OT:RR:CTF:VS H266527 RMC
William Brent Weaver
Director of Operations
Kyocera Solar, Inc.
7812 E. Acoma Dr.
Scottsdale, AZ 85260
Re: Revocation of New York Rulings R00721 and N047417; Country of Origin Marking of Solar Panels from Mexico under the North American Free Trade Agreement
Dear Mr. Weaver:
This is in reference to two ruling letters issued to Kyocera Solar, Inc.: New York Ruling Letter (NY) R00721, dated September 17, 2004, and NY N047417, dated January 14, 2009. Both rulings concerned the country of origin marking of solar panels imported from Mexico. In NY R00721, we held that solar panels assembled in Mexico were products of Mexico. In NY N047417, we held that it was acceptable to mark the solar panels with the proposed wording “Components from Japan, Assembled in Mexico” or “Components from Japan, Manufactured in Mexico.” After reviewing these two rulings, we found that they are incorrect.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), a notice was published in the Customs Bulletin, Vol. 49, No. 39, on September 30, 2015, proposing to revoke NY R00721 and NY N047417, relating to the country of origin marking of certain solar panels under the North American Free Trade Agreement (“NAFTA”). One comment regarding the proposed revocation was received in response to that notice, which is addressed herein. For the reasons set forth below, we hereby revoke NY R00721 and NY N047417.
FACTS:
When Kyocera Solar submitted the ruling for NY R00721 in August 2004, it was in the process of setting up a solar-panel assembly line in Tijuana, Mexico. The solar panels, classifiable under subheading 8541.40.6020, Harmonized Tariff Schedule of the United States (“HTSUS”), are assembled using solar cells, classifiable under subheading 8541.40.6030, HTSUS, manufactured at Kyocera’s factory in Japan. All other components, classifiable outside of subheading 8541.40, HTSUS, are imported from Japan, except for the glass panel, which is manufactured in the United States.
Based on the outcome in NY R00721, in the ruling request for NY N047417, Kyocera Solar asked whether it would be acceptable to label the solar panels “Components from Japan, Assembled in Mexico” or “Components from Japan, Manufactured in Mexico.”
ISSUE:
Whether the finished solar panels are a product of Mexico 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 (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
Section 134.1(j), CBP Regulations (19 C.F.R. 134.1(j)), provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g), CBP Regulations (19 C.F.R. 134.1(g)), defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules, set forth at 19 C.F.R. Part 102. Section 102.11(a), CBP Regulations (19 C.F.R. 102.11(a)), sets forth the required hierarchy under the NAFTA Marking Rules for determining country of origin for marking purposes. This section states that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in [section] 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
Since the components of the solar panels are manufactured in both Japan and the United States, they are neither “wholly obtained or produced” in one country nor “produced exclusively from domestic materials.” Accordingly, the country of origin of the solar panels may not be determined under the first two steps of the hierarchy in 19 C.F.R. 102.11(a)(1) and (a)(2). Under the third step of the hierarchy, 19 C.F.R. 102.11(a)(3), the country of origin of a good is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section.” Section 102.1(e), CBP Regulations (19 C.F.R. 102.1(e)) defines “[f]oreign material” as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The finished solar panels are classified in subheading 8541, HTSUS. When Kyocera Solar’s ruling request was submitted in 2004, the tariff shift rule for subheading 8541, HTSUS required:
“A change to heading 8541 through 8542 from any other subheading, including another subheading within that group; or
A change to a mounted chip, die or wafer classified in heading 8541 or 8542 from an unmounted chip, die or wafer classified in heading 8541 or 8542; or
A change to a programmed ‘read only memory’ (ROM) chip from an unprogrammed ‘programmable read only memory’ (PROM) chip.”
NY R00721 incorrectly concluded that the Japanese solar cells classified under subheading 8541.40.6030 satisfied the tariff shift rule from any other subheading. Because the finished solar panels are classified under subheading 8541.40.6020, HTSUS, there is no “change to heading 8541 through 8542 from any other subheading . . . .” The 10-digit number is actually the statistical reporting number for an article that is formed by combining the 8-digit subheading number with the appropriate 2-digit statistical suffix. See General Statistical Notes 3(a), HTSUS, which describes the “Statistical Reporting Number.”
Further, there is no evidence that the finished solar panels contain any chips, dies, wafers, or “read only memory” chips. Accordingly, the solar panels do not undergo the required change in tariff classification as a result of the operations in Mexico.
When a good’s country of origin cannot be determined under the three methods described in 19 C.F.R. 102.11(a), 19 C.F.R. 102.11(b) provides that “[e]xcept for a good that is specifically described in the Harmonized System as a set, or is classified as a set . . . the country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good.” Here, the single material or component that impacts the essential character to the solar panels is the individual solar cell. The individual solar cells allow the solar panels to fulfill their purpose of generating electricity and represent the majority of the finished product’s value. Therefore, under 19 C.F.R. 102.11(b), the country of origin for marking purposes of the finished solar panels is Japan, the country of origin of the individual solar cells. We also note that since 2004, another rule was added in 19 CFR 102.20 for goods of heading 8541, HTSUS; however, this rule is not applicable to solar panels.
