OT:RR:CTF:VS H325232 CMR
AF Romero & Co.
U.S. Customs Brokers & Warehouse
1749 Stergios Road
Calexico, CA 92231
RE: Refurbished solar panels; Subheading 9802.00.50, HTSUS
Dear Mr. Romero:
This is in response to your request, on behalf of your client, We Recycle Solar Co. (hereinafter, We Recycle), for a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS) to used solar panels exported from the United States, processed in Mexico, and returned to the United States. You present three processing scenarios set forth below.
You state that your client, We Recycle, collects used solar panels in the United States. The used solar panels range in age from 1 to 30 years of use. The used solar panels are collected for refurbishment and re-use, and their individual countries of origin are unknown. You indicate that the used solar panels are classified under subheading 8541.40.60, Harmonized Tariff Schedule of the United States (HTSUS). However, that provision no longer appears in the tariff schedule. We note that the applicable provision in the 2022 tariff schedule is 8541.43.00, HTSUS, which provides for, in relevant part: "Semiconductor devices . . . ; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; . . . : parts thereof: 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, Other.
The used solar panels are sent to Mexico where they are sorted according to the nature and extent of repair needed. The used solar panels will be processed in one of three methods. First, some used solar panels will only be inspected, tested, and returned to the United States. Second, some used solar panels will be inspected, tested, cleaned, and returned to the United States. Third, some used solar panels will be inspected, tested, cleaned, repaired in Mexico, and returned to the United States.
The repairs of used solar panels in Mexico can consist of replacement of a junction box, replacement of cables, replacement of cable ends, repair of glass damage, and repair of the back sheet. After processing in Mexico, the solar panels are packaged for sale.
I. Whether the used solar panels, processed as described above, qualify for preferential tariff treatment under subheading 9802.00.50, HTSUS?
II. What is the origin of the used solar panels under the three processing scenarios described above?
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS
The United States - Mexico - Canada Agreement (USMCA) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. It 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)). The USMCA provides at Article 2.8 for goods re-entered after repair or alteration. The agreement states, in relevant part:
1. No Party shall apply a customs duty to a good, regardless of its origin, that re-enters its territory after that good has been temporarily exported from its territory to the territory of another Party for repair or alteration, regardless of whether that repair or alteration could have been performed in the territory of the Party from which the good was exported for repair or alteration or has increased the value of the good.
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4. For the purposes of this Article, repair or alteration does not include an operation or process that:
a) destroys a good's essential characteristics or creates a new or commercially different good; or
(b) transforms an unfinished good into a finished good.
The provision for articles exported for repair or alteration and re-imported appears at subheading 9802.00.50, HTSUS. This provision provides a complete duty exemption for articles exported from and returned to the U.S. after having been advanced in value or improved in condition by repairs or alterations in Canada or Mexico.
Note 3, Subchapter II, Chapter 98, sets forth additional provisions applicable to subheading 9802.00.50, HTSUS. The Special Program Indicator for the USMCA which appears in the tariff rate column of the tariff is "S" or "S+." Notes 3(d) and (e), Subchapter II, Chapter 98, indicate, in relevant part, that the symbol "S" in parentheses indicates that the rates of duty in the "Special" column 1 and the "Special" subcolumn of column 1, for goods classified in subheading 9802.00.50, HTSUS, apply to any goods which are returned to the United States after having been repaired in Canada or Mexico, respectively, whether or not such goods are goods of Canada or Mexico under the terms of general note 11 to the tariff schedule.
Nineteen CFR 182.112(a) provides:
General. This section sets forth the rules that apply for purposes of obtaining
duty-free treatment on goods returned after repair or alteration in Canada or
Mexico as provided for in subheadings 9802.00.40 and 9802.00.50, HTSUS.
Goods returned after having been repaired or altered in Canada or Mexico,
regardless of whether the repair or alteration could be performed in the United
States or has increased the value of the good and regardless of their origin, are
eligible for duty-free treatment, provided that the requirements of this section are
met. For purposes of this section, "repairs or alterations" means restoration,
addition, renovation, re-dyeing, cleaning, re-sterilizing, or other treatment that
does not destroy the essential characteristics of, or create a new or commercially
different good from, the good exported from the United States.
At 19 CFR 182.112(b), the Customs and Border Protection (CBP) Regulations state:
Goods not eligible for duty-free treatment after repair or alteration. The duty-free
treatment referred to in paragraph (a) of this section will not apply to goods that:
1) In their condition, as exported from the United States to Canada or Mexico, are incomplete for their intended use and for which the processing operation performed in Canada or Mexico constitutes an operation that is performed as a matter of course in the preparation or manufacture of finished goods; or
2) Are imported under a duty-deferral program that are exported for repair or
alteration and are not re-imported under a duty-deferral program.
Based upon the definition of "repairs or alterations" in 182.112(a), cited above, the used solar panels which are simply inspected, tested and returned to the United States do not qualify for preferential tariff treatment under subheading 9802.00.50, HTSUS. However, you may wish to reimport these used solar panels under subheading 9801.00.10, HTSUS. Subheading 9801.00.10 provides for: "Products of the United States when returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad."
