HQ 0087737 - Bicycles - United States International Trade Commision Rulings

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HQ 087737

August 27, 1990

CLA-2 CO:R:C:G 087737 TLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 732.24; 8712.00.30

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,

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