NC is a “Free City” in terms of it’s status within the structure of NUSA. Essentially, a territory they claim is theirs, but which they don’t actually have the means to exercise control over. So it just functions more or less autonomously.

But it essentially functions as a Japanese Treaty Port in terms of military influence and is the point where East Asian and NUSA criminal and corporate organizations use to bring goods cheaply into and out of the NUSA market with both international and domestic corporations using Night City as a corporate tax haven and tariff-free port of entry. Smuggling is king as everyone seeks to skim their share off the goods as they move inland, each government agency or smuggler serving as competing “taxes” for entry into markets.

NUSA has largely reunited in 2070, but NC is still one of the last holdouts, baked as it is with all the might of Arasaka and the threat of igniting a new Corporate War if NUSA were to try to annex it actually attempt to assert influence over the city.