The used solar panels which are cleaned, in addition to being inspected, tested and returned to the United States, and those panels which are cleaned and repaired, are eligible for duty-free treatment under subheading 9802.00.50, HTSUS pursuant to 19 CFR 182.112(a). In addition, Customs and Border Protection (CBP) has previously held that cleaning and sanitizing soiled garments and floor mats in a Mexican or Canadian laundry facility qualified as an alteration under subheading 9802.00.50, HTSUS. See Headquarters Ruling ("HQ") 254785, dated September 17, 2014; HQ 559072, dated June 21, 1995; and HQ 221046, dated May 11, 1989. Further, the used solar panels are finished articles when exported to Mexico and the repairs described herein do not change the identity of the solar panels, but simply replace certain components of the solar panels. See HQ 559740, dated October 3, 1996, discussing the eligibility of a rebuilt transformer for classification in subheading 9802.00.50, HTSUS (The replacement and/or addition of parts to restore products to their original condition may constitute repair operations for purposes of subheading 9802.00.50, HTSUS, provided that the particular article does not lose its identity and the replacement and/or additions are not so extensive as to create a new or different article.)
Certain documentary requirements set forth in 19 CFR 182.112(c) of the CBP Regulations must be satisfied. Nineteen CFR 182.112(c) provides that the provisions of 10.8(a), (b), and (c) of this chapter, relating to the documentary requirements for goods entered under subheading 9802.00.40 and 9802.00.50, HTSUS, apply for goods entered from Canada or Mexico after having been exported for repair or alterations and claimed to be duty-free.
Country of Origin Marking
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. Section 102.11(a) provides 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 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
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Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because we have no information to indicate that the used solar panels are wholly obtained or produced in a country or produced exclusively from domestic materials in any country. Accordingly, because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). "Foreign material" is defined in section 102.1(e) 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 applicable tariff shift requirement in section 102.20 for the products of headings 8541 to 8542, in relevant part, is as follows:
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A change to any other good of heading 8541 through 8542 from any other subheading, including another subheading within that group.
According to the applicable section 102.20 tariff shift requirement for heading 8541, HTSUS, a tariff shift must occur. No tariff shift occurs as a consequence of the processing of the used solar panels which occurs in Mexico. Accordingly, we conclude that the tariff shift requirement of section 102.11(a)(3) is not met. Since an analysis of section 102.11(a) does not yield a country of origin determination, we turn to section 102.11(b) of the regulations. Section 102.11(b) provides as follows:
(b) Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
1) 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, or
2) If the material that imparts the essential character to the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method.
The rule of interpretation set forth in 19 C.F.R. 102.18(b) states, in pertinent part, the following:
(1) For purposes of identifying the material that imparts the essential character to a good under 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the 102.20 specific rule or other requirements applicable to the good. . . .
In this case, used solar panels are exported and used inspected and refurbished solar panels are imported. Accordingly, the origin of refurbished solar panels is the origin of the used solar panels imported into Mexico for processing.
CBP has determined in rulings that the essential character of solar panels is imparted by the solar cells. See Headquarters Ruling Letter (HQ) H298653, dated November 19, 2018, citing HQ H261693, dated September 16, 2015, wherein CBP found that solar cells imparted the essential character of the solar panels. See also, HQ H266527, dated April 11, 2016. Thus, if the solar cells in the used solar panels are marked with their country of origin, applying 102.11(b)(1), the country of origin of the refurbished solar panels is the origin of the solar cells in the panels.
However, you indicate that you do not know the origin of the used solar panels. Therefore, it appears that the used solar panels are not marked with their country of origin. In addition, we recognize that if in the process of repair of the used solar panels, the solar cells were visible, it is unlikely that the solar cells are marked with their country of origin. Thus, without knowledge of the origin of the used solar panels, that is, the origin of the solar cells contained within them, an origin determination under 102.11(b)(1) is not possible.
You reference Headquarters Ruling Letter (HQ) H237642, dated May 6, 2013, in which used, non-working automatic data processing (ADP) machines were exported from the United States to Mexico where some were repaired, refurbished and exported back to the United States. In that ruling, it was found that the repaired and refurbished ADP machines qualified as originating goods under the North American Free Trade Agreement (NAFTA) and qualified to be marked as goods of Mexico.
Unlike the ADP machines in HQ H237642 which qualified as NAFTA originating goods, the solar panels imported into the United States after processing in Mexico do not qualify as originating goods under the United States - Mexico- Canada Agreement (USMCA). Further, the NAFTA override provision of the NAFTA Marking Rules, 102.19, is not applicable in marking determinations for purposes of the USMCA.
In HQ H237642, with regard to the ADP machines which could not have their origin determined by application of 19 CFR 102.19, CBP applied the remainder of the 102 hierarchy to determine the correct country of origin for marking purposes. We will do the same here.
Section 102.11(c), CBP Regulations (19 C.F.R. 102.11(c)), is not applicable to this good, because that rule only applies to goods described as a set or mixture. Therefore, we resort to 19 C.F.R. 102.11(d), which states:
Where the country of origin of a good cannot be determined under paragraph (a), (b) or (c) of this section, the country of origin of the good shall be determined as follows:
1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;
(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under paragraph (d)(1) or (d)(2) of this section, the country of origin of the good is the last country in which the good underwent production.
The country of origin of the merchandise remaining to be considered is asserted to be unknown. Therefore, 19 C.F.R. 102.11(d)(1) and (d)(2) are inapplicable. We then resort to 19 C.F.R. 102.11(d)(3).
The definition of production in 19 C.F.R. 102.1(o) provides:
"Production" means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.
The term "minor processing" is defined at 19 C.F.R. 102.1(n), in relevant part, as:
"Minor processing" means the following:
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2) Cleaning, including removal of rust, grease, paint, or other coatings;
3) Application of preservative or decorative coatings, including lubricants, protective encapsulation, preservative or decorative paint, or metallic coatings;
4) