CLA-2-87:OT:RR:NC:N2:201
Ruta Riley
Senior Counsel, Trade Compliance
Lyft
441 9th Ave.
New York, NY 10001
RE: The tariff classification and country of origin of an electric bicycle from Taiwan
Dear Ms. Riley:
In your letter dated April 26, 2021, you requested a tariff classification and country of origin ruling.
The product under consideration has been identified as “Cosmo E-Bike”, which is an electric pedal-assist bicycle designed for use in the alternative transportation rental market. You indicate in your request that these e-bikes are being imported and sold by Lyft.
You state that the Cosmo E-bike is equipped with conventional bicycle components such as a frame, fork, wheels, seat post, saddle, pedals, brakes, shifters, front crank, arms, chain, handlebars, headlight, taillight, and kickstand. In addition, the bike integrates a distinctive electrically powered pedal-assist system that provides a separate source of motive power for the vehicle. The bike's hybrid propulsion system allows the rider to reach and maintain higher velocities with less physical effort than is needed for a traditional bicycle. All components work together to maintain precise control over the speed and course of the bike.
You state this hybrid propulsion system will allow Lyft to expand its customer base to include commuters who are disinclined or even physically unable to use a traditional bicycle, especially in cities which have topographies that make the use of bicycles a challenge.
Lyft's e-bike's pedal-assist system is an integrated network, which consists of an electric motor, motor controller, bottom bracket, and electric battery. These components contain printed circuit board assemblies (PCBAs) of various complexities.
The PCBAs for the motor controller and the battery are equipped with microcontrollers, other integrated circuits (ICs), and various capacitors, resistors, and diodes, and run custom firmware that enables the motor controller and battery to control the transmission of electric power and communications within the system. The battery, which attaches via a keyless locking mechanism to a mount affixed to the bike's downtube, powers the pedal-assist system and provides energy input for the electric motive power. The motor controller acts as the pedal assist system's "brain" by actuating the motor, moderating speed, regulating electrical current flow throughout the system and preventing back flow. In addition, the motor controller also monitors several data points (such as current within the motor, motor torque, revolutions per minute (RPM), and others) to prevent damage to the motor and ensure the safety of the rider.
The applicable subheading for the Lyft Cosmo E-Bike, will be 8711.60.0090, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars; side-cars: With electric motor for propulsion: Other”. The rate of duty will be Free.
The substantial transformation test will determine the country of origin for purposes of the Section 301 measures. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018.
The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In this case, you state that, amongst the major components:
Frame, fork, electric motor, electric motor controller, wheel assemblies (including the rims, spokes, and nipples), drum brake, freewheel, saddle, and grips are from Taiwan
IoT system, vehicle control unit (VCU), body plastics, kickstand, seat post, bottom bracket, triangle, leaf spring/battery backstop, fasteners, chain tensioner, handlebars, cable lock, beacon, battery ejection, battery pack, rear fender, and cable lock subcomponents are from China
Paint, displays, decals, e-bike identification, and custom firmware are from the United States
Triangle for charging/docking is from Canada
Tubes are from Vietnam
Tires are from Indonesia
In your request you question Country of Origin under two (2) scenarios:
The e-bike is manufactured from components sourced in the various countries as outlined above. The frame and fork are manufactured in Taiwan; the assembly is completed in Taiwan.
With the exception of the frame and fork, which are still sourced in Taiwan, the rest of the components are sourced in China and the e-bike assembly is completed in China.
You provided a detailed explanation laying out the manufacturing practices in Taiwan. For example, production in Taiwan involves creating and integrating various components and
subassemblies to build the e-bike. The Taiwanese production steps include:
Production of the motor controller and battery: The PCBAs are produced in a process involving fabrication of a printed circuit board, mounting of various elements by surface mount technology (SMT), accompanied where needed by through-hole placement and wave soldering, and flashing with Lyft's custom firmware. The finished and programmed PCBAs are built into the motor controller and battery in additional stages involving wire routing and placement into housings.
Production of other components: The rims, spokes, nipples, the saddle, pedals, brake levers, cables, front brake, crank, arms, and chain are manufactured in Taiwan.
Construction of the wheels: Rims, tires, inner tubes, spokes, nipples, hubs, sprockets, motor, and brakes undergo construction into wheels with the use of special machinery that places spokes in the rim, weaves the spokes, and trues the wheel. The inner tube and tires are fitted around the wheels. The motor is affixed to the front hub and connected via a custom wiring harness to the motor controller.
Construction of other subassemblies, including frame, fork, seat, handlebar, Smart Fender, and basket subassemblies. The remaining subassemblies are built through processes involving a diverse range of steps, including bolting, screwing, drilling, riveting, intricate routing of mechanical cables and electrical wires through the structural components sourced from various countries. Construction of the subassemblies is governed by a 128-page manual that calls for the assembly of over 100 parts and subpart with the use of 66 different tools.
At that point, the subassemblies (less the battery) are integrated to form the complete ebike, which is replete with a network of electrical wires to connect the electric modules of the pedal-assist and IoT systems. Additionally, the firmware initially installed on component PCBAs in their respective countries of origin receives final updates in Taiwan. Each e-bike then undergoes tuning and checking in preparation for use.
Accordingly, when the e-bike departs Taiwan for the United States, it requires only a simple attachment of the battery to be fully functional and rideable.
In your request you suggest that the country of origin of the e-bike should be its country of assembly. We disagree.
It has continually been the opinion of CBP that the frame, which in this case is a product of Taiwan, is the part of the bicycle that imparts its “essential character”. Based on the information provided, the culmination of production processes performed in Taiwan and/or China to the Taiwanese frame and fork does not substantially transform the frame. Accordingly, the merchandise will remain a product of Taiwan, and the Section 301 measures will not apply.
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 the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
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 Matthew Sullivan at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division