CKD Import Interpretation: identifiable motorcycle sub-assemblies can qualify for concessional customs duty under trade practice

The expression "completely knocked down" in a customs exemption notification is to be understood in a practical, trade-sensitive sense where no statutory definition exists. Identifiable basic sub-assemblies such as engine, transmission, clutch and axle assemblies may still qualify as CKD imports, and the goods need not be dismantled to the last individual component. However, if the imported items are assembled abroad to the extent that they lose the character of identifiable sub-assemblies, CKD treatment is unavailable. On that construction, motorcycle components and sub-assemblies imported as described would qualify for concessional duty, provided the engine and transmission assemblies are designed to be housed and are in fact assembled in a single housing.

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Issues: Whether the import of motorcycle components, parts and sub-assemblies constituted import of motorcycles in completely knocked down form so as to qualify for concessional duty under Entry 345 of Notification No. 21/2002-Cus dated 1 March 2002.

Analysis: The expression "completely knocked down" is not defined in the notification or in the customs law. The term must therefore be understood in a practical and trade-sensitive manner, and not by insisting that imported goods be broken down to the last individual component. In the absence of a statutory definition, the notification was construed in light of industry practice and the earlier ruling concerning motor vehicle kits. Identifiable basic sub-assemblies such as engine assembly, transmission assembly, clutch assembly, axle assembly and similar units can still fall within CKD treatment. However, if the imported goods are so assembled abroad that they lose the character of identifiable basic sub-assemblies, they would fall outside CKD.

Conclusion: The import would constitute CKD import and would qualify for concessional duty under Serial No. (1) of Entry 345, provided the engine and transmission assemblies are designed to be housed and are in fact assembled in a single housing. The same approach applies to the other motorcycle models if imported in the form of identifiable basic sub-assemblies or components.

Ratio Decidendi: In the absence of a definition, "completely knocked down" in a customs exemption notification includes identifiable basic sub-assemblies according to commercial practice, and not merely imports dismantled to the last possible component.

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