CLA-2 CO:R:C:G 087737 TLS
David A. Riggle, Esq.
Riggle, Keating and Craven
Attorneys at Law
205 West Wacker Drive
Chicago, Illinois 60606
RE: Bicycles
Dear Mr. Riggle:
This is in reference to a ruling dated April 21, 1989, (our
file 082733) issued to you as counsel for Sears Roebuck and
Company with regard to the tariff classification of the Dynasty
ATB 10-speed bicycle. For the reasons set forth below, we have
concluded that the ruling was in error and is not in accord with
the current views of the Customs Service.
FACTS:
The Dynasty ATB has wheels which are over 25 inches in
diameter when measured to the outer circumference of the tire
mounted thereon, weighs less than 36 pounds complete without
accessories and is valued over $16.66 2/3 each. It is imported
equipped with tires having a cross-sectional diameter which does
not exceed 1.625 inches.
The Dynasty's frame is similar to traditional ATB frames in
shape and size. You contend that the bicycles are priced toward
the lower end of the bicycle market to specifically target those
consumers who want ATB styling and comfort but do not necessarily
wish to ride their bicycles off-road or on mountain trails. You
acknowledge that the bicycle is suitable for both on and off-road
use.
ISSUES:
1. Whether the Dynasty ATB is "not designed for use with tires
having a cross-dimensional diameter exceeding 1.625 inches"
within the meaning of item 732.18, Tariff Schedules of the United
States (TSUS). If not classifiable in item 732.18, the bicycle
is classifiable in item 732.24, TSUS.
2. Whether the subject bicycle is "not designed for use with
tires having a cross-sectional diameter exceeding 4 cm" within
the meaning of subheading 8712.00.20, Harmonized Tariff Schedule
of the United States (HTS). If not classifiable in subheading
8712.00.20, the bicycle is classifiable in subheading 8712.00.30.
LAW AND ANALYSIS:
In a letter dated April 21, 1989, we concluded that the
bicycles were classifiable in item 732.18 TSUS. That conclusion
was based in significant part on the assumption that a bicycle
designed for off road use is most likely designed for use with
tires larger than 2.0 inches, while a bicycle designed for street
use is not designed for use with a wide tire, even if it can
accommodate such a tire. We then considered these bicycles not
to be designed for use with larger tires because they are not
marketed as "true all-terrain bicycles." This was based on our
belief that only true all-terrain bicycles would be used with
larger tires. Thus, the decision focused on whether the bicycles
were designed to be used off-road or on paved streets.
For the reasons which follow, we find that whether a bicycle is
designed for street use is not the relevant inquiry in
determining its classification.
The Statutory Standard
The courts have not had occasion to construe the phrase,
"not designed for use with tires with a cross-dimensional
diameter exceeding 1.625 inches." The first source of
interpretation of the statute is, of course, the terms of the
language itself. In examining this language, we find that the
term "not designed for use" is susceptible of different
interpretations. For example, the phrase, could simply refer to
the subjective intent of the manufacturer in the design of the
bicycle.
Alternatively, the language may be regarded as requiring an
objective inquiry of suitability for use with larger tires.
Under this test it would not matter whether there was intent to
use larger tires. Rather the inquiry would be whether the
merchandise is capable of use with larger tires. Because the
statute is subject to differing interpretations, it is
appropriate to examine its legislative history. Al Tech
Specialty Steel Corp. v. United States, 10 C.I.T. 743 (1986).
As originally enacted, paragraph 371, Tariff Act of 1930,
provided simply for bicycles and applied a unitary rate of 30
percent ad valorem. As the result of a bilateral trade agreement
with the United Kingdom, effective January 1, 1939, this
paragraph was subdivided into three subcategories on the basis of
wheel diameter (i.e., "over twenty-five inches" "over nineteen
but not over twenty-five inches", and "not over nineteen
inches"). Each category was subject to a specific rate of duty
provided that such rate was neither less than 15 percent nor more
than 30 percent ad valorem.
