HQ H309802
OT:RR:CTF:VS H309802 CMR
Barbara Broussard, Esq.
Sidley Austin LLP
1501 K Street N.W.
Washington, D.C. 20005
RE: Country of origin of transistors
Dear Ms. Broussard:
This is in response to your request, on behalf of your client, STMicroelectronics, Inc. (“ST”), for a ruling on the country of origin of silicon carbide metal-oxide-semiconductor transistors manufactured using silicon carbide substrates. You indicate that your client previously declared the country of origin of the product as China, but based upon a recent review of the processing operations, it now believes the correct country of origin is Italy. The request is related to duty assessment and whether the imported product is subject to Section 301 duties as a product of China.
You have requested confidential treatment be accorded to certain information submitted in connection with this matter. In consideration of the request and sufficient justification presented pursuant to 19 CFR 177.2(b)(7), the request for confidential treatment is approved. Information for which confidentiality is being accorded is not referenced in this ruling.
FACTS:
“ST designs, develops, manufactures, and markets semiconductor products used in various microelectronic applications.” The imported product consists of two silicon carbide metal-oxide-semiconductor transistors (hereinafter, transistors) encapsulated in a plastic-metallic package. Each transistor is 4.9 x 4.49mm² in dimension and has a thickness of 180 micrometers. You indicate that packaging the transistors makes for easier handling and assembling into their final application.
You describe the production process of the transistors as comprising three stages, i.e., the substrate construction, the front end operations, and the back end operations. The substrate construction occurs in the United States. You describe the production process for the substrate as involving seven distinct steps starting with procuring high quality silicon carbide powder and ending with the creation of silicon carbide substrates, also known as “empty” wafers. ST procures the “empty” wafers from an unrelated U.S. manufacturer.
The empty wafers are shipped to ST Italy where the front end operations occur. You describe these operations as six steps of processing – inspection of the silicon carbide substrates, or empty wafers; EPY (epitaxial) growth; visual inspection; marking; fabrication; and EWS (an electrical test).
You indicate that the first step, visually inspecting the substrates and producing Certificates of Analyses, accepting the substrate batch, takes a full day for two highly skilled laborers, mainly engineers, to complete. The second step, processing each substrate through automated silicon carbide epitaxial film growth equipment takes approximately one week per lot, which may consist of multiple batches, and requires 16 highly skilled and qualified employees. You describe the processing of the substrates as follows:
ST Italy places the substrates in a furnace for a high temperature Chemical Vapor Deposition (“CVD”) using silicon, carbide, and a nitrogen dopant. CVD is a deposition method, wherein the substrate is exposed to chemical reactions. During this process, ST Italy grows thin SiC epitaxial film on the substrate, creating SiC wafers. . . .
After the EPY growth process, all silicon carbide wafers are submitted “to a full-surface, high-sensitivity, automated defect inspection through the use of state-of-the-at advanced surface inspection equipment.” You indicate this inspection takes one day per lot and requires two highly skilled and qualified employees to complete. Next, ST Italy laser marks the wafers on both sides to ensure traceability, which allows ST to track the wafers as they are further processed.
At this point, the wafers are ready to be fabricated into the transistors. The fabrication process is described as consisting of six main sub-processes: oxide deposition, photolithography, etching, ion implantation, diffusion, and metal deposition. You indicate that this fabrication process takes about nine weeks per batch and involves 146 highly skilled and qualified employees. You describe the fabrication process as follows:
First, ST Italy creates a thin insulator layer through the deposition of tetraethyl orthosilicate (“TEOS”). ST Italy uses TEOS as a crosslinking agent in silicon polymers. ST Italy evenly applies a light-sensitive polymer, also known as photoresist, while spinning the wafer. This material is originally soluble in an organic solvent, but allows the polymers to crosslink when exposed to light, making the affected regions insoluble.
Second, ST Italy brings a glass mask, containing the patterns it wishes to transfer, in close proximity to the wafer. The glass mask essentially is a “negative” of one layer of the microcircuit. ST Italy then exposes the proximate glass makes and wafer to ultra-violet light. Where the mask is transparent, the photoresist becomes insoluble. ST Italy develops the wafers by removing the non-exposed areas of the photoresist. ST Italy eventually verifies the efficacy of these critical lithographic process steps through the automatic measurements of lithographic geometries.
Third, ST Italy then further develops the wafer by removing the exposed photoresist and heats the wafer to harden the remaining photoresist pattern. ST Italy then exposes the wafer to a chemical solution or plasma (gas discharge) so that areas not covered by the hardened photoresist are etched away. ST Italy then subjects the exposed area to a wide range of recurring process steps for introducing dopant, such as ion implantation or activation.
Fourth, in the ion implantation stage, ST Italy introduces dopants as ions into the material. The ion implantation system directs and sweeps a beam of purified ions over the semiconductor surface. The acceleration of the ions determines how deep they will penetrate the material, while the beam current and the exposure time determine the dosage.
Fifth, ST Italy places the wafers in a quartz tube embedded in a heated furnace. The high temperatures of the furnace, typically 900ºC to 1100ºC, activate the dopants into the silicon carbide structure or growth oxide interface.
Sixth, ST Italy loads the wafers into metal deposition equipment that allows the realization of electrical connections between the different cells of the MOS [metal-oxide-semiconductor] field-effect transistor. ST Italy uses the same equipment to deposit a metal layer, composed of titanium, nickel, and silver on the backside of the wafer.
You indicate that after the fabrication process, the wafers contain fully formed and fully functional silicon carbide metal-oxide-semiconductor transistors, or dice.
