
Justice William H. Rehnquist: When you say proper did you think that would be constitutional for Congress to do that?
Mr. James Dexter Clark: No sir it would not.
I think there are limitations on congressional authority and what I was getting to if I may emphasize this once again is that the logic of the federal system requires that if the federal government take the tax power away from the states, they must also have a responsibility before those benefits and protections which the state confers in one way or another.
Now that's the logic to me of the federal system and the relationship between those benefits and protections --
Justice William H. Rehnquist: In fact --
Chief Justice Warren E. Burger: You are urging that as an economic argument, advancing it that way or as a constitutional argument that there is a constitutional obligation to provide a substitute for the tax revenue?
Mr. James Dexter Clark: Mr. Chief Justice I think the constitutional argument is that there is no power in Congress to do that in the first place.
I speak, economically in the other terms.
Chief Justice Warren E. Burger: Well, you said they could it if they made the substitute provision?
Mr. James Dexter Clark: I'm sorry Your Honor I meant to say if they could do it I believe that that would follow and I believe that is an economic argument following I think the federal relationship between the state and the federal government.
Mr. Justice Stevens?
Justice John Paul Stevens: I just want to be sure what you are suggesting here about the quid pro quo.
This is your idea, there are no cases that suggest this?
Mr. James Dexter Clark: No sir, they are not.
Justice John Paul Stevens: I'm just wondering why you make the argument so strenuously.
It seems me you would be much tactically much better off to say yes Congress has all the power in the world, but hasn't exercised it?
Mr. James Dexter Clark: Well, I think that quite frankly tactically that's, I'm sorry it is true, the enactment is not there.
Mr. Justice Stevens perhaps that is a luxury for those of us in public law have to strenuously urge those things which we feel are right and sound and perhaps that is where I am, but I believe that both arguments are quite correct.
I'm concerned, Mr. Justice Stevens, if the federal government has that power as to what is going to happen in terms of our federal system in terms of state and federal relationships.
I honestly believe that the states have a purpose and I say it has been constructed by probably correct interpretations of the commerce.
Justice John Paul Stevens: What might happen is that you won't be able to tax things, if you haven't been able to tax unless couple of hundred years?
Mr. James Dexter Clark: [Attempt to Laughter] Mr. Justice Stevens the idea of course is that they have not been here for a couple of 100 years. California has exercised I guess it is totally --
Justice John Paul Stevens: No the vessels have been coming and going and I think you stared earlier and saying these are just like vessels and I don't think you try to tax vessels for couple of hundred years?
Mr. James Dexter Clark: Well, under California law we cannot.
The constitutional -- state constitutional provision which the appellants are alluded to has been interpreted as not corresponding with equal protection standards and therefore the exemption was applied by the Court to all vessels.
Justice Lewis F. Powell: Mr. Clark, may I ask you an easier question?
Mr. James Dexter Clark: Mr. Justice Powell.
Justice Lewis F. Powell: If we should affirm the decision of the California court, could the counter tax of the aircraft owned by foreign lands and based in foreign countries, but they use your airport?
Mr. James Dexter Clark: If the continuous presence is there, actually on the scheduled airlines I think that Ott versus Mississippi Barge Lines would go along with a regular presence as well as continuous, I would say yes.
Justice Lewis F. Powell: The aircraft also use containers?
Mr. James Dexter Clark: They have their own interior containers which are however are not used in the same way as these containers, they are simply taken off the airplane, perhaps taken to the warehouse often unloaded directly at the airport and kept with the airplane itself.
Justice William J. Brennan: But Mr. Clark you would say you could tax not only the containers but the aircraft itself?
Mr. James Dexter Clark: Oh yes Mr. Justice Brennan I think there was a question to whether we could tax the aircraft and I think that's correct.
Justice William H. Rehnquist: Is it possible to distinguish the aircraft from the taxation and the containers here so that we could affirm the decision of the Supreme Court of California and yet nonetheless not foreclose the question of the taxability of the aircraft?