In 1947, during negotiations concerning the General
Agreement on Tariff and Trade, initially conducted with the
United Kingdom, the record indicates that the U.S. agreed to a 50
percent tariff reduction for the following category:
Bicycles with or without tires, having wheels over 25
inches in diameter (measured to the outer circumference of
the tire), weighing less than 36 pounds complete without
accessories and not designed for use with tires having a
cross-sectional diameter exceeding 1-5/8 inches.
The TSUS created only editorial changes in the formulation
agreed to in GATT. The Tariff Classification Study issued by the
Tariff Commission provided the following explanation of the
language:
Items 732.14 through 732.18 cover bicycles having both
wheels over 25 inches in diameter "if weighing less than 36
pounds complete without accessories and not designed for
use with tires having a cross-sectional diameter exceeding
1.625 inches". This description is intended to "carve out"
for separate duty treatment so-called lightweight bicycles.
Our examination of the legislative history provides two
noteworthy observations. First, the intent of the language at
issue was to carve out or provide more advantageous tariff
treatment for a particular type of article, lightweight English
style bicycles. This is evident from the combination of maximum
weight and maximum wheel diameter. Secondly, to effectuate this
result, Congress employed an unusual negative formulation of "not
designed for use". Congress could have articulated the
provision affirmatively, so that bicycles designed for use or
imported equipped with smaller tires would have received the
tariff benefit. That they saddled the importer with proving a
negative indicates an intent to carve out a narrow category
within the provision for bicycles.
The next question to be examined is the criteria to be used
in determining whether a bicycle has been shown to be not
designed for use with larger tires. In the absence of decisions
construing the term "not designed for use" we seek guidance from
court decisions of concerning whether an article is specially
designed or specially constructed for a particular purpose.
In Plus Computing Machines, Inc. v. United States, 44
C.C.P.A. 160, 167, C.A.D. 655 (1957), the issue before the court
was whether the importer's computing machine was specially
constructed for multiplying and dividing. In fact, the machine
could be used to perform multiplication and division but operated
through addition and subtraction. In concluding that the
machines were specially constructed for the statutory purpose,
the court stated: "the statement that an article is specifically
constructed for a particular purpose means merely that it
includes particular features which adapt it for that purpose.
The purpose in question need not be the sole one served by the
article and may not even be the principal one."
In Porter v. United States, 409 F. Supp. 757, C.D. 4641
(1976), the issue presented was whether motorcross gloves could
be considered "specially designed for use in sports" under TSUS
item 735.05. The court, citing Sports Industries, Inc. v. United
States, 65 Cust. Ct. 470, C.D. 4125 (1970) stated "it is well
established that whether an article is 'specially designed' or
'specially constructed' for a particular purpose may be
determined by an examination of the article itself, its
capabilities, and its actual use or uses." (emphasis added).
The court then concluded that the gloves had features which
satisfied the specially designed requirement.
Under these cases, the inquiry is whether the article has
features which make it suitable for the statutory purpose. In
applying the approach followed in these cases to the particular
negative language at issue here, and given the legislative
history cited above, we conclude that in order to qualify for
classification in item 732.18, the importer must demonstrate that
there are important design features in the bicycles that preclude
the use of tires exceeding 1.625 inches in diameter. In this
regard, it is not enough to prove that a bicycle was designed
with smaller tires in mind. Rather, the use of larger tires must
be inconsistent with the safe and proper operation of the
bicycle.
Clearly it is insufficient that as presented for
importation, the bicycle is equipped with smaller tires. To
decide otherwise would mean that identical models equipped with
different size tires would be classifiable in different tariff
provisions. We do not believe that such a result is consistent
with the statutory test.
In the instant case, the bicycles can easily accommodate
tires larger than 1.625 inches. Nothing about the bicycles'
frames or components would have to be altered or modified to
accommodate the larger tires. In fact, it has been effectively
demonstrated that only the inner tubes and tires themselves would
have to be changed to change the tire size. Nothing else on the
bicycles would require any changes, including the rims on which
the tires would fit. Equipped with tires of 1.75 inches, the
Dynasty ATB will perform in its normal fashion. Given the easy
suitability for use with such tires, the statutory standard is
not met.
