OT:RR:NC:N2:209
Nick Baker
FTI Consulting, Inc.
1301 McKinney Street, Suite 3500 Houston, TX 77010
RE: The tariff classification and country of origin of solar panels
Dear Mr. Baker:
In your letter dated February 16, 2024, you requested a tariff classification and country of origin ruling determination on behalf of your client SolarGoal Tecnología de México, S.A. de C.V.
The items concerned are solar panels (model #’s, HC 108 - 400 to 410 Watts, HC 144 - 450 to 460 Watts, HC 120 - 450 to 460 Watts, and HC 144 - 550 to 560 Watts). These solar panels are manufactured in Mexico from both domestic and foreign sourced materials/components.
We initially address the classification of the subject solar panels. As stated within your request, the solar panels are incapable of supplying power directly to an external load, and the cells within each panel are made from silicon wafers that equal or exceed 20 micrometers in thickness. As such, the solar panels in question meet the terms of Note 10 to Chapter 85.
The applicable subheading for each solar panel (model #’s, HC 108 - 400 to 410 Watts, HC 144 - 450 to 460 Watts, HC 120 - 450 to 460 Watts, and HC 144 - 550 to 560 Watts) will be 8541.43.0010, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Semiconductor devices (for example, diodes, transistors, semiconductor-based transducers); 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 into panels; light-emitting diodes (LED): Photovoltaic cells assembled in modules or made up into panels: Crystalline silicon photovoltaic cells of a kind described in statistical note 10 to this chapter.” The general rate of duty will be Free.
Effective January 23, 2018, Presidential Proclamation 9693 imposed safeguard measures on imports of crystalline silicon photovoltaic (CSPV) cells and certain products incorporating CSPV cells in the form of additional tariffs or tariff rate quotas for a period of three years. The safeguard measures were subsequently extended by Presidential Proclamation 10339, dated February 4, 2022, for an additional four years. As a result, products classified under subheading 8541.43, HTSUS, unless specifically excluded, are subject to the additional duties. See Note 18 to Chapter 99 and subheadings 9903.45.21 through 9903.45.27, HTSUS.
In your request, you state that the manufacturing process for each of the solar panels occurs in Mexico. The initial manufacturing process that takes place in Mexico begins with the manufacturing of a solar cell. The raw silicon wafers used in the manufacturing process are of Chinese origin and the chemicals used in the manufacturing process (i.e. silver and aluminum pastes used in printing of gridlines) are of Mexican origin. At the time of import into Mexico, the raw silicon wafers do not have a positive/negative (P/N) junction.
The solar cell manufacturing process involves a seven step process that includes:
(1) wafer selection
(2) texturing
(3) diffusion (doping)
(4) etching
(5) PECVD film application
(6) printing and sintering
(7) testing
The diffusion process facilitates the creation of the P/N junction. During the diffusion process phosphorous (negative dopant) is diffused into the positive type wafer/semiconductor, creating a junction between the two types of electrically charged semiconductor material. Once the P/N junction has been created the wafer is now considered a solar cell which can facilitate the creation of electrical current when exposed to light. The additional steps such as etching, film application, printing and sintering, improve the solar cells’ ability to create electrical power.
The finished solar cells are shipped to a second location in Mexico to be assembled into solar panels of various sizes and wattages. The materials used in the assembly of the solar panels include solar cells and junction boxes from Mexico, along with tempered glass, back-sheeting, ethylene vinyl acetate (“EVA”) film, aluminum framing, silicone, and solar ribbon of Chinese origin.
The solar panels are assembled by first removing the protective film from the tempered glass and cutting EVA film to fit the specified solar panel sizes. From there, series of solar cells are soldered together in order to connect them and increase their collective voltage, and are then strung and welded onto the tempered glass. The now-called photovoltaic modules are then backed with EVA film, laminated, and pressed into the aluminum frame. At this point the general assembly of the solar panels is complete, with the end products undergoing various testing procedures to ensure that relevant quality standards, such as power generation and efficiency, are being met. In the final steps, solar panels are individually packaged and bundled ahead of exportation to the United States.
Eligibility for preferential treatment under the USMCA:
In your letter, you inquire whether the solar panels are eligible for preferential treatment under the USMCA. The 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, 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, in relevant part:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country…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 -
(i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
(iii) the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); ….
In the instant case, the solar panels consist both of originating and non-originating materials, as such, the solar panels are not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the solar panels are not a good produced entirely in Mexico exclusively from originating materials. Therefore, we must determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
As noted above, the solar panels will be classified in 8541.43.0010, HTSUS. The applicable rule of origin in GN 11(o)/85.109 requires “no 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 8541.43.0010, HTSUS, and the solar panels will be 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 and entered for consumption.
Regarding the country of origin for marking purposes:
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.
The "country of origin" is defined, in pertinent part, in 19 CFR 134.1(b) 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 this part; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. 102.21. See 19 C.F.R. 102.11.
Applied in sequential order, 19 CFR Part 102.11(a) provides for:
(a) 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 requirements of these rules are satisfied.
The subject solar panels are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the solar panels, and paragraph (a)(3) must be applied next to determine the origin of the finished article. As the subject solar panels are classified under subheading 8541.43.0010, HTSUS, we note the applicable tariff shift requirements in Part 102.20 as:
A change to any other good of heading 8541 through 8542 from any other subheading, including another subheading within that group.
Based on the information supplied we note that all non-originating components/materials change to a new/different good within heading 8541, HTSUS, thus satisfying the tariff shift rule, as such, the country of origin for marking purposes of solar panels will be Mexico.
Regarding the country of origin for determining applicability of 201, 232 and 301 trade remedy purposes:
Though the USMCA origin rules within 19 CFR Part 102 are used to determine the country of origin for marking purposes, the substantial transformation test determines the origin for sections 201, 232 and 301, trade remedy purposes. For tariff purposes, the courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).
Based upon the facts presented, it is the opinion of this office that the solar cells manufactured in Mexico impart the essence to the finished solar panel. The raw silicon wafers of Chinese origin undergo a substantial and complex manufacturing process within Mexico. Each is transformed within Mexico into functioning solar cells with the requisite P/N junction, resulting in an article with a new name, character, and use. As such, the origin of the solar panels for 201, 232 and 301 trade remedy purposes is Mexico.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Steven Pollichino at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division