. .
`
`collier, Shannon, Rill & Scott, PIX
`Attorneys -at -Law
`3050 K Street, N.W.
`Suite 400
`Washington, D.C. 20007
`
`Michael R k s h o w
`(202) 342-8580
`Internet mrlr@colshan.Com
`
`Tel.: (202) 342-8400
`Fax: (202) 342-8451
`
`April 14, 1997
`
`10 Barrack Street
`Level 12
`Sydney, NSW 2000, Auatralia
`Tel.: 61-2-262-6700
`Fax: 61-2-262-8268
`
`The Honorable Donna R. Koehnke
`Secretarv
`-,
`U.S. International Trade Commission
`500 E Street, S.W.
`Washington, D.C. 20436
`
`~
`
`.
`
`Re:
`
`International Harmonization of Customs Rules of
`Oripin. Inv. No. 332-360
`
`Dear Secretary Koehnke:
`
`On behalf of the Bicycle Manufacturers Association of America, Inc. ("BMA"), a trade
`association whose members account for more than 90 percent of the bicycles manufactured in the
`United States,l' we wish to comment briefly on the Administration's draft proposal for Chapter
`87 - and more specifically, the proposed rules for Harmonized System ("HS") Code No. 87.12,
`covering "Bicycles and other cycles, not motorized."
`
`The U.S. draft provides that, in the case of articles classified under HS Code No. 87.12,
`a substantial transformation is considered to have taken place in the country in which there is "a
`change to [heading 87.121 from any other heading" - including, presumably, a change from
`heading 87.14, which covers (among other things) bicycle frames and other bicycle parts and
`components. The import of this general origin rule, therefore, is that the country in which
`bicycle parts are assembled together into a complete bicycle is the bicycle's country of origin;
`the country or countries in which the parts originate have no bearing upon the origin
`determination. The proposed legal notes further make clear that this rule does not apply in cases
`
`- 11
`
`The manufacturer members of BMA are the Huffy Bicycle Company, Murray,
`Inc., and the Roadmaster Unit of Brunswick Corporation. The association also has
`a number of supplier members that supply materials and components to the
`manufacturer members.
`
`

`

`The Honorable Donna R. Koehnke
`April 14, 1997
`Page 2
`
`of so-called "constructive assembly" (e.g., to the mere collection of bicycle parts into complete
`(but unassembled) bicycle "kits" classifiable under HS Code No. 87.12 pursuant to General Rules
`of Interpretation 2(a)) (see Legal Note 1.c.) and that the actual assembly of a "kit" into a
`complete bicycle operates to confer origin, so long as none of the components in the kit (e.g., a
`subassembly consisting of the frame and other components and having the "essential character"
`of a bicycle) is itself classifiable as an incomplete bicycle under HS Code No. 87.12 (see Legal
`Note 1.d.).
`
`For the record, BMA wishes to express its strong support for these rules and to note that
`the rules are, in BMA's estimation, a vast improvement over the similar "tariff shift" rules
`developed by the U.S. Customs Service pursuant to Annex 3 1 1 of the North American Free-Trade
`Agreement ("NAFTAI'). See 61 Fed. Reg. 28,932 (1996). Enclosed for your review and
`inclusion in the record of this investigation are two letters that BMA filed with Customs in
`connection with the NAFTA origin regulations, the first (dated July 19, 1995) a comment on the
`agency's proposed NAFTA regulations, and the second (dated August 7, 1996) a request for
`further clarification of Custom's final rule.2' In a nutshell, the NAFTA origin rule promulgated
`by Customs - which prescribes a tariff shift to HTS heading 8712 "from any other heading . . . ,
`except porn heading 871 4 when that change is pursuant to General Rule of Interpretation 2(a)"
`(19 C.F.R. § 102.20) (emphasis added) - is highly ambiguous. While we would have thought
`that Customs merely intended the italicized qualifying phrase to make clear - as Legal Note 1 .c.
`in the Administration's proposed rules for Chapter 87 does - that the simple "constructive
`assembly'' of bicycle parts into a "kit" does not effect a substantial transformation, the notices
`accompanying both Customs' proposed and final rules only make the agency's intent confusing
`and obscure.
`
`In particular, as the enclosed letters explain, Customs' notices appear to suggest that the
`basic tariff shift rule (ie., the country of origin of a bicycle is the country in which parts
`classified under HS Code No. 87.14 are assembled into a bicycle classified under HS Code No.
`87.12) does not apply in the case of so-called 'kemi-knocked-down" ("SKD") bicycles - which,
`as it happens, account for virtually all bicycles traded in international commerce. Under GRI
`2(a), SKD bicycles are "complete" and "finished," but are entered partially "unassembled or
`disassembled" for the convenience of commerce. As suggested in our letters to Customs, BMA
`believes that it is important for the NAFTA and other international origin rules to make clear that
`the basic tariff shift rule - rather than some less predictable "essential character" test applied by
`default - operates to determine the legal country of origin of bicycles traded in international
`commerce. The Administration's proposed harmonized rule, as we understand it, does this, while
`also making clear that the situs of the final assembly into SKD condition may not be the country
`of origin if that assembly entails the use of significant subassemblies produced in other countries.
`
`- 2/
`
`Customs has yet to respond to the second letter.
`
`

