HQ H298653
OT:RR:CTF:FTM H298653 YAG
Ms. Laura Callesano
CBC America Corp.
55 Mall Drive
Commack, NY 11725
RE: Modification of NY N227976; Country of Origin Marking; Solar panels
Dear Ms. Callesano:
This letter is to inform you that U.S. Customs and Border Protection (“CBP”) has partially reconsidered New York Ruling Letter (“NY”) N227976, issued to CBC America Corp. on August 22, 2012. In NY N227976, CBP found that the processing performed in China substantially transformed all of the Chinese and non-Chinese components into solar panels. Therefore, CBP determined that China was the country of origin of the finished solar panels. We have reviewed NY N227976 and found the country of origin determination to be incorrect. For the reasons set forth below, we are modifying this ruling. CBP’s analysis of appropriate marking requirements pursuant to 19 C.F.R. § 134.46 and 19 C.F.R. § 134.47 in NY N227976 remains unchanged.
Pursuant to 19 U.S.C. § 1625(c)(1), a notice was published in the Customs Bulletin, Volume 52, No. 42 on October 17, 2018, proposing to modify NY N227976, and any treatment accorded to substantially similar transactions. One comment was received in response to this notice, supporting CBP’s modification and this ruling, as they adhere to CBP’s prior decisions on this issue.
FACTS:
In NY N227976, CBP described the solar panels as follows:
The items concerned are solar panels, which are assembled in China using both Chinese and non-Chinese components. There are 5 different sized solar panels concerned (GSP-6, GSP-12, GSP-30, GSP-40, GSP-55). The polycrystalline solar cells are manufactured in Germany. The front sheet is manufactured in Japan. The remainder of the parts, such as Ethylene Vinyl Acetate copolymer (“EVA”), anodized aluminum back board, edge protector, grommet, junction box, cable protection, output cable, inter connector, buss bar, insulation tape, blocking diodes, fuse and ring terminals, are all stated to be products of China. All the parts are sent to an assembler in China for assembly into a finished solar panel. These particular solar panels are for off-grid usage only. They are described as semi-flexible solar panels. They use a semi-flexible aluminum backing and an unbreakable protective plastic film coating. They are used on boats and in RV’s. Typical applications for these solar panels include, trickle charging 12V batteries, maintenance charging for boats at moorings, maintenance charging for emergency vehicles and sole source charging for auxiliary recreational equipment (RV’s, jet skis, traffic signs, small appliances & other electronics). These solar panels are not made of glass and cannot be installed on a roof top to produce solar energy for homes.
Based on the information submitted in NY N227976, CBP found that the processing performed in China substantially transformed all of the components into a new and different article (solar panels). CBP considered the finished solar panels to be products of China and determined that they should be marked accordingly. We have now reconsidered our country of origin determination. However, we also find the analysis of the proposed marking in NY N227976 to be correct. Accordingly, we are only modifying the country of origin determination, as reflected in NY N227976.
ISSUE:
What is the country of origin of solar panels for country of origin marking purposes?
LAW AND ANALYSIS:
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. § 1304) provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).
Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. § 1304. Section 134.1(b), Customs Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations.
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 C.I.T. 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). If the manufacturing or combining process is a minor one that leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982).
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation.” Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All of the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight.
The court reviewed the “name, character and use” test utilized in determining whether a substantial transformation has occurred and noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. at 226, 542 F. Supp. at 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In reaching its decision in Energizer, the court expressed the question as one of whether the imported components retained their names after they were assembled into the finished Generation II flashlights. The court found “[t]he constitutive components of the Generation II flashlight do not lose their individual names as a result [of] the post-importation assembly.” The court also found that the components had a pre-determined end-use as parts and components of a Generation II flashlight at the time of importation and did not undergo a change in use due to the post-importation assembly process. Finally, the court did not find the assembly process to be sufficiently complex as to constitute a substantial transformation. Thus, the court found that Energizer’s imported components did not undergo a change in name, character, or use as a result of the post-importation assembly of the components into a finished Generation II flashlight. The court determined that China, the source of all but two components, was the correct country of origin of the finished Generation II flashlights under the government procurement provisions of the TAA.
In Headquarters’ Ruling Letter (“HQ”) H095409, dated Sept. 29, 2010, a U.S. manufacturer produced finished solar panels in California. Forty three percent of the cost content of the parts originated from the United States and all research and development took place in California. Key to CBP’s finding that a substantial transformation had taken place in the United States was the complex manufacturing process of the solar cells themselves. This process—which involved depositing thin films of chemicals on the inside of glass tubes—took five of the six and a half days it took to manufacture the finished solar panels. CBP found that turning bare glass tubes into functional solar cells in the United States constituted making a product with a new name, character, and use such that a substantial transformation had occurred.
However, in HQ H261693, dated September 16, 2015, CBP determined that the assembly processes fell short of those described in HQ H095409. In HQ H261693, solar panels were manufactured in Korea and Poland from solar cells (product of Malaysia or Korea), glass (China), frames (China/Belgium), junction box, cable, and connector (China/Czech Republic), back sheets (China/Germany), EVA (Korea/Japan), and interconnect ribbons. In addition to considering the country of origin of all of the components, CBP stated that the most important aspect of the case was the fact that the solar cells were produced in Malaysia or Korea and not in the countries where the solar panels were put together. Therefore, CBP found that assembling solar cells into finished solar panels did not result in a product with a new name, character, and use. CBP opined that solar cells imparted the essential character of the solar panels. Accordingly, where Malaysian solar cells were used, the country of origin was Malaysia, and in the scenario where Korean solar cells were used, the country of origin was Korea.
We find that this case is similar to HQ H261693. In this case, solar panels are assembled in China using both Chinese and non-Chinese components. However, the polycrystalline solar cells, which constitute the very essence of the solar panels, are entirely manufactured in Germany. Solar cells do not lose their identity and become an integral part of the solar panels when they are combined with other components during the processing in China. The end-use of the solar cells and other components was pre-determined before the components were imported into China, and the solar cells (and other components) remained solar cells during processing in China. Therefore, in accordance with CBP’s decision in HQ H261693 and the judicial precedent cited above, we find that the solar cells and other components are not substantially transformed by the processing in China, and thus the country of origin of the solar panels is Germany.
HOLDING:
Based on the facts provided, the solar cells from Germany are not substantially transformed into the solar panels by the processes that take place in China. As such, the country of origin of solar panels at issue is Germany.
EFFECT ON OTHER RULINGS:
NY N227976, dated August 22, 2012, is hereby MODIFIED in accordance with the above analysis.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division