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Factual Background

Discuss about the Legal Aspects of International Business for Nissan Motor Mfg. Corp.

In the matter of Nissan Motor Mfg. Corp., U.S.A. v. United States 693 F.Supp. 1183 (1988), cross motions were made for the summary judgment, made on the basis of Rule 56 of the Rule of United States Court of International Trade. The question which was raised in this matter was related to the imposition of duty over the importation of machinery for producing the merchandise in a foreign trade subzone (Court Listener, 2017). The plaintiff, i.e., Nissan Motor Manufacturing Corporation U.S.A., or simply Nissan, moved to the court for a summary judgment as which the United States Customs Service, or simply Customs, was required to reliquidate the entries of production machinery, as well as, the related capital equipment, and also for getting the refund of duties amounting to over $3,000,000. The United States, i.e., the defendant asked the court to confirm the assessment of duty by Customs (JKPC, 2017).

The following parts cover a detail of this very case, whereby the arguments put forward by the defendant have been stated, along with the decision of the court. Though, before that is done, the factual background of this case has been discussed.

As per the US Foreign Trade Zones Act, the authority has been given to the establishments of foreign trade zone, when the merchandise can be imported in a duty free manner, for the purposes relating to sale; and this includes cleaning, mixing, grading, sorting, distributing, assembling, repackaging, breaking up, selling, storing, mixing with domestic of foreign merchandise, otherwise manipulated, or can be manufactured except as has been provided in this chapter (Enforcement, 2017). In Smyrna, Tennessee, a foreign trade subzone had been created for Nissan. And $116 million worth of machinery had been imported by Nissan which was being used by the company for manufacturing the cars at its plant. A value amounting to more than $3,000,000 was assessed by the US Customs Service as this machinery’s import duties. The tax was paid by Nissan under protest and the validity of these duties was challenged by the plaintiff in the court. The assessment was upheld by the US Court of International Trade and the plaintiff appealed against this decision (Cameron, 2015).

The defendant would like to highlight that the exhaustive list of activities contained in the amendment of 1950, the plain language of the statute would distort for reading in other terms as operated, consumed, or used. The statutory construction’s general rule is that expressio unius est exclusio alterius, as per which expressing of a particular thing, can be deemed as an exclusion of the alternative. And this regard, the case of United States v. Douglas Aircraft Co., 62 CCPA 54, 59, C.A.D. 1145 (1975) is helpful (Case Text, 2017a). The activities which have been identified by the Congress, in the comprehensive list, do not permit any of the operations or installations of the production equipment, till the time the duties have been paid. And apart from the plain reading of this statute, the 1950 amendment of the Foreign Trade Zones Act’s legislative history is also instructive of the intent of the Congress (The Court, 2014).

Defendant’s Arguments

The defendant would like to interpret this very history to depict the intent of the Congress regarding the notion that the zones cannot be used in complete manner so as to avoid the duties on the production equipment which is used or is consumed in that zone. The defendant would further support the interpretation through the legislative history behind the amendment of the Foreign Trade Zones Act (Durant, 2017). As per this, it has been clearly stated in the act as per 1950 amendment that the exemption from payment of duties, for the imported merchandise in a foreign trade zone is not applicable over the equipment and machinery which has been imported for use in this foreign trade zone (Bolle and Williams, 2013). Even though this observation has been made in 1984, till which time, the production machinery had already been imported in the Nissan subzone; it does show the history of the amendment (Justia, 2017a). A theme was held in Butler v. United States Dep't of Agriculture, 826 F.2d 409, 414 n. 6 (5th Cir.1987) and in 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) with regards to careful consideration of the subsequent statements as an authoritative expression of the expert opinion (Case Text, 2017b).