`

`The Honorable Donna R. Koehnke
`April 14, 1997
`Page 3
`
`Collier, Shannon, Rill & Scott, PLLC
`
`These rules are both logical and clear, and BMA urges the Administration to advance them during
`the continuing negotiations.
`
`We appreciate your attention to these comments, and would be happy to discuss any and
`all aspects of this issue with Commission staff if ow input would be helpful.
`
`Sincerely,
`
`MICHAEL R. KERSHOW
`
`Counsel to the Bicycle Manufacturers Association of
`America, Inc.
`
`MRK:mdl
`
`Enclosures
`
`1/1413 78
`
`

`

`Collier, Shannon, Rill & Scott
`Attorneys-at-Law
`3050 K Street, N.W.
`Suite 400
`Washington, D . C. 20007
`-
`Tel.: (202) 342-8400
`Fax: (202) 338-5584
`
`(202) 342-8580
`
`July 19, 1995
`
`16-18 O’Conneu Street
`Level 3
`Sydney, NSW 2000, Australia
`Tel.: 61-2-223-6788
`Fax: 61-2-223-2737
`
`747 Third Avenue
`New York, New York 10017
`Tel.: (212) 688-4800
`Fax: (212) 688-6307
`
`HAND DELIVERY
`
`Regulations Branch
`U.S. Customs Service
`Franklin Court
`1301 Constitution Avenue, N.W.
`Washington, D.C. 20229
`
`Re:
`
`Proposed Amendments to Interim Rules for Determininp the
`Country of Origin of a Good for Purposes of Annex 311 of the
`North American Free-Trade Avreement and . Proposed
`Amendments to the Rules of Origin Applicable to Imported
`Merchandise Generally (RIN 1515-AB19 and -AB341
`
`Dear Sirs:
`
`These comments on the above-referenced proposed rules are submitted on behalf of the
`Bicycle Manufacturers Association of America, Inc. (“BMA”). See 60 Fed. Reg. 22,312 (May
`5, 1995); id at 29,520 (June 5, 1995). When Customs published its interim NAFTA and
`proposed general country of origin rules on January 3, 1994, BMA welcomed what it at the time
`considered to be a new “bright line’’ test for determining the origin of bicycles for marking and
`other purposes. Unfortunately, however, the modifications to these interim and proposed
`regulations published on May 5, 1995 have given BMA cause to believe that the rules as
`originally proposed may not be as clear as BMA had believed. Accordingly, BMA respectfully
`requests that Customs include in the notice accompanying its final rule cIarification of the specific
`origin rule applicable to bicycles.
`
`The proposed rule of xigin for bicycles is based on a change or shift in -=.iff
`classificatio 1. Under sections 3 02.1 1 (a)(3) and 102.20 of the interim regulations, the counuj wi
`
`

