CLA-2-87:OT:RR:NC:N4:424
Misty Gibbons
Pacific Customs Brokers Inc.
1400 A ST
Blaine, WA 98230
RE: The tariff classification and eligibility of the United States-Mexico-Canada Agreement (USMCA) of bicycles from Canada
Dear Ms. Gibbons:
In your letter dated February 25, 2022, you requested a binding ruling, on behalf of your client, Cycles Devinci Inc., on the tariff classification and eligibility of bicycles under the United States-Mexico-Canada Agreement (USMCA). A cost breakdown, bill of materials and a description of the manufacturing processes accompanied your inquiry.
The products under consideration are three models of bicycles, all constructed with lightweight aluminum frames. The specific models at issue are the Marshall, FV22052351; the Minus, FV22069331; and the Kobain, FV22037311. Collectively, these three products are referred to as the “bicycles.”
According to the information contained in your submission, the Marshall model is a full suspension bicycle, in which the frame is made of three distinctive parts, seatstay, chainstay, and a front triangle. You state this model has a wheel size of 73.2 cm, weighs 15.84kg, with a tire cross sectional diameter of 5.8 cm. For this model, the parts of the frame are manufactured separately and assembled at the end of the fabrication process. You refer to the Minus and the Kobain models as hardtail bikes, in which the frame is manufactured and welded in one piece. You further state that the Minus model is equipped with a drivetrain, powerful brakes, and a low stand-over geometry that enables the rider to stay in control on cold slick terrain. The Minus model has a wheel size of 77.8cm, weighs 16.74kg, with a tire cross sectional diameter of 10.16 cm. Lastly, the Kobain model has a wheel size of 73.2 cm, weighs 13.92kg, with a tire cross sectional diameter of 5.8 cm and is constructed to enable better control on tough trails and terrain.
In your letter, you state that manufacturing operations for all three models of bicycles will occur in Canada. The manufacturing process begins with aluminum extrusions made in China. These extrusions are then cut to proper length to fit the bicycle’s different size measurements. The tubing for the chainstay and seatstay are also machined and crafted on a Computer Numerical Control (CNC) machine. When all the different pieces are ready, the frames are welded together to form either the front triangle, chainstay and seatstay (full suspension) or the complete frame (hardtail). Robotic welding cells are also used to speed up and regularize this process. The welding process weakens the aluminum; therefore, the parts are thermally treated to return the metal back to its natural strength. The frames are placed in an oven for a couple of hours and then plunged into water to quickly cool off. Next, the frames are manually straightened and aligned individually so that all the angles fit with the templates for each different bike and size. To finalize the thermal treatment, the frames are kept in an oven overnight. They then go back to machining for the parts to be threaded. The holes that were punched prior to welding, are then machined to the correct size so that everything fits together once assembled. The raw frames are shipped to a Canadian powder coating paint shop where they are painted, and decals are applied, and then returned to the factory for quality control. After inspection, the frames are assembled with all the components to form the full bicycles. The factory also assembles the bicycles’ wheels with special equipment since the wheel parts initially arrive at the factory as rims, hubs, spokes, tires, and tubes. For shipping purposes, the handlebar and front brake are not affixed to their final position but are attached and hang from the bicycle by the brake/derailleur cables. Also, the front wheel and seat post aren’t attached must be attached and secured by the end user. Included with the bicycle is an accessory bag which contains the safety lights, a quick release for the wheel and the instruction manual. In the final step, the completed bicycle is packaged with protective shipping materials and placed in a shipping box. The bicycles are manufactured in Canada using both originating and non-originating parts.
Classification:
The applicable subheading for the Marshall, FV22052351, the Minus, FV22069331 and the Kobain, FV2203731, models of bicycles will be 8712.00.3500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for bicycles and other cycles (including delivery tricycles), not motorized, bicycles having both wheels exceeding 63.5 cm in diameter, other. The rate of duty will be 11 percent ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/current.
USMCA:
The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o));
Since the bicycles contain non-originating ingredients, they are not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are the products produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the product qualifies under GN 11(b)(iii). As previously noted, the bicycles are classified under subheading 8712.00.3500, HTSUS. The applicable rule of origin for goods classified under subheading 8712.00.3500, HTSUS, is in GN 11(o)/ 87.59 (A)(B)(1), HTSUS, which provides, in relevant part:
(A) A change to headings 8711 through 8713 from any other heading, including another heading within that group, except from heading 8714; or
(B) A change to headings 8711 through 8713 from heading 8714, whether or not there is also a change from any other heading, including another heading within that group, provided there is a regional value content of not less than:
(1) 60 percent where the transaction value method is used; or
(2) 50 percent where the net cost method is used.
With regard to all three models of bicycles, we find that the bicycle components undergo the applicable tariff shift from heading 8714 to heading 8712 when they are used to form the bicycle in Canada, and, in applying the transaction value method, GN 11(o)/ 87.59 (B)(1), HTSUS, all three models exceed the applicable regional value content requirement of 60 percent. Therefore, based on the facts provided, the goods described above qualify for USMCA preferential tariff treatment, because they will meet the requirements of HTSUS General Note 11(b)( iii)(c)(ii). The goods will therefore be entitled to a free rate of duty under the USMCA upon compliance with all applicable laws, regulations, and agreements.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
The holding set forth above applies only to the specific factual situation and merchandise descriptions as identified in the ruling request. This position is clearly set forth in 19 C.F.R. § 177.9(b)(1). In the event that the facts or merchandise are modified in any way, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and you should resubmit for a new ruling in accordance with 19 C.F.R. § 177.2.
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Roseanne Murphy at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division