The plaintiff had relied upon the case of Hawaiian Indep Refinery v. United States, 81 Cust Ct  117, 460 F Supp 1249 (1978). In this particular matter, importation of crude oil took place in the foreign trade zone and the same was processed at the oil refinery which was located in the subzone. Later on, a part of this processed crude oil was stores and was used on the basis of requirement, as a source of fueling the operations of the refinery (Leagle, 2017b). The Customs asked the plaintiff of the quoted case to file refined crude oil use in the zone as consumption entry and also to classify the fuel as per TSUS, i.e., Tariff Schedules of the United States. The decision of the custom was protested in this case and it was claimed that the refined crude oil had not been subjected to duty. In this matter, it was held that since the refined crude oil was being used as a secondary source of duel, the same could not be held as dutiable (Justia, 2017b).  

However, the defendant would like to differentiate between the present case and the quoted case. In the quoted case, the meaning of merchandise under the Foreign Trade Zones Act contained the refined crude oil. However the production equipment, of the present case, are not covered under the definition of merchandise due to the exhaustive list of the Congress with regards to the permissible operations not being allowed as an article which can be brought into a zone, which was free of duty and which could be used as a production machinery for making other articles (Leagle, 2017a).

Decision of the Court

The defendant would also like to state that as a matter of public policy, it was not the intention of the Congress to place the domestic sellers or the manufactures of production machinery in a manner which places them at a competitive disadvantage with regards to the production machinery which is foreign manufactured which could be imported without any duty for the foreign trade zones and which could be sold in a cheaper manner (Leagle, 2017a).

It was stated in one of the Customs Service Decision with regards to the production machinery, which had been imported from Japan in that case, for use of the same in some other foreign trade zone. In that case, it was stated by the Customs that each and every article cannot be deemed as merchandise. The defendant would again like to highlight that the legislative proposal with regards to permit the entry of production equipment in a specific manner in a foreign trade zone, without the paying the duties was rejected by the Congress (Leagle, 2017a).

On the basis of Hawaiian Indep Refinery v. United States, the defendant would also like to state that the tariff schedules are applied on Nissan through the act as the payment of these duties was specifically contemplated by the Board, which was created in the subzone. And as per the defendant, the Board has the power of prescribing the rules and regulations which are required for carrying out the Act and hence, the payment of duties with regards to the production equipment cannot be denied by Nissan (Leagle, 2017a).

The defendant would also like to state that the company had acknowledged in an implied manner the requirement of paying the duty on the production equipment for establishing a foreign trade zone in a formal and complete application, along with in the FTZ System’s basic plan. These were submitted in 1982 May. These documents help in clearly defining the scope which has been granted by the Board regarding the zone (Leagle, 2017a).

It was held by the court that without giving regards to the authority of the Board to put conditions on the grant of a zone for the production equipment’s payment of duty, the Board was not conditioned to grant subzone of the Company any implicit promise, based on the documents presented in May, with regards to payment of duties. This conclusion was reached by the Court as the Resolution and Order had already been adopted and the Grant of Authority had already been delivered; more importantly, these documents had already been published in the Federal Register (Leagle, 2017a).

With regards to the Board’s actions, it was held by the Court that when the application was made by the company to the Board, a reference was not made with regard to the production machinery’s dutiable status and the grand of authority given by the Board did not restrict the right of entering the production machinery in the zone by the company, without payment of the duties or conditioned the grant in a manner which could have waived the rights of the company to challenge the entry requirement of Customs trough filing of a protest against the liquidation, along with initiated actions to challenged the protest’s denial. And do, the second argument of the defendant was declined. Though, it was clearly stated that the defeat of the second argument of the defendant did not defeat the success of the first argument made by the defendant, which was related to the statute and the legislative history (Schaffer, Agusti and Dhooge, 2014).

On the basis of the language given in the governing act, i.e., in Foreign Trade Zones Act and its amendments, along with the legislative history presented by the defendant, it was held by the Court that the production machinery and the related capital equipment have to be held dutiable. The determination of the customs for assessing the duties on the production machinery was affirmed by the court. And so, the motion of the defendant for summary judgment was granted and that of Nissan was denied by the court (Leagle, 2017a).

Conclusion

The court held in Nissan Motor Mfg. Corp., U.S.A. v. United States that the review of Foreign Trade Zones Act, along with the pertinent legislative history regarding the machinery, as well as, the related capital equipment, which were imported for the production of merchandise in the foreign trade zone subzone, were indeed subjected to duty. Hence, the motion for summary judgment of the defendant was granted and that of the plaintiff was denied.

References

Bolle, M.J., and Williams, B.R. (2013) U.S. Foreign-Trade Zones: Background and Issues for Congress. [Online] Congressional Research Service. Available from: https://fas.org/sgp/crs/misc/R42686.pdf [Accessed on: 30/05/17]

Cameron, G.D. (2015) International Business Law: Cases and Materials. Michigan: Van Rye Publishing.

Case Text. (2017a) United States V. Douglas Aircraft Co. [Online] Case Text. Available from: https://casetext.com/case/united-states-v-douglas-aircraft-co [Accessed on: 30/05/17]

Case Text. (2017b) Nissan Motor Mfg. Corp., U.S.A. V. U.S., (CIT 1988). [Online] Case Text. Available from: https://casetext.com/case/nissan-motor-mfg-corp-usa-v-us [Accessed on: 30/05/17]

Court Listener. (2017) Nissan Motor Mfg. Corp., USA v. United States, 693 F. Supp. 1183 (Ct. Intl. Trade 1988). [Online] Court Listener. Available from: https://www.courtlistener.com/opinion/2357262/nissan-motor-mfg-corp-usa-v-united-states/? [Accessed on: 30/05/17]

Durant, J. (2017) HQ 219492. [Online] Internet FAQ Archives. Available from: https://www.faqs.org/rulings/rulings1990HQ0219492.html [Accessed on: 30/05/17]

Enforcement. (2017) U.S. Foreign-Trade Zones Board. [Online] Enforcement. Available from: https://enforcement.trade.gov/ftzpage/19uscftz/ch1a.html [Accessed on: 30/05/17]

JKPC. (2017) Foreign Investment. [Online] JKPC. Available from: https://jpkc.suibe.edu.cn/files/101830/1509/24756_201b58d461d.pdf [Accessed on: 30/05/17]

Justia. (2017a) Nissan Motor Mfg. Corp., U.S.A., Plaintiff-appellant, v. the United States, Defendant-appellee, 884 F.2d 1375 (Fed. Cir. 1989). [Online] Justia. Available from: https://law.justia.com/cases/federal/appellate-courts/F2/884/1375/463930/ [Accessed on: 30/05/17]

Justia. (2017b) Hawaiian Independent Refinery, Inc., Appellant, v. the United States, Appellee, 697 F.2d 1063 (Fed. Cir. 1983). [Online] Justia. Available from: https://law.justia.com/cases/federal/appellate-courts/F2/697/1063/11356/ [Accessed on: 30/05/17]

Leagle. (2017a) Nissan Motor Mfg. Corp., U.S.A. v. U.S. [Online] Leagle. Available from: https://www.leagle.com/decision/19881876693FSupp1183_11747/NISSAN%20MOTOR%20MFG.%20CORP.,%20U.S.A.%20v.%20U.S. [Accessed on: 30/05/17]

Leagle. (2017b) HAWAIIAN INDEPENDENT REFINERY V. UNITED STATES. [Online] Leagle. Available from: https://www.leagle.com/decision/19781709460FSupp1249_11512/HAWAIIAN%20INDEPENDENT%20REFINERY%20v.%20UNITED%20STATES [Accessed on: 30/05/17]

Schaffer, R., Agusti, F., and Dhooge, L.J. (2014) International Business Law and Its Environment. 9th ed. USA: Cengage Learning.

The Court. (2014) Customs Cases Adjudged in the Court of Appeals for the Federal Circuit. Michigan: Michigan State University.

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