`

`U.S. Customs Service
`July 19, 1995
`Page 2
`
`Collier, Shannon, Rill & Scott
`
`origin of a bicycle (which is classified under Harmonized Tariff System ("HTS") heading 8712)
`is that country where each foreign component part undergoes a change in tariff classification to
`heading 8712 "from any other heading . . . , except a change porn heading 8714 [covering
`various bicycle parts] if that change is pursuant to GRI 2(a)" (emphasis added). 19 C.F.R.
`$$ 102.1 l(a)(3), 102.20 (1994).
`
`General Rule of Interpretation ("GRI") 2(a) provides as follows:
`
`Any reference in a heading to an article shall be taken to
`include any reference to that article incomplete or unfinished,
`provided that, as entered, the incomplete or unfinished article has
`the essential character of the complete or finished article. It shall
`also include a reference to that article complete or finished (or
`falling to be classified as complete or finished by virtue of this
`rule), entered unassembled or disassembled.
`
`Section 102.18(a) of the regulations purports to explain the intended meaning of the
`reference in the tariff shift rule for bicycles and other assembled articles to "a change pursuant
`to GRI 2(a)." As originally set forth in the January 3, 1994 interim and proposed regulations,
`two specific examples were given in section 102.18(a)( 1) of "changes pursuant to GRI 2(a)":
`"[tlhe collection of parts being classified as if it were an assembled good" and "[tlhe assembly
`of parts into a subassembly that is still not a complete or finished good, but is classified as a
`complete or finished good." Additionally, section 102.18(a)(2) explained that "Cplaragraph (a)
`shall not apply to assembled goods that were previously assembled into a good, and then
`disassembled for convenience of packing, handling or transport."
`
`In the modified proposed rules published on May 5, 1995, the text of section 102.18(a)
`has been substantially changed, with the reference to "the collection of parts" transferred to
`section 102.17 as a "non-qualifying operation" of genera1 application, the reference in former
`section 102.18(a)( I)(ii) to "a subassembly" dropped as "unnecessary," and section 102.18(a)(2)
`deleted in its entirety. See 60 Fed. Reg. at 22,3 18. As modified, proposed section 102.18(a) now
`states simply that "[wlhen General Rule of Interpretation (GRI) 2(a) is referred to in $ 102.20
`as an exception to an allowed change in tariff classification, this means that such change Mill not
`be acceptable for purposes of that section if the change results from the assembZy of parrs into
`an incomplete or unjnished good which is classifiable in the same manner as a complete or
`finished good pursuant to GRI 2(a)." Id. at 22,326 (emphasis added).
`
`Analysis of the tariff shift rule specified for bicycles in section 102.20 in light of the
`interpretative rules cmtained ir, sections 102.17 and 102.18(a) - both as originally proposed on
`January 3, 1994 and as modified on May 5, 1995 - leads to two very clear conclusions.
`
`

