HQ 0087738 - Internal Advice Request No. 2/88 concerning the classification of certain "All Terrain Bicycles" - United States International Trade Commision Rulings

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HQ 087738

August 27, 1990

CLA-2 CO:R:C:G 087738 TLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 732.24; 8712.00.30

District Director of Customs
U.S. Customs Service
103 South Gay Street
Baltimore, Maryland 21202

RE: Internal Advice Request No. 2/88 concerning the classification of certain "All Terrain Bicycles"

Dear Sir:

In a letter dated June 29, 1990, you were instructed to withhold liquidation of certain entries for certain models of Service Supply Corp. all terrain bicycles, pending a decision by the Office of Regulations and Rulings on the classification of these bicycles. The decision follows.

FACTS:

The Service Cycle models which are the subject of this decision are the Alta, the Hilltopper and the Switchback. These bicycles have wheels which are over 25 inches in diameter when measured to the outer circumference of the tire mounted thereon, weigh less than 36 pounds complete without accessories and are valued over $16.66 2/3 each. They are imported equipped with tires having a cross-sectional diameter which does not exceed 1.625 inches.

All have frames that look like traditional ATB frames in shape and size. The importer states that these bikes have longer wheelbases than "true ATBs" and steeper head and seat angles. The importer also points out that these bicycles have softer seats, handlebars with larger spans, plastic pedals instead of metal, and braking systems designed for more gradual output rather than the direct response of true ATBs. The bicycles are stated to be 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.

ISSUE:

The issue presented is whether the bicycles are "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. If not, they are classifiable in item 732.24, TSUS.

LAW AND ANALYSIS:

In a letter dated April 21, 1989 (our file 082732), issued in response to a request for Internal Advice, Customs 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 to be not 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 that 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 State, 10 CIT 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 language applicable to the entries which are the subject of this letter was adopted with the enactment of the Tariff Schedules of the United States in 1963. 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 examining 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 such a showing requires more than the fact that as presented for importation, the bicycle is equipped with smaller tires. As we observed in our earlier decision, this factor cannot be dispositive of the classification issue. 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 large tires. Nothing about the bicycles' frames or components would have to be altered or modified to accommodate the larger tires. It has been demonstrated that a rim measuring 26" by 1.5" would easily accommodate a tire measuring 26" by 1.75" without any modifications to the rim. Moreover, a survey of representatives at bicycle shops in the Washington D.C. area disclosed that this is routinely done. All representatives stated that these bicycles can be used with such tires without any changes to the bicycles themselves and are in fact used that way regularly. The testimony of expert users of the article is deemed to be of "high probative value." Porter, supra, at 761. Thus, our examination of "the article, its capabilities, and its actual uses", rather than precluding the use of larger tires, indicates suitability with larger tires.

In our original letter, 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 no longer find this argument 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. Moreover, our information indicates that the use of a larger tire would not risk safety. Accordingly, the limitations of the warranty are not evidence that the design precludes the use of large tires.

It has been suggested by the importer that despite the suitability of using larger tires on this bicycle such use is a fugitive use. Firstly, this claim is contradicted by the survey discussed above. Secondly, 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.

The importer also argued that it is cost prohibitive for a consumer to purchase the bicycle and immediately change to larger tires. Assuming this to be correct, it does not demonstrate that use of larger tires with the bicycles is fugitive. In any event, there is no guarantee that worn or damaged tires would be replaced with tires of the same size. In fact, there is nothing that would prevent the consumer from replacing the worn or damaged tires with larger tires.

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.

You are instructed to resume liquidations of entries of these models in accordance with the terms of the foregoing decision.

Sincerely,

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