## Facts

- Japan Line, Ltd. and other Japanese shipping companies owned cargo containers used exclusively in international shipping.
- The containers were based, registered, and subject to property tax in Japan.
- The containers were temporarily present in Los Angeles County and various California cities as part of foreign commerce operations.
- Local California taxing authorities imposed an apportioned ad valorem property tax on the containers based on their average presence in the jurisdiction.
- The shipping companies paid the taxes under protest and sought refunds, alleging violations of the Commerce Clause and U.S. treaties.
- A California trial court ordered refunds, but the California Supreme Court upheld the tax; the U.S. Supreme Court granted review.

## Issues

1. Whether the Supreme Court had appellate jurisdiction under 28 U.S.C. § 1257(2) to review a state court judgment sustaining a state tax against Commerce Clause and treaty challenges.
2. Whether California could impose an apportioned ad valorem property tax on cargo containers owned, based, and registered abroad and used exclusively in foreign commerce without violating the dormant Commerce Clause as applied to foreign commerce.

## Decision

- The Court held it had jurisdiction under 28 U.S.C. § 1257(2) because the state court sustained the tax against federal constitutional and treaty objections.
- The Court reversed the California Supreme Court and held the tax unconstitutional as applied to the Japanese-owned containers.
- The Court concluded that, even if a tax satisfies the usual interstate-commerce taxation criteria, additional limits apply when the taxed activity is foreign commerce.
- The Court found the tax invalid because it created a substantial risk of international multiple taxation and impaired the federal government’s ability to speak with one voice in foreign trade regulation.

## Legal Principles

- Under the dormant Commerce Clause, state taxes affecting interstate commerce are generally evaluated under the Complete Auto test: substantial nexus, fair apportionment, nondiscrimination, and fair relation to state-provided services.
- When a state taxes instrumentalities of foreign commerce, courts must apply an additional foreign-commerce inquiry beyond Complete Auto.
- A state tax on foreign commerce is unconstitutional if it either:
  - creates a substantial risk of international multiple taxation (including taxation by a foreign sovereign), or
  - interferes with the federal government’s ability to maintain a single national position in regulating commercial relations with foreign governments.
- Foreign ownership, foreign registration, and exclusive use in international commerce heighten the constitutional concern that state taxation will duplicate foreign taxation and intrude into national control over foreign trade.

## Conclusion

The Court held that California’s apportioned ad valorem tax on Japanese-owned cargo containers used solely in international commerce violated the Commerce Clause because it posed a substantial risk of international double taxation and interfered with the United States’ ability to act with a single national voice in foreign commercial relations.


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