`

`U S . Customs Service
`July 19, 1995
`Page 3
`
`Collier, Shannon, Rill & Scott
`
`First, it is absolutely clear that, at least in some cases, the mere act offinal assembly
`- that is, the joining together of finished bicycle parts classified under heading 8714 (as well as
`other finished bicycle parts, such as tires and tubes and brake wire classified under other HTS
`headings) into a "bicycle" - determines the origin of that bicycle. If this were not the intended
`result, the tariff shift rule specified for bicycles would not indicate - as it plainly does - that a
`change to heading 8712 from 8714 is sufficient, except where that change is "pursuant to GRI
`2(a)." Significantly, the tariff shift rule does not specify that any particular "essential" component
`must originate in the country of origin. But in what circumstances is the act of assembly alone
`sufficient to confer origin on previously manufactured bicycle components? At the very least,
`it seems absolutely clear that the final assembly of ajnished and complete bicycle in a single
`country using foreign parts classified under HTS heading 87 14 (or any heading other than 87 12)
`makes that country the legal "country of origin," notwithstanding the origin of any of the
`individual bicycle components. The tariff shift rule's exception for changes "pursuant to GRI
`2(a)" clearly has no application in such a situation, since GRI 2(a) applies, by its terms, only to
`"incomplete," "unfinished," "unassembled," or "disassembled" merchandise.
`
`Secondly, it is equally clear that origin is nor conferred by the simple operation of
`''collecting" all of the individual bicycle parts needed to produce a complete bicycle and
`packaging them for assembly subsequent to importation. While GRI 2(a) ordinarily provides that
`this type of fully unassembled article is classifiable as the article itself, both section
`102.18(a)( l)(i) of the January 3, 1994 interim regulations and the proposed amendment to section
`102.17(e) make perfectly clear that the act of simply collecting parts together, even with
`additional "minor processing," is insufficient to confer origin.
`
`If the two situations just described were typicaI of how bicycles are imported into the
`United States, application of the tariff shift rule for bicycles would be a straightforward matter.
`Unfortunately, however, the overwhelming majority of bicycles are imported in neither fully
`assembled condition (where the rule identifies the site of final assembly as the country of origin)
`or in fully unassembled or disassembled condition (where the rule disqualifies the country in
`which the parts are simply collected from being the country of origin). Instead, the vast majority
`of bicycles have historically been - and will doubtless continue to be - imported into the United
`States in "semi-knocked-down" ("SKD") form. SKD bikes are complete bicycles, individually
`boxed and ready for sale to the ultimate purchaser. They are not, however, fully assembled when
`imported. The seat, seat post, front wheel (an assembly consisting of a hub, spokes, nipples, rim,
`tire, inner tube and rimstrip), pedals, handlebars and handlebar stem are not assembled to the
`bike, but are simply placed separately in the shipping carton in order to reduce the size of the
`carton and thereby reduce freight costs. The bicycle is finally assembled after importation, either
`by the retailer or by the consumer. This is a very minor operation requiring relatively little time,
`simple tools and no particular skill.
`
`

`

`Collier, Shannon, Rill & Scott
`
`U.S. Customs Service
`July 19, 1995
`Page 4
`.
`
`A far less common scenario is to import bicycles in the form of subassemblies - that is,
`as combinations of several bicycle parts - which can then be assembled in the United States,
`together with other subassemblies and/or individual bicycle components, into a complete bicycle.
`In the past, Customs has classified certain of these subassemblies under HTS heading 8712 on
`the ground that they have the "essential character" of complete bicycles. See, e.g., HQ 955806
`(Feb. 9, 1994) (subassembly consisting of frame and fork set combined with derailleur, kickstand,
`brakes, levers, reflector, handlebar, grips and stem is classifiable under HTS heading 8712).
`
`As we read the tariff shift rule for bicycles, the country in which an SKD bicycle is
`assembled j?om bicycle parts is its country of origin, while the country in which a bicycle
`subassembly is produced does not qualib as its country of origin, notwithstanding the fact that
`in neither case is the bicycle fully assembled at the time of importation. Our reasoning is as
`follows:
`
`0
`
`An SKD bicycle is not "incomplete" or "unfinished," as it contains
`all of the parts customarily found on a bicycle; at most, therefore,
`an SKD bicycle is a "complete or finished [bicycle], entered
`[partially] unassembled or disassembled" under the second sentence
`of GRT 2(a). Moreover, the lack of final assembly is strictly "for
`convenience of packing, handling or transport," which section
`102.18(a)(2) of the interim regulations previously recognized as not
`invoking the GRI 2(a) exception. An SKD bike is clearly more
`than a mere "collection of parts" (see section 102.18(a)( l)(i) of the
`interim regulations and section 102.17(e) of the newly-proposed
`regulations). And most significantly, because an SKD bike is a
`is partially
`complete and Jinished bicycle, albeit one that
`unassembled, it falls within neither the original nor the modified
`regulatory definition of the exception for "changes pursuant to GRI
`2(a)." An SKD bicycle is clearly more than "[tlhe assembly of
`parts into a subassembly that is still not a complete or finished
`good" (see section 102.18(a)( l)(ii) of the original interim
`regulations) and it is more than the "assembly of parts into an
`(see section 102.18(a), as
`incomplete or unfinished good'
`amended). Accordingly, the GRI 2(a) exception does not apply.
`The same analysis does not hold for a bicycle subassembly -
`which is, by definition, an "incomplete" or "unfinished" bicycle at
`most. Under both the original interim regulations and the proposed
`amendments, the "assembly of parts into
`.PI incomplete or
`unfinished good" is fir quintessential example of tlte type of
`operation that does not confer origin on the site of asse:nhIy, eve2
`
`

`

`I
`
`C
`
`
`
`U.S. Customs Service
`July 19, 1995
`Page 5
`
`- - -
`
`Collier, Shannon, Rill & Scott
`
`though the incomplete or unfinished bicycle is classifiable under
`HTS heading 8712 "pursuant to GRI 2(a)."
`
`Having reached these conclusions, a few qualifications are in order. First, in concluding
`that the country in which an SKD bicycle is assembled is its "country of origin," we are mindful
`that section 102.1 l(a)(3) specifies that "[elach foreign material incorporated in th[e] good [must]
`undergo[ 3 an applicable change in tariff classification set out in $ 102.20." Hence, if the
`assembly of an SKD bike in Country A entails the use of a subassembly imported from Country
`B that is classifiable under HTS heading 8712 pursuant to GRI 2(a), the requisite tariff shift is
`not produced. In that case, whether the legal "country of origin" is Country A, Country B or
`some other country must be determined by reference to one of the other general rules of origin
`specified in section 102.1 1 (b)-(d), as amended. This is also the case, we assume, for "collections"
`of bicycle parts or incomplete bicycle "subassemblies" for which the tariff shift rule is
`inapplicable because of the GRI 2(a) exception.
`
`BMA respectfully requests that Customs confirm the foregoing interpretation, particularly
`BMA's belief that the tariff shift rule specified for bicycles leads to the conclusion that the
`assembly of bicycle parts classified under HTS heading 8714 and other applicable headings into
`a complete, but partially massembled SKD bicycle determines the "country of origin" of that
`bicycle for Customs purposes.
`
`Respectfully submitted,
`
`MICHAEL R. KERSHOW
`JOHN B. BREW
`
`Counsel to the Bicycle Manufacturers
`Association of America, Inc.
`
`MRK:JBB/mdl
`
`

`

`e .
`
`.-
`
`Couier, Shannon, Rill & Scott, pwx:
`Attorneys- at-Law
`3050 K Street, N.W.
`Suite 400
`Washington, D.C. 20007
`-
`Td.: (202) 342-8400
`Fax: (202) 342-8451
`
`-
`
`10 Barrack Street
`Level 12
`Sydney, NSW 2000, Australia
`Tel.: 61-2-262-6700
`F~x: 61-2-262-8263
`
`Michael R k h o w
`(202) 342-8580
`Internek mrk@colahan.com
`
`August 7, 1996
`
`Office of Regulations and Rulings
`U.S. Customs Service
`Franklin Court
`130 1 Constitution Avenue, N. W.
`Washington, D.C. 20229
`
`Attn: Sandra L. Gethers
`
`Re: Rules for Determining; the Country of Origin of Bicycles Under Annex
`311 of the North American Free-Trade Agreement
`
`Dear Ms. Gethers:
`
`On July 19, 1995, we filed comments on behalf of the Bicycle Manufacturers Association
`of America, Inc. ("BMA") in response to Customs' issuance of its proposed amendments to the
`interim rules for determining the country of origin of a good for purposes of Annex 31 1 of the
`North American Free-Trade Agreement ("NAFTA'I) and proposed amendments to the rules of
`origin applicable to imported merchandise generally (RIN 15 15-AB 19 and -AB-34). See 60 Fed.
`Reg. 22'3 11 (May 5, 1995); id. at 29,520 (June 5, 1995). Having read the final rule published
`by the agency on June 6, 1996 (see 61 Fed. Reg. at 28,932), and in particular, Customs'
`published response to our comment, we continue to have questions concerning the application of
`the NAFTA country of origin marking rules to bicycles imported in semi-knocked-down ("SKD")
`condition. The purpose of this letter is to request a ruling or information letter setting forth
`clearly how the NAFTA country of origin marking rules apply to SKD bicycles.
`-
`As we indicated in our July 19, 1995 letter - a copy of which is attached for your
`reference - virtually all bicycles imported into the United States are shipped in SKD condition.
`As set forth in our letter (and as accurately recounted in Customs' June 6 notice, see 61 Fed. Reg.
`at 28,939), SKD bicycles are classifiable under HTSUS heading 8712 as complete, butpartially
`disassembled bicycles, in accordance with General Rule of Interpretation ("GRI") 2(a). All of
`the individual components needed to make a bicycle are present; most are assembled together,
`
`