You contend that historically there are instances in which
bicycles equipped with smaller tires were capable of
accommodating larger tires. Specifically, an affidavit submitted
refers to the Raleigh Electrolux made in 1949 as having tires
1.375 inches in diameter, advertised as having 1.5 inch tires and
being able to accommodate tires as wide as 1.75 inches, "even
though the wider tire was not typically utilized".
Testimony before the Tariff Commission in the course of the
1947 tariff negotiations was that a British lightweight bicycle
could not accommodate tires greater than 1.5 inches.
See Stenographer's Minutes of the Hearing Before the
Committee for Reciprocity Information, Volume 12 at 2187 (January
31, 1947, Testimony of H.L. Coe). Assuming that the Raleigh
Electrolux was an exception to this rule, there is no evidence
that this fact was taken into account in the statute. This is
not surprising since the affidavit states that the Raleigh in
question was neither equipped with or advertised as using larger
tires. Thus, we do not regard the Raleigh's claimed capability
with larger tires as relevant.
In a letter involving the same classification issue with
respect to a similar bicycle, we noted the importer's claim that
the manufacturer's warranty would be voided if the bicycle were
altered in any way inconsistent with its design. Our inference
was that such an alteration would be necessary in order to
accommodate larger tires. In addition, we noted that the
manufacturer proposed to issue a warning label stating that the
bike is designed for small tires and that changing tires would
risk safety and void the warranties. We regarded this as some
evidence that the bicycle was not designed for use with larger
tires.
We no longer find this reasoning persuasive. All of the
warranties submitted for review speak of "alterations" or
"modifications." As we noted above, such alterations or
modifications are not necessary to change the tires.
Accordingly, the warranty is no indication of whether the bicycle
is designed for use with larger tires.
You suggest that use with larger tires would constitute a
fugitive use which should be disregarded for classification
purposes. Based on our interpretation of the statute, it need
not be shown that the bicycles are principally used with larger
tires. See Plus Computing Machines v. United States, supra.
Rather, the relevant consideration is whether or not the bike can
be used in its proper manner with the larger tires.
You also argued that in view of the low cost of the bicycle,
it was unreasonable to expect that a consumer would purchase it
and immediately change to larger tires. As discussed above, it
is the ability to accommodate such tires that we find to be the
relevant standard. In any event, assuming that new tires would
not be immediately replaced, there is nothing that would prevent
the consumer from replacing the worn or damaged tires with larger
tires.
We reject your contention that our decision in CIE 1784/58
is inconsistent with this analysis. The issue in that ruling was
simply whether the statutory diameter could be regarded as having
been met because the tires with which the bicycle was equipped
were so close in size (1.6535 inches) to the standard. The
decision merely held that the standard was to be applied exactly
as written. It did not examine how to evaluate whether or not a
bicycle met the standard.
CONCLUSION:
In view of their suitability for use with large tires, it
has not been demonstrated that the bicycles are not designed for
use with tires exceeding 1.625 inches. Accordingly, they are
classifiable in item 732.24, TSUS, dutiable at the rate of 11
percent ad valorem.
In our previous decision, we indicated the classification of
this merchandise under the Harmonized Tariff Schedule of the
United States (HTS). In accordance with the analysis above, we
find our conclusion to have been in error. The language of the
HTS tracks directly the provision in the TSUS. Therefore, in
accordance with the above analysis, the proper classification of
this merchandise under the HTS is subheading 8712.00.30,
providing for bicycles and other cycles (including delivery
tricycles), not motorized: bicycles having both wheels exceeding
65 cm in diameter: other, dutiable at the rate of 11 percent ad
valorem.
Pursuant to section 177.9(d)(1), Customs Regulations, (19
CFR 177.9(d)(1)), Ruling letter 082733, dated April 21, 1989, is
found to be in error and is hereby revoked.
To the extent that you believe that you may have relied to
your detriment on the foregoing ruling, you may, at your
discretion, apply for temporary relief from the binding effects
of this revocation pursuant to 19 CFR 177.9(d)(3), Customs
Regulations.
Sincerely,
Harvey B. Fox
Director
Office of Regulations and Rulings