Mr. James Dexter Clark: Yes, Mr. Justice Rehnquist I think so.
The aircraft, I hate to use this touching language, but the aircraft do come into only one place in the taxing jurisdiction and that place is covered by well like the New York airport authority, Los Angeles has the same sort of thing and is covered by airport fees.
When the container comes in here, the fee in the port is imposed on the vessel whether it has containers or not.
When the containers come here they put the in and through and to destinations and from destinations throughout the taxing jurisdiction and that gives you the assurance I believe that the benefits and protections and the tax relationship is there, whereas with the airplane perhaps that benefits and tax relationship is a little bit more conjectural, simply just hard.
Justice William J. Brennan: Yes Mr. Clark if you are right and you could tax the aircraft, I take it if Japan airlines has scheduled stop at Los Angeles.
Mr. James Dexter Clark: Yes Sir.
Justice William J. Brennan: And another scheduled stop at Chicago and another scheduled stop at New York, at (Inaudible) that Illinois and New York could also tax the aircraft?
Mr. James Dexter Clark: That's correct Mr. Justice Brennan.
They could indeed, but only in sense of its apportioned presence.
We are not going –
Justice William J. Brennan: Presence of what?
Mr. James Dexter Clark: Only in keeping with its apportioned presence.
Justice Thurgood Marshall: Could you also tax the trains that stop at each place?
Mr. James Dexter Clark: Mr. Justice Marshall, we do.
Justice Thurgood Marshall: You could?
Mr. James Dexter Clark: Yes sir.
Justice Thurgood Marshall: And the Pullman, what about the Pullman case?
Mr. James Dexter Clark: The Pullman case has been followed by every state imposing personal property taxes ever since its inception, yes sir.
Justice Thurgood Marshall: And you put the trains and planes on the same level?
Mr. James Dexter Clark: Sir, I think the difference between --
Justice Thurgood Marshall: I should take a whole lot of weight, you are only talking about -- this case only involves containers?
Mr. James Dexter Clark: Yes Mr. Justice Marshall.
Justice Thurgood Marshall: [Inaudible] ships and everything else, how far you going?
Mr. James Dexter Clark: Mr. Justice Marshall, I think that there are --
Justice Thurgood Marshall: [Inaudible] just a container point [Inaudible] decided by this Court?
Mr. James Dexter Clark: I believe that it can be decided that way Mr. Justice Marshall, that's correct and I don't mean to assert or push anybody Mr. Justice Marshall, but what I'm saying in essence is that the apportionment doctrine logically applies to the benefits and protections conferred to all of these instrumentalities.
If as I say, the port authority and these things follows.
Justice Thurgood Marshall: You won't be satisfied that we just stop on containers.
Mr. James Dexter Clark: Oh no sir, I'll be satisfied.
Justice Potter Stewart: Well, it wasn't your idea to make this broad argument, you are simply trying to answer the questions from members of the Court.
Mr. James Dexter Clark: That is correct Mr. Justice Stewart and --
Justice Thurgood Marshall: I started it.
Mr. James Dexter Clark: [Attempt to Laughter] The home port doctrine then deals with the exceptions to it and the argument regarding the home port doctrine deals with that exception by means of apportionment.
The friendship, commerce and navigation treaty stands I believe soundly for the proposition that both national treatment and apportionment are the expectations which the appellants received when they came here.
There are many treaties involving prevention of double taxation with regard to federal income taxes and the like and the friendship commerce and navigation treaties I believe were intended to fill a general rule as to all other taxes including state and local taxes which are specifically mentioned there in and in which in essence show that the national treatment and the very idea of apportionment are encountered by the people who involved in negotiating that treaty and accepted both.
So I think the enactments of the executive and of the federal government indicate that this tax is proper.
The container convention contains no explicit language and as I say if we contend that the taxation by reason of importation means that this tax is covered by that language that all taxes are covered by that language.
Thank you Mr. Justice, thank you.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.