`

`Sandra L. Gethers
`August 7, 1996
`Page 2
`
`Collier, Shannon, Rill & Scott, m
`
`but a few (e. g. , the pedals, saddle, handlebars, reflectors and front wheel) are packaged separately
`in the shipping carton in order to reduce the size of that carton and thereby reduce shipping costs.
`The SKD bicycle, as presented for classification, is not an incomplete bicycle (ie., a
`subassembly), as all of the parts needed to make a complete bicycle are present in the shipment.
`Only "simple assembly'' (as defined in section 102.l(a) of the regulations) is required after
`importation.
`
`In our July 19, 1995 submission, we asked Customs to confirm the following two
`propositions:
`
`(1)
`
`the country in which an SKD bicycle is produced through the
`assembly of bicycle parts classified under HTSUS heading 8714 (as
`well as other materials classified in headings other than 8712) is its
`country of origin, notwithstanding the national origin of these parts
`or materials and notwithstanding that the SKD bicycle requires
`further assembly after importation; and
`
`(2)
`
`is, an
`the country in which a bicycle subassembly -that
`ltincompletel' or "unfinished" bicycle - is produced does not qualify
`as its country of origin even if the subassembly is classifiable under
`HTSUS heading 8712 pursuant to General Rule of Interpretation
`2(a).
`Our reasoning in support of these two conclusions is set forth at pages 4-5 of our July 19 letter
`and will not be reiterated fully here.
`
`Unfortunately, Customs' June 6 notice expressly confirmed neither of these assertions
`- and indeed, appears to imply that the country of origin of an SKD bicycle is not the country
`in which it is produced through the assembly of bicycle parts. In its notice, Customs stated:
`
`If the production of an SJSD bicycle in Country A entails
`the use of a subassembly imported from Country B that is
`classifiable under heading 8714, HTSUS, 8 102..18(a) is applicable
`and the tariff shift from the subassembly (classifiable under heading
`8714) to the SKD bicycle (classifiable under 8712 pursuant to GRI
`2(a)) will not be allowed.
`
`

