## Facts

- Nissan operated an automobile assembly plant in a foreign-trade subzone in Smyrna, Tennessee.
- Nissan planned to import large quantities of production machinery and equipment from Japan directly into the subzone.
- Nissan intended to assemble, install, and test the machinery in different configurations before deciding which items would remain in permanent production.
- Nissan expected that machinery not retained would be removed and either resold or scrapped.
- Nissan sought a ruling that the imported machinery could enter and remain in the subzone duty-free under the Foreign Trade Zones Act.
- Customs ruled the machinery was dutiable under the tariff laws because it was not “merchandise” for purposes of the Foreign Trade Zones Act’s exemption from customs laws, but deferred duty assessment until Nissan determined what equipment would be kept.
- The Court of International Trade granted summary judgment for the United States, and Nissan appealed.

## Issues

1. Whether production machinery and equipment imported into a foreign-trade subzone qualifies as “merchandise” exempt from customs duties under the Foreign Trade Zones Act.
2. Whether Customs lawfully treated such production equipment as dutiable imports despite its placement in a foreign-trade subzone, including deferring duty assessment until final equipment selection.

## Decision

- The Federal Circuit affirmed the Court of International Trade’s summary judgment for the United States.
- The court held that Nissan’s imported production machinery was subject to duty under U.S. customs statutes.
- The court upheld Customs’ determination that the Foreign Trade Zones Act’s “merchandise” provisions did not exempt this capital equipment from duties.
- The court left in place Customs’ approach of deferring duty assessment until Nissan identified the machinery retained at the plant.

## Legal Principles

- Foreign-trade zone and subzone status does not categorically exempt all items located in the zone from application of U.S. customs duty statutes.
- The Foreign Trade Zones Act’s duty-related benefits for “merchandise” do not necessarily extend to capital equipment imported for installation as production machinery in a domestic manufacturing facility.
- Courts may uphold Customs’ reasonable construction of the Foreign Trade Zones Act and implementing regulations when determining the duty status of items brought into a zone, including administrative choices about timing of duty assessment.

## Conclusion

The Federal Circuit held that production machinery imported into a foreign-trade subzone for use in manufacturing remained dutiable under U.S. customs law, rejecting Nissan’s claim that subzone placement alone made the equipment duty-free under the Foreign Trade Zones Act.


Nissan Motor Mfg. Corp. v. United States, 884 F.2d 1375 (Fed. Cir. 1989)