The case of Nissan Motor Mfg. Corp., U.S.A. v. United States 693 FSupp 1183 (1988) saw a number of cross motions being made for summary judgment. This summary judgement had been based on Rule of United States Court of International Trade, particularly its rule 56. The main issue raised here was regarding the duty being imposed on the machinery importation in foreign trade subzone for production of merchandise (Court Listener, 2018). Nissan Motor Manufacturing Corporation U.S.A. (Nissan) was the plaintiff, who had moved to the court for this judgement on the basis that United States Customs Service (USCS) had to re-liquidate the production machinery entries and relevant capital requirements; along with for getting the duties refunded which were above $3,000,000. The defendant, United States, applied before the court for assessing the duty (August, Mayer and Bixby, 2012). This discussion presents a summary of this case, where the arguments put forth by the defendant have been covered.
Background of the case
Under the US Foreign Trade Zones Act, the relevant authority was provided to foreign trade zone’s establishment, in which the merchandise could be imported duty free for the purpose of selling. This included distribution, sorting, grading, mixing, cleaning, storing, selling, breaking up, assembling, mixing of foreign merchandise with mixing, and assumption, or any other sort of manipulation save for the ones provided herewith (Enforcement, 2018). A foreign trade zone was formed in Smyrna, Tennessee, for Nissan. Nissan imported machinery worth $116 million for its use for manufacturing the cars at this plant. US Customs Service assessed over $3,000,000 as the import duties of machinery. Nissan paid this tax under protest and challenged the validity of this duty. This assessment was upheld and an appeal was made against this decision by the defendant (Cameron, 2015).
Arguments of Defendant
As a defendant, it is argued that the exhaustive list of activities covered in 1950 amendment of the Foreign Trade Zones Act (FTZA), where it is clearly provided that the clear language of the statute distorted the reading as other terms in context of used, operated or used. The general rule under the statutory construction is expressio unius est exclusio alterius, which provides that a specific item is to be considered as excluding the substitute. Reference here needs to be made to United States v. Douglas Aircraft Co., 62 CCPA 54, 59, C.A.D. 1145 (1975) (Case Text, 2018a). The activities identified by Congress in their comprehensive list did not allow the installation or operation of production equipment till the duties were paid. Along with the simple reading of statute, the amendment of 1950 and the legislative history shows the Congress’s intention (The Court, 2014).
The legislative history would be interpreted by the defendant to show the intention of Congress in the matter of the zones to not be used completely for avoiding the duties on production equipment, which are consumed or used in that particular zone. The defendant supports this interpretation by using the history of statue for amending the FTZA (Durant, 2018). Based on this, it can be presented that as per the amendment of 1950, there was an exemption from payment of these duties, particularly for the merchandise imported in the free trade zone; which is not applied on the machinery or equipment which is imported for purpose of being used in this zone (Bolle and Williams, 2013). The defendant agrees that this observation was made long back in 1984 and that the production machinery by that time had been imported in Nissan subzone, it highlights this amendment’s history (Justia, 2018a). In the two cases of Co. v. United States, 74 Cust Ct 583, 590, 200 F Supp 302, 308 (1961), aff'd, 50 CCPA 36, C.A.D. 816 (1963), as well as, Butler v. United States Dep't of Agriculture, 826 F.2d 409, 414 n. 6 (5th Cir.1987), a common theme was followed regarding a careful consideration of the following statements as the expert opinion’s authoritative expression (Case Text, 2018b).
Reliance had been made by the plaintiff on Hawaiian Indep Refinery v. United States, 81 Cust Ct 117, 460 F Supp 1249 (1978). This matter had crude oil being imported in the foreign trade one which had been processed at oil refinery present in this subzone. After some time, a segment from this processed crude oil was stored and used as source of fuelling the refinery’s operations based on the relevant requirement (Leagle, 2018a). The plaintiff of this case had been asked by USCS, for fling the refined crude oil use as consumption entry in the zone, and for classifying the fuel based on Tariff Schedules of the United States (TSUS). The decision was protested based on the refined crude oil not being subjected to duty. The refined crude oil was used as secondary source of fuel in this case and this was not made dutiable as a result of this (Justia, 2018b).
Though, there is a stark between the quoted case and this present instance. This is because in the quoted case, the FTZA covered refined crude oil in the meaning of merchandise. Though, production equipment is not covered in this definition owing to the Congress’s exhaustive list regarding allowed operation not being permitted an article to be brought in this zone, free of duty, and for the same to be used as production machinery for making the other articles. As a matter of public policy, the Congress had no intent of placing the manufacturers or sellers of this machinery in a place which puts them at an entire competitive disadvantage in context of production machinery being manufactured in foreign, which could be imported without the duty in such zones and could be sold off cheaply. One of the Customs Service Decisions provided that the production machinery imported from Japan for using in other foreign trade zone that every article could not be considered as merchandise. Here, the defendant would emphasize on the legislative proposal regarding permitting the entry of this equipment in a specified manner in foreign trade zone, without making the payment of duty, which the Congress had rejected (Leagle, 2018b).
In context of Hawaiian Indep Refinery v. United States, there is also a need to present that the tariff schedule which were applicable on Nissan, acted as payment of such duties, had been contemplated specifically by the board creating the subzone. The board did hold the power, as per the defendant, of giving regulations and rules required for carrying this act. Thus, the payment of duties regarding production equipment could not be denied by the plaintiff. Nissan had acknowledged implicitly that the payment of duty as a requirement for the production equipment for foreign trade zone in the complete and formal application was the basic plan in the FTZ system. This had been submitted back in May of 1982. Through these documents, the scope granted by the Board, in context of the zone, had been clearly defined (Leagle, 2018b).
The court stated that there was no need to consider the authority of Board in putting the stipulations on granting the payment of duty for production equipment for a particular zone. Still, the Board was not under the condition to grant Nissan’s subzone any kind of implicit promise on the basis of the documents which had been presented regarding the payment of duties in May. The Court reached the conclusion regarding Order, and regarding the resolution, which had been adopted already and the Grant of Authority been already delivered. Further, in the Federal Register, these documents had been published already (Leagle, 2018b).
Regarding the actions of Board, the court held that the application made to the board by Nissan, could not make reference to the dutiable status of production machinery; along with this, the grant of authority does not restrict the right of entry of such machinery by the company in the zone, without paying the relevant duties or the same being conditioned by the grant in such a way which could waive the rights of company for challenging the entry needs of USCS by filing protest and by initiating an action to challenge the denial of such protest. This led to the second argument being declined; but this did not result in the first argument of defendant being defeated regarding legislative history and statue (Schaffer, Agusti and Dhooge, 2014).
Based on the amendments of FTA, and its language, coupled with legislative history, the capital equipment and the production machinery were held as dutiable by the court. This led to the summary judgment of defendant being granted and in the denial of the same filed by Nissan (Leagle 2018b).
This case shows that the production equipments and the capital equipments which are brought in the foreign trade subzones are subjected to duty, owing to the legislative history and the applicable statues. This led to the claims made by the plaintiff in this case being denied and the verdict being given in favour of the defendant.
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The Court. (2014) Customs Cases Adjudged in the Court of Appeals for the Federal Circuit. Michigan: Michigan State University.