After the fabrication process, the dice on the wafers are tested using the EWS (Electrical Wafer Sorting) test to check the performance and functionality of the silicon carbide metal-oxide-semiconductor transistors. Transistors that are working sub-optimally are marked and subsequently discarded when the dice are singularized. ST Italy checks the transistors for quality assurance/quality control and packs them in specific boxes for shipment to the final point of processing. The testing and packing process done in Italy requires one week per batch and involves 24 highly skilled and qualified employees.
You indicate that the Front End operations performed in Italy take 11 weeks and represent 95% of the processing time. At the end of this processing, customers can use the transistor because its electrical, thermal and mechanical features are finalized. While the transistor at issue is only sold to one customer, you point out that in the case of similar transistors, some customers purchase them at this stage of processing. Other customers, similar to the purchaser of the transistors at issue, prefer to purchase transistors after singularization and encapsulation for ease of handling and final assembly for its pre-determined end use.
The Back End operations occur in China where ST China singularizes the transistors by dicing and encapsulate the transistors into the plastic package that makes the finished product more convenient to handle. ST China singulates each die using general purpose wafer sawing equipment. During this process, the transistors that were deemed sub-optimal during testing are removed. After dicing, ST China attaches the die (two die together in parallel) to a direct bonded copper base with aluminum wires using standard ultrasonic welding. The die are connected to external pins using a copper clip. The pins are used to connect the transistors when used in their intended product. ST China encapsulates the die, base and portion of external pins using a generic epoxy molding compound. Finally, ST China tests the finished product to electrically verify the functionality of the transistors was not impacted by the packaging process. The electrical performance of the transistors is unchanged by the packaging operations that occur in China. You submitted test results of transistor parameters from the EWS test performed in Italy and the testing performed after packaging in China as evidence that no change in electrical performance occurs. You indicate that the packaging and testing operations that occur in China takes about four days which reflects only 5% of the processing time involved in producing the finished transistors, and it is performed by employees who are trained operators. Further, you submit that only twelve percent of the value of the finished transistors is attributable to the operations performed in China.
ISSUE:
Whether the transistors produced as described herein are products of Italy or products of China.
LAW AND ANALYSIS:
The country of origin of a good is the country in which the good last underwent a substantial transformation. See 19 CFR § 134.1(b). “A substantial transformation test is used in a number of different trade-related situations, including compliance with the country of origin marking statute, allowance of drawback, and qualification for GSP status.” See SDI Technologies, Inc. v. United States, 21 C.I.T. 895, 897 n.2, 977 F.Supp. 1235, 1239 n.2 (CIT 1997). In this case, a substantial transformation test is used to determine the origin of the transistors at issue for purposes of duty assessment.
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).
In this case, silicon carbide substrates, also known as “empty” wafers, are processed in Italy to create transistors. We agree with counsel that the processing in Italy results in a substantial transformation as the “empty” wafers are not usable in that form, but only serve as a foundation upon which the transistors are created through the various processing steps which occur in Italy. After the fabrication process in Italy, the silicon carbide substrates have a new name, character and use. After the processing in Italy, they are usable as transistors and known as such or as dice.
The processing that occurs in China, i.e., the dicing and packaging of the transistors does not change the function or character of the transistors. It merely separates multiple transistors on the wafer and packages them for easier handling and use. The situation here is akin to that in SDI Technologies, Inc. v. United States, supra. In SDI Technologies, unhoused printed circuit board assemblies with face-plate incorporating components for radio receivers [and] duel cassette decks, referred to as a “chassis” and the raw speaker cones produced in China were imported into Mexico. At the time of importation, the chassis and speaker cones were fully functional. In Mexico, they were assembled with other components, such as laminated cut and grooved particle board, molded plastic components, and cut and painted foam to create rack stereo systems. In deciding that Customs (now Customs and Border Protection) was correct in determining that the imported rack stereo systems were not products of Mexico, the court found that the Chinese origin chassis did not undergo a substantial transformation in Mexico. As the court stated:
. . . the chassis imported into Mexico from China were the fully-functional electronic components of the stereo rack systems, capable of use by the consumer in the state in which they arrived in Mexico. Indeed, the chassis underwent no changes before they were housed, paired with speakers, and renamed "stereo rack systems."
Similarly, in this case, the transistors are fully-functional electronic components, capable of use by customers of ST at the time they arrive in China. As you point out, the dicing and packaging in China does not change the functioning parameters of the transistors. Like the chassis in SDI Technologies, the transistors, after attachment to a base and external pins, are merely being housed, or packaged, by encapsulation using a generic epoxy molding compound. In SDI Technologies, the court found that “[t]he essence of the goods, stereo receivers and tape players, did not change when the chassis were housed in the wood-laminate cabinets.” See SDI Technologies at 1241. As in SDI Technologies, the essence of the goods, the electrical function of the transistors, does not change, and therefore, the character of the goods is not affected by the processing in China.
You point out and distinguish C.S.D. 80-227 in which the assembly of semiconductors was found to constitute a substantial transformation. In that case, semiconductor chips and other materials were determined to have no functional use in their condition prior to assembly to form an integrated circuit. In this case, the transistors are fully functional prior to their dicing; assembly with a copper base, aluminum wires and external pins; and encapsulation. In addition, after the processing in China, the transistors are still transistors. They have not been changed into another electrical device, such as an integrated circuit. Their name, character and use are fixed at the time the transistors leave Italy and are not changed by the processing in China. Therefore, we find that the transistors are not substantially transformed by the processing performed in China, and their country of origin remains Italy.
HOLDING:
The country of origin of the transistors produced as described above is Italy. As the transistors are not a product of China, they are not subject to the Section 301 tariffs for goods of China.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Classification Branch