The U.S. Customs Loophole on Bicycles and E-bikes Rules of Origin

Earlier this year we had heard about rumors of assembly manufacturers utilizing a considerable loophole from the U.S. Customs and Border Protection (CBP) agency’s designation on the rules of origin for bicycles and e-bikes.

The CBP basically rules that the bike frame is the most essential component that determines the bike’s country of origin and that any substantial transformation such as painting of the frame and/or using the frame for assembly into a complete bike, will not be determinative of the bike’s origin.

What this means is that assembly manufacturers from for example China, can source bike frames from its neighbors (Taiwan, Vietnam, Cambodia, Thailand, Indonesia, etc), ship the frames into China, assemble the frames into complete bikes using only China-origin components, and then ship them into the United States directly from China with documentation indicating that the frame was sourced outside of China. The CBP will then designate that the bicycle or e-bike origin as wherever the bike frame was sourced from, relieving the importer of the shipment from China-origin tariffs.

With the increase in total percentage of tariffs that bicycles and e-bikes originating from China that are designated as Made in China are facing in the U.S., there has been a significant increase in utilization of the frame sourcing loophole. In the past few months, we have verified with several manufacturers that actively source frames from overseas with the knowledge and participation of their customers, so that they avoid designated tariffs. It is also apparent now that even Taiwan-based bike assembly manufacturers are taking utilizing this scheme, as a measure to avoid sourcing frames from China.

The compliance aspect of adhering to this legal designation on the rules of origin for bicycles and e-bikes appear to be dubious since the most apparent type of paperwork used to determine origin are the Certificate of Origin or invoicing for the bike frames. However even the Certificate of Origin or invoices for the bike frames can be easily misrepresented and does not clearly distinguish a specific batch of product. There is no clear chain of custody documentation that can be presented on the actual origin of a frame. This demonstrates that the CBP method for designating the origin for bicycles and e-bikes to be inherently problematic and can be thoroughly utilized as a legal loophole. 

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