CSA 6470 International Legal Framework

1. CSA 6470International Legal Framework Eleanor Henry August 2003

2. Nissan Motor Mfg. Corp., v. The United States Judicial Body: United States Court of Appeals for the Federal Circuit Court.

3. Nissan Motor Mfg. Corp., v. The United States The facts: Nissan operated a car manufacturing operation in a Free Trade subzone established for Nissan in Smyrna, Tennessee USA. Free zone activities are governed by the Free Trade Zones Act (1934) (FTZA)

4. Nissan Motor Mfg. Corp., v. The United States The facts (cont�d) Nissan imported from Japan, highly automated production machinery which included a system of integrated industrial robots, automated conveyor and stamping systems, and a complex computer interface to be used in its production operation

5. Nissan Motor Mfg. Corp., v. The United States The facts (cont�d) Nissan was not sure whether the machinery would be able to handle full-scale production when assembled Machinery was assembled on arrival and tested as it was intended that some of the machinery may have been replaced redesigned or scrapped.

6. Nissan Motor Mfg. Corp., v. The United States The facts (cont�d) Nissan applied to the United States Customs Service (Customs) to establish its obligations for duties. Customs deferred assessment of duties until the equipment was installed and tested and assessed them at approx. $116.3m in value and levied $3m in duty on Nissan.

7. Nissan Motor Mfg. Corp., v. The United States The facts (cont�d) Nissan entered the merchandise as required and upon liquidation, filed a protest The protest was denied and Nissan commenced court proceedings.

8. Nissan Motor Mfg. Corp., v. The United States The facts (cont�d) Court of International Trade upheld the decision of Customs on reference to the FTZA which permits duty exemption for merchandise. The production equipment was not deemed to be merchandise. Nissan took its case to the Court of Appeal for the Federal Circuit.

9. Nissan Motor Mfg. Corp., v. The United States The issue The issue that the Appeal Court must decide is whether the equipment imported by Nissan for production in the subzone is subject to duty while in the zone.

10. Nissan Motor Mfg. Corp., v. The United States Nissan�s Arguments A foreign trade zone is outside the Customs territory of the United States. Merchandise entered into a zone only becomes dutiable when it is sent into �the Customs territory of the United States�. The production equipment was treated as merchandise

11. Nissan Motor Mfg. Corp., v. The United States The decision The Court of Appeals for the Federal Circuit affirmed the decision of the Court of International Trade and Nissan lost its appeal.

12. Nissan Motor Mfg. Corp., v. The United States Rationale Section 81c (e) 1 of the FTZA: merchandise which is admitted into a Foreign-trade zone for use within such zone as production equipment or as parts for such equipment, shall not be subject to duty until such merchandise is completely assembled, installed, tested and used in the production for which it was admitted

13. Nissan Motor Mfg. Corp., v. The United States Rationale Section 81c (a) 1 of the FTZA: The section enumerates the uses to which imported merchandise can be put and under the general rule of statutory construction, use of the machinery for production was not included and hence is not duty exempt

14. Nissan Motor Mfg. Corp., v. The United States Relevance It is incumbent on businesses operating in such situations to know and understand the laws that govern the circumstances of their operations in order to: Act within the law Avoid unexpected expenses Avoid foreign litigations which can be costly