OT:RR:CTF:VS H312425 RMC
Griselda Valenzuela
R.L. Jones Customhouse Brokers, Inc.
1778 Zinetta Rd. Suite A
Calexico, CA 92231
RE: Tariff Classification and USMCA Eligibility of Residential and Commercial Solar Panels
Dear Ms. Valenzuela:
This is in response to your correspondence dated July 1, 2020, in which you request rulings on the tariff classification of SunPower residential and commercial solar panels and on the eligibility of those products for duty-free treatment under the United States-Mexico-Canada Agreement (“USMCA”). Your requests, submitted as electronic ruling requests, were consolidated and forwarded to this office from the National Commodity Specialist Division for response.
FACTS:
According to the information provided, the residential units are SunPower model E20-327-C-AC solar panels. The units “include a factory-integrated SunPower microinverter” and “provide a revolutionary combination of high efficiency, with reliability, and module-level DC-to-AC power conversion.” Each finished solar panel will consist of a framed sheet of 96 photovoltaic solar cells, a junction box, and a microinverter. The technical specifications indicate that the nominal power of the residential units is 327 watts with a maximum output of 0.420 kilovolt amperes (“kVA”). You assert that the residential units will be classified under subheading 8501.61.0010, Harmonized Tariff Schedule of the United States (“HTSUS”).
The information provided indicates that the commercial units are SunPower E-Series model E20-435-COM solar panels. Each commercial unit contains a framed sheet of 128 solar cells and a junction box. Unlike the residential units, the commercial units do not include a microinverter to convert the direct current electricity into alternating current. Accordingly, you state that the commercial units are incapable of being connected directly to external devices or a grid. Instead, they are intended to to be connected to other solar modules to create a larger panel. The technical specifications indicate that the nominal power of the commercial units is 435 watts with a maximum output of 0.470 kVA. You assert that the commercial units will be classified under subheading 8541.40.6015 HTSUS.
The assembly of both the residential and the commercial units will take place at SunPower’s facility in Mexicali or Ensenada, Mexico, using both originating and non-originating components. Your submission includes a schematic of the assembly operations, including descriptions and photographs of all steps, and complete bills of materials including the originating status, tariff classification, and value of all materials used in the production of the residential and commercial units.
The assembly of the residential units in Mexico involves cutting of the encapsulant material, washing and inspection of the anti-reflective glass, assembly of the strings of solar cells, alignment of the strings of solar cells, lamination of the various components to create the solar sheets, trimming of the product, installation of the frame, installation of the junction box, testing of the product, and installation of the microinverter. The assembly of the commercial units in Mexico involves similar steps, except that no microinverter is installed. You assert that both the residential and commercial units will be eligible for preferential tariff treatment under the USMCA.
ISSUES:
Whether the residential solar panels will be properly classified under subheading 8501.61.0010, HTSUS, and the commercial solar panels will be properly classified under subheading 8541.40.6015, HTSUS.
Whether the residential solar panels and the commercial solar panels will be eligible for USMCA preferential tariff treatment when they are imported from Mexico into the United States.
LAW AND ANALYSIS:
Classification
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
Residential Units
CBP has classified merchandise similar to the SunPower residential units in heading 8501, HTSUS. For example, in New York Ruling (“NY”) N160415, dated May 6, 2011, we considered the classification of a solar panel with an integrated power modulator to convert the direct current produced by the panel into alternating current electricity. We rejected the proposed classification of 8541.40.60, HTSUS, which provided for “Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes: Other diodes: Other; Solar cells: Assembled into modules or made up into panels,” as the merchandise did not consist simply of photovoltaic cells arranged into a solar panel, but rather of a solar panel with a power module attached. Therefore, in its condition as imported, the solar panel was capable of supplying power to an external load, and classification under 8541.40.60, HTSUS, was improper. Instead, we concluded that the merchandise was properly classified under subheading 8501.61, HTSUS, as “Electric motors and generators…: AC generators: Of an output not exceeding 75 kVA.”
Here, as in NY N160415, the merchandise consists of a solar panel with a power modulator (or “microinverter”) attached. This microinverter allows the unit to convert the direct current electricity generated by the solar panels into alternating current electricity that is capable of supplying power to an external load. The technical specifications of the residential units indicate that the electrical output does not exceed 75 kVA. Accordingly, by operation of GRI 1, the residential units will be properly classified under 8501.61.0010, HTSUS, as “Electric motors and generators…: AC generators: Of an output not exceeding 75 kVA: Photovoltaic generators of a kind described in statistical note 9 to this chapter.”
Commercial Units
CBP has classified merchandise similar to the SunPower commercial units in 8541.40.60, HTSUS. For example, in Headquarters Ruling (“HQ”) H250768, dated December 2, 2016, CBP held that certain solar panels that were designed to be connected to other solar panels were properly classified in subheading 8541.40.60 of the 2013 HTSUS, which provided for “Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels …: Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up in panels …: Other diodes.” We noted that “per the [Explanatory Notes], panels or modules without elements that supply the power directly to an external load, are classified in heading 8541, HTSUS, and cannot be classified in heading 8501, HTSUS.” Although the subject merchandise contained a junction box, connectors, and bypass diodes that protected the solar cells from overheating, these features were not elements that supplied power directly to an external load. Therefore, the merchandise was properly classified in subheading 8541.40.60, HTSUS. See also NY N047472, dated January 9, 2009 (holding that modules that could only connect to other solar modules to create a single solar panel and could not connect to external devices or an electrical grid were classified in 8541.40.60, HTSUS).
Here, unlike the residential units, the commercial units do not contain a microinverter to convert the direct current electricity generated by the panels into alternating current electricity. Moreover, the technical specifications indicate that the commercial units do not contain any element that allows the panels to supply power to an external load. As noted above, you state that the commercial units are intended to be connected to other solar modules to create a larger solar panel. Therefore, as in HQ H250768, the merchandise will not be classifiable in heading 8501, HTSUS. Instead, we agree that the merchandise will be properly classified by operation of GRI 1 in 8541.40.6015, HTSUS, as “Diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes (LED); mounted piezoelectric crystals; parts thereof: Other diodes . . . Other: Solar Cells: Crystalline silicon photovoltaic cells of a kind described in statistical note 11 to this chapter: Assembled into modules or made up into panels.”
Eligibility for USMCA Preferential Tariff Treatment
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
…
Here, the residential units and the commercial units will be produced in Mexico using originating and non-originating materials. Therefore, the merchandise will not qualify as originating pursuant to GN 11(b)(i) or (ii). We must therefore consider whether the merchandise qualifies as originating pursuant to GN 11(b)(iii).
Residential Units
As noted above, the residential units will be classified in heading 8501, HTSUS (and not for use in a motor vehicle). The applicable rule of origin in GN 11(o)/85.1 requires:
A change to heading 8501 from any other heading, except from tariff items 8503.00.35, 8503.00.45 or 8503.00.65; or
A change to heading 8501 from tariff items 8503.00.35, 8503.00.45 and 8503.00.65, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
60 percent where the transaction value method is used; or
(2) 50 percent where the net cost method is used.
Here, the bill of materials for the residential units shows that all non-originating materials are classified outside of heading 8501 and no non-originating materials are classified in subheadings 8503.00.35, 8503.00.45 or 8503.00.65. The residential units therefore qualify as USMCA originating goods pursuant to GN 11(o)/85.1(A) and, provided that all other requirements are met, the merchandise will be eligible for preferential tariff treatment under the USMCA when imported into the United States.
Commercial Units
As noted above, the commercial units will be classified in 8541.40.6015, HTSUS. The applicable rule of origin in GN 11(o)/85.109 requires “[n]o change in tariff classification to a good of subheadings 8541.10 through 8542.90.”
Here, as no change in tariff classification is required for goods of 8541.40.6015, HTSUS, and the commercial units are assembled in Mexico, the merchandise will qualify as USMCA originating goods pursuant to GN 11(o)/85.109. Provided that all other requirements are met, the merchandise will be eligible for preferential tariff treatment under the USMCA when imported into the United States.
HOLDING:
Based on the information provided, the residential units will be classified in subheading 8501.61.0010, HTSUS, and will be eligible for preferential tariff treatment under the USMCA. The commercial units will be classified in 8541.40.6015, HTSUS, and will be eligible for preferential tariff treatment under the USMCA.
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 Customs Service 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 and Special Programs Branch