Because the panels’ country of origin is Japan, they cannot be labeled “Components from Japan, Assembled in Mexico” or “Components from Japan, Manufactured in Mexico.” 19 C.F.R. 134.43(e) permits such labeling only when the assembled article’s country of origin is “the country in which the article is finally assembled.” As noted above, the solar panels are goods of Japan. Accordingly, NY N047417 is also incorrect.
CBP received one comment on behalf of the importer, Kyocera Solar Inc. In its comment, Kyocera argues that the NAFTA preference override in 19 C.F.R. § 102.19 applies and that NY R00721 and N047417 were therefore correct in concluding that the solar panels’ country of origin for marking purposes was Mexico. The NAFTA preference override provides that:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see § 181.11 of this chapter) has been completed and signed for the good.
See 19 C.F.R. § 102.19.
As defined in 19 C.F.R. § 181.1(q), “[o]riginating, when used with regard to a good or a material, means a good or material which qualifies as originating in the United States, Canada and/or Mexico under the rules set forth in General Note 12, HTSUS, and in the appendix to this part.” Thus, the NAFTA preference override applies only when a good originates in a NAFTA country under GN 12, HTSUS but does not qualify to be marked as a good of the originating country under 19 C.F.R. § 102.11(a) or (b). At the time that NY R00721 and N047417 were issued, Kyocera did not provide evidence that the solar panels originated under GN 12, HTSUS. This is why neither NY R00721 nor N047417 refer to the NAFTA rules of origin in General Note 12, HTSUS or invoke the NAFTA preference. Instead, they address only the country of origin marking of the solar panels under 19 C.F.R. § 102. Therefore, in the absence of evidence that the solar panels originated under GN 12, HTSUS, the NAFTA preference override did not apply, and the analysis in NY R00721 and N047417 on the country of origin marking of the solar panels under 19 C.F.R. § 102 was incorrect.
While Kyocera did not provide evidence that the solar panels originated under GN 12, HTSUS in 2004 and 2009 when NY R00721 and N047417 were issued, it has now provided a completed and signed NAFTA certificate of origin and claims that the solar panels originate under GN 12, HTSUS. Thus, CBP can now consider whether future imports will qualify to be marked as products of Mexico pursuant to the NAFTA preference override.
As explained above, the first requirement of the NAFTA preference override in 19 C.F.R. § 102.19 is that the goods originate under GN 12, HTSUS. GN 12(b) sets forth the methods for determining whether a good originates in the territory of a NAFTA party and provides, in relevant part:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if:
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
Here, because the solar panels are neither “wholly obtained or produced entirely in the territory of Canada Mexico and/or the United States” nor “produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials,” the solar panels must “have been transformed in the territory of Canada, Mexico and/or the United States so that . . . each of the non-originating materials used in the production of such goods undergoes a change in tariff classification [in General Note 12, HTSUS].” The GN 12, HTSUS tariff shift rule applicable to solar panels classified under subheading 8541.40, HTSUS is: “[n]o required change in tariff classification to any of subheadings 8541.10 through 8542.90.” Because no tariff shift is required under the GN 12, HTSUS rule and the finished solar modules were “transformed” for the purposes of GN 12, HTSUS when they were assembled in Mexico, the finished solar panels will originate under GN 12, HTSUS.
The second requirement of the NAFTA preference override in 19 C.F.R. § 102.19 is that the originating good fails to qualify to be marked as a good of the originating country under 19 C.F.R. § 102.11(a) or (b). As explained above, under 19 C.F.R. 102.11(b), the country of origin for marking purposes of the finished solar panels is Japan. Thus, because the finished solar panels originate in the territory of a NAFTA party under GN 12, HTSUS but do not qualify to be marked as a good of the originating country under 102.11(a) or (b), future imports will qualify to be marked as products of Mexico pursuant to the NAFTA preference override.
HOLDING:
Based on the information available when NY R00721 and NY N047417 were issued, the solar panels’ country of origin for marking purposes was Japan pursuant to 19 C.F.R. 102.11(b). Therefore, they did not qualify to be labeled “Components from Japan, Assembled in Mexico” or “Components from Japan, Manufactured in Mexico.” However, future imports will qualify to be marked as “products of Mexico” pursuant to the NAFTA preference override if Kyocera continues to meet the requirements in 19 C.F.R. § 102.19.
EFFECT ON OTHER RULINGS:
NY R00721, dated September 17, 2004 and NY N047417, dated January 14, 2009, are hereby revoked. 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 Trade & Facilitation Division