`

`Sandra L. Gethers
`August 7, 1996
`Page 3
`
`61 Fed. Reg. at 28,939.'
`
`collier, Shannon, Rill & Scott, p ~ u 3
`
`We respectfully submit that this analysis is incorrect, both in terms of the conclusion
`reached and the reasoning apparently employed. As stated at page 3 of our July 19, 1995
`submission, it is absolutely clear that producing a complete and fully assembled bicycle in
`Country A using parts or subassemblies imported from Country B that are classifiable under
`HTSUS heading 8714 produces the requisite tariff shift specified in section 102.20 of the
`regulations for HTSUS headings 871 1-8713. Hence, the act of assembling bike parts together
`is clearly sufficient, in and of itself, to confer origin - at least in cases where the assembly is
`absolutely complete. This being the case, we are puzzled by Customs' apparent position that
`section 102.20's tariff shift rule is inapplicable when the bicycle is presented for classification
`as a complete but partially disassembled unit, requiring only "simple assembly" in order to
`produce a complete, "ready-to-ride'' bicycle.
`
`By its terms, section 102.18(a) of the regulations applies only if the change in tariff
`classification "results from the assembly of parts into an incomplete or unfinished good which is
`classifiable in the same manner as a complete or finished good pursuant to GRI 2(a)." An SKD
`bicycle is not, however, an "incomplete or unfinished" bicycle that is classifiable as a complete
`or finished bicycle pursuant to thefirst sentence of GRI 2(a) - which is the only portion of GRI
`2(a) referenced in section 102.18(a) of the regulations - but rather, is classifiable as a bicycle
`b'ecause it is "complete" and "finished," but entered partially "unassembled or disassembled," as
`provided in the second sentence of GRI 2(a). The second sentence of GRI 2(a) is, of course, the
`basis for section 102.17(e) of the regulations, but since the production of an SKD bicycle
`certainly entails far more than "[c]ollecting parts that, as collected, are classifiable in the same
`tariff provision as [the] assembled good," such production is not a "non-qualifying operation''
`under that section.
`
`If Customs' implicit position is that the assembly of bicycle parts classifiable under
`HTSUS heading 8714 into anything less than a complete and fully assembled bicycle results in
`a tariff shift "pursuant to GEU 2(a)" within the meaning of section 102.18(a), the implications of
`that position warrant examination. As noted, the overwhelming majority of bicycles imported
`into the United States are shipped in SKD condition -that
`is, as complete but partially
`unassembled bicycles. Moreover, all over the world, the production of bicycles almost invariably
`
`The notice goes on to address two points that we believe to be fairly self evident:
`first, that the mere collection of bicycle parts or incomplete bicycle subassemblies
`would not confer origin, in accordance with section 102.17(e) of the regulations,
`and second, that the final assembly of an SKD bicycle into a fully assembled
`bicycle does not produce a tariff shift and thereby confer origin on the site of final
`assembly. We fully agree with both propositions.
`
`

`

`Sandra L. Gethers
`August 7, 1996
`Page 4
`
`Collier, Shannon, Rill & Scott, PLU:
`
`involves (at least in part) the assembly of finished bicycle parts classified under HTSUS heading
`8714 that frequently originate outside the country of assembly. Given these commercial realities,
`the specific tariff shift rule for bicycles specified in section 102.20 of the regulations will only
`apply to more than an insignificant percentage of bicycle imports if SKD bicycles are regarded
`as not triggering the GRI 2(a) exception.
`
`Clearly, in developing the specific tariff shift rules, Customs was attempting to articulate
`objective, "bright line" rules that fairly reflected the results of the agency's longstanding
`"substantial transformation" analyses. It would be wholly inconsistent with this purpose if origin
`determinations for the overwhelming majority of bicycle imports are to be made not by reference
`to the specific tariff shift rule of section 102.20, but rather, by resort to the hierarchical rules of
`section 102.11 of the regulations. While BMA would not necessarily oppose such a result, it
`should go without saying that application of the hierarchical rules prescribed by section 102.1 1
`could well lead to origin determinations inconsistent with the determination nominally called for
`by the specific tariff shift rule prescribed in section 102.20 (Le., that the country of origin of a
`bicycle is the country in which it is assembled). If, for example, the single component imparting
`the essential character to the bicycle is generally to be the applicable criterion (see section
`102.1 l(b)(l)), one might well conclude (for example) that an SKD bicycle assembled in Canada
`from a Chinese-made frame and fork, a Canadian made saddle, handlebar and rims, and other
`parts originating in various other countries must be labeled "Made in China," rather than "Made
`in Canada." See HQ 734478 ER (June 14, 1993).
`
`For the foregoing reasons, BMA respectfully reiterates its request that Customs state
`clearly whether the assembly of bicycle parts classified under HTSUS heading 8714 and other
`applicable headings (other than heading 8712) into a complete, but partially unassembled, SKD
`bicycle determines the "country of origin" of that bicycle under the NAFTA marking regulations.
`If oral discussion of the issues would assist you, we would be happy to meet with you at your
`convenience.
`
`Respectfully submitted,
`
`MICHAEL R. KERSHOW
`
`Counsel to the Bicycle Manufacturers Association of
`America, Inc.
`
`MRK:mdl
`Enclosure
`
`1/117168
`
`

