Japan Line, Ltd. v. County of Los Angeles
The case of Japan Line, Ltd. v. County of Los Angeles demonstrates a problem that affects any company involved in international commerce. The symptom demonstrated in Japan Line is the problem of multiple taxation by different sovereign nations. However, the fundamental issue underlying the case is the political nature of the process that makes the rules that govern international commerce. The primary causal factor of problems of international commerce is the sovereignty of states and nations and the power each has to regulate trade and business within its jurisdiction. Any response to the problem of negative and contradictory regulations affecting international commerce requires a company's active role in the governing institutions.
Justification for Problem Definition
The case of Japan Line is instructive of the problem because it demonstrates that rules governing local trade can affect the home-country's relationships with other nations. The U.S. Supreme Court addressed this issue when it stated that:
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
(emphasis added). Companies involved in international trade, therefore, must be careful of the perception of their home country in the countries in which they do business.
In Japan Line, the state of California imposed a tax on Japanese-owned cargo containers temporarily located in California ports. The containers were involved solely in international commerce and only spent an average of three weeks each year in California. In addition, the containers were based, registered, and taxed a...