Appeal from: U.S. Court of International Trade, Judge DiCarlo.
Markey, Chief Judge, Friedman and Archer, Circuit Judges.
Nissan Motor Mfg. Corp., U.S.A. (Nissan) appeals from the summary judgment of the United States Court of International Trade holding that machinery imported by Nissan from Japan into a foreign trade zone subzone for use in the production of motor vehicles is subject to duty as prescribed by the United States Customs laws. Nissan Motor Mfg. Corp., U.S.A. v. United States, 12 C.I.T. 737, 693 F. Supp. 1183 (Ct. Int'l Trade 1988). We affirm.
The Foreign Trade Zones Act, 19 U.S.C. §§ 81a-81u (1982), authorizes the establishment of foreign trade zones within the United States. The Act is administered by a Board which has authority "to grant to corporations ["public" and "private" as defined in the Act, 19 U.S.C. § 81 a] the privilege of establishing, operating, and maintaining foreign-trade zones in or adjacent to ports of entry under the jurisdiction of the United States." 19 U.S.C. § 81b(a). "Merchandise" may be brought into a foreign trade zone for the purposes set forth in the statute "without being subject to the customs laws of the United States." 19 U.S.C. § 81c (1982).
According to the trial court:
In 1952 the Board promulgated regulations pursuant to 19 U.S.C. § 81h to authorize "zones for specialized purposes" or "subzones" in areas separate from existing free trade zones "for one or more of the specialized purposes of storing, manipulating, manufacturing, or exhibiting goods" when the Board finds that existing or authorized zones will not serve adequately the convenience of commerce with respect to the proposed purposes. 17 Fed. Reg. 5316 (June 11, 1952), now codified without amendment at 15 C.F.R. § 400.304 (1988). In contrast to general purpose zones where a municipal corporation leases a portion of the zone to firms that subsequently locate within that zone, subzones are generally used by a single firm.
693 F. Supp. at 1185. A foreign trade zone subzone was established at Nissan's motor vehicle manufacturing and assembly plant in Smyrna, Tennessee.
Nissan imported production machinery for use in the subzone which consisted of a highly automated, integrated system of industrial robots, automated conveyor and stamping systems, and a complex computerized interface. Nissan requested a ruling from the United States Customs Service under 19 C.F.R. § 177.1(a)(1) (1988) regarding its obligation for duties. Nissan noted that it was uncertain whether the proposed final configuration of the machinery would be capable of full-scale production of motor vehicles and that the machinery needed to be assembled, installed and tested. Nissan stated that based on these tests some or all of the machinery might be returned to the foreign manufacturers, replaced, redesigned, or scrapped.
Customs decided, based on these facts, that production equipment imported into Nissan's subzone was not "merchandise" for purposes of the Foreign Trade Zones Act and was therefore dutiable. Customs deferred assessment of duties, however, until the machinery was completely installed and tested in full-scale production of motor vehicles in the subzone. C.S.D. 82-103, 16 Cust. Bull. 869, 870 (March 4, 1982).
After installation and testing, Customs required that formal duty-paid entries be made even though the equipment was to remain in the subzone. The production equipment was valued at approximately $116,314,883 with over $3,000,000 in assessed duties. Nissan entered the merchandise as required by Customs and, upon liquidation, filed a protest. The protest was denied and Nissan commenced this proceeding. The Court of International Trade held that "based on the language of the Foreign Trade Zones Act, as amended, and the relevant legislative history . . . [Nissan's] production machinery and related capital equipment are dutiable." 693 F. Supp. at 1189.
Congress authorized the creation of foreign trade zones in the Foreign Trade Zones Act of 1934, Pub. L. No. 566, 64 Stat. 249 (1950) (codified as amended at 19 U.S.C. § 81c (1982)). In 1950, section 3 of the Act was amended to provide:
Foreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated, or be manufactured except as otherwise provided in this chapter, and be exported, destroyed, or sent into customs territory of the United States therefrom, in the original package or otherwise; but when foreign merchandise is so sent ...