OT:RR:CTF:VS H333250 AM
Misty Gibbins
Pacific Custom Brokers, Inc.
1400 A St.
Blaine, WA 98230
RE: USMCA Eligibility of Bicycles
Dear Ms. Gibbins:
This is in response to your request, dated June 30, 2023, filed on behalf of Cycles Devinci, Inc. (“Cycles Devinci”). In your letter, you request a binding ruling regarding whether the Chainsaw and Ewoc models of full suspension bicycles imported from Canada are eligible for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”). You also requested a ruling on the tariff classification of these models. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response.
FACTS:
The products under consideration are two models of full suspension bicycles, the Chainsaw and the Ewoc. Collectively, these two products are referred to as the “bicycles.” The bicycles are manufactured in Canada using both originating and non-originating parts. You state the Chainsaw model, weighing 17.5 kg, has two options for wheel sizes: 27 and 29 inches (68.58 cm and 73.66 cm). It has a cross sectional tire diameter of 5.8 cm. You state the Ewoc model, weighing 14 kg, is sold with a wheel size of 24 inches (60.96 cm) having a cross sectional tire diameter of 5.8 cm.
The frame for both the Chainsaw and Ewoc bicycles is made of three distinctive parts: seatstay, chainstay, and a front triangle. These three parts are manufactured separately and assembled at the end of the fabrication process. The bikes arrive at the facilities as aluminum extrusions. The extrusions are then cut to the correct length according to the bicycle’s different size measurements. The tubing for the chainstay and seatstay are machined and crafted on a Computer Numerical Control (CNC) machine.
When all the different pieces are ready, the frames are welded together to form the front triangle, chainstay, and seatstay. Robotic welding cells are 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 to heat up 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 bike. To finalize the thermal treatment, they are kept in an oven overnight.
The frames then go back to machining because some parts need to be threaded. The holes punched prior to welding are then machined to the correct size so everything fits together once assembled. The raw frames are shipped to a Canadian powder coating paint shop where stickers are applied, and the frames are painted before sending it back to the factory for quality control. During quality control, each frame is individually inspected. 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.
Ultimately, the bicycle is covered in protective cardboard and other shipping material before it is packed in the box it will be shipped in. The bicycles are 95% assembled and shipped as complete bicycles in one box with everything in place except for the front wheel and the seat post which are attached separately by the end user. The handlebar and the front brake are not affixed to their final position but are attached and hang from the bicycle by the brake and derailleur cables as they will need to be securely attached before usage. Additionally, included with the bicycle is an accessory bag which contains the safety lights, a quick release for the wheel, and the instruction manual.
You provided the costed bill of materials for both bicycles.
ISSUE:
Whether the bicycles are eligible for preferential tariff treatment under the USMCA when imported from Canada into the United States.
LAW & ANALYSIS:
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(a)(i) provides:
Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . .
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 nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
…
Since the bicycles contain non-originating materials, 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 products qualify under GN 11(b)(iii).
Based on the description of the Chainsaw model included in your submission, we agree that the applicable subheading for the subject merchandise is 8712.00.3500, Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”), which provides for: “Bicycles and other cycles (including delivery tricycles), not motorized: Bicycles having both wheels exceeding 63.5cm in diameter: Other.” Additionally, based on the description of the Ewoc model included in your submission, we agree that the applicable subheading for the subject merchandise is 8712.00.1550, HTSUSA, which provides for: “Bicycles and other cycles (including delivery tricycles), not motorized: Bicycles having both wheels not exceeding 63.5cm in diameter: Having both wheels exceeding 55cm but not exceeding 63.5 cm in diameter.”
The applicable rule of origin for goods classified under subheadings 8712.00.35 and 8712.00.15, HTSUS, is in GN 11(o)/ 87.59 (A)(B)(1), HTSUS, which provides, in relevant part:
59. (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.
Since the bicycles contain parts classified under subheading 8714, HTSUS, GN 11(o)/ 87.59(A) is inapplicable. Therefore, we apply GN 11(o)/ 87.59 (B).
You have provided us with information pertaining to the cost of the materials, and you utilized the transaction value in your calculations to calculate the regional value content (“RVC”) of the originating materials. Under GN 11(c)(ii), the transaction value method is set forth as follows:
Transaction value method: An importer, exporter, or producer of a good may calculate the regional value content of a good on the basis of the following the transaction value method:
RVC = ((TV - VNM)/TV) x 100
where RVC means the regional value content of the good, expressed as a percentage; TV means the transaction value of the good adjusted to exclude any costs incurred in the international shipment of the good; and VNM means the value of nonoriginating
materials, including materials of undetermined origin, used by the producer in the production of the good.
You provided a costed bill of materials for the bicycles which includes the total costs of the originating and non-originating components, as well as the production costs. You state that the transaction value of the Chainsaw bicycle is $3396.36. The costed bill of materials indicates that the value of the non-originating materials is $1283.92 ($1482.50 - freight costs of $198.50). As such, the RVC is (($3396.36 - $1283.92) /$3396.36) * 100] = 62.20%. This is above the 60% minimum required by GN 11(o)/ 87.59 (B)(1). Accordingly, the Chainsaw bicycle classified under subheading 8712.00.3500, HTSUSA, qualifies as a USMCA originating good.
Additionally, you state that the transaction value of the Ewoc bicycle is $2229.48. The costed bill of materials indicates that the value of the non-originating materials is $720.27 ($848.27 – freight costs of $198.58). As such, the RVC is (($2229.48 - $720.27) /$2229.48) * 100] = 67.69%. This is above the 60% minimum required by GN 11(o)/ 87.59 (B)(1). Accordingly, the Ewoc bicycle classified under subheading 8712.00.1550, HTSUSA, qualifies as a USMCA originating good.
Provided that all other requirements are met, Chainsaw and Ewoc models of full suspension bicycles will be eligible for preferential treatment under the USMCA when imported into the United States from Canada.
HOLDING:
The Chainsaw bicycle model is classified under subheading 8712.00.3500, HTSUSA, which provides for “Bicycles and other cycles (including delivery tricycles), not motorized: Bicycles having both wheels exceeding 63.5cm in diameter: Other.” The Ewoc bicycle model is classified under subheading 8712.00.1550, HTSUSA, which provides for “Bicycles and other cycles (including delivery tricycles), not motorized: Bicycles having both wheels not exceeding 63.5cm in diameter: Having both wheels exceeding 55cm but not exceeding 63.5 cm in diameter.” Based on the information provided, the Chainsaw and Ewoc models of full suspension bicycles are eligible for preferential tariff treatment under USMCA.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Elif Eroglu, Acting Branch Chief
Valuation and Special Programs Branch