`

`Collier, Shannon, Rill & Scott
`Attorneys-at-Law
`8050 K Street, N.W.
`Suite 400
`Washington, D.C. 80007
`-
`Tel.: (202) 3428400
`Fax: (202) 3884534
`
`(202) 342-8580
`
`July 19, 1995
`
`-
`
`16-18 O'Comell Street
`Level 8
`Sydney, NSW 2000. Australia
`Tel.: 61-2-823-6788
`Fax: 61-2-223-2787
`
`747 Third Avenue
`New York, N e w York 10017
`%I.: (212) 6884800
`Fax: (218) 6886907
`
`HAND DELIVERY
`
`Regulations Branch
`U.S. Customs Service
`Franklin Court
`130 1 Constitution Avenue, N. W.
`Washington, D.C. 20229
`
`Re:
`
`Proposed Amendments to Interim Rules for Determininv the
`Country of Orbin of a Good for Purposes of Annex 311 of the
`North American Free-Trade Ameement and Proposed
`Amendments to the Rules of Oridn Applicable to Imported
`Merchandise Generallv (RIN 1515-AB19 and -AB341
`
`Dear Sirs:
`
`These comments on the above-referenced proposed rules are submitted on behalf of the
`Bicycle Manufacturers Association of America, Inc. ("Bh4A"). See 60 Fed. Reg. 22,312 (May
`5, 1995); id.' at 29,520 (June 5, 1995). When Customs published its interim NAFTA and
`proposed general country of origin rules on January 3, 1994, Bh4A welcomed what it at the time
`considered to be a new "bright line" test for determining the origin of bicycles for marking and
`other purposes. Unfortunately, however, the modifications to these in@m and proposed
`regulations published on May 5, 1995 have given BMA cause to believe that the rules as
`originally proposed may not be as clear as BMA had beIieved. Accordingly, BMA respectfully
`requests that Customs include in the notice accompanying its final rule clarification of the specific
`origin rule applicable to bicycles.
`The proposed rule of origin for bicycles is based on a change or shift in tariff
`classification. Under sections 102.1 l(a)(3) and 102.20 of the interim regulations, the country of
`
`

`

`U.S. Customs Service
`July 19, 1995
`Page 2
`
`Collier, Shannon, Rill & Scott
`
`origin of a bicycle (which is cIassified under Harmonized Tariff System ("HTS") heading 8712)
`is that country where each foreign component part undergoes a change in tariff classification to
`heading 8712 "from any other heading . . . , except a changefiom heading 8714 [covering
`various bicycle parts] if that change is pursuant to GRI ,(a)" (emphasis added). 19 C.F.R.
`$3 102.1 l(a)(3), 102.20 (1994).
`
`General Rule of Interpretation ("GRI") 2(a) provides as follows:
`
`Any reference in a heading to an article shall be taken to
`include any reference to that article incomplete or unfinished,
`provided that, as entered, the incomplete or unfinished article has
`the essential character of the complete or finished article. It shall
`also include a reference to that article complete or finshed (or
`falling to be classified as complete or finished by virtue of this
`rule), entered unassembled or disassembled.
`
`Section 102.18(a) of the regulations purports to explain the intended meaning of the
`reference in the tariff shift rule for bicycles and other assembled articles to "a change pursuant
`to GRI 2(a)." As originally set forth in the January 3, 1994 interim and proposed regulations,
`two specific examples were given in section 102.18(a)(l) of "changes pursuant to GRI 2(a)":
`"[tlhe collection of parts being classified as if it were an assembled good" and "[tlhe assembly
`of parts into a subassembly that is still not a complete or finished good, but is classified as a
`complete or finished good." Additionally, section 102.18(a)(2) explained that "lplaragraph (a)
`shall not apply to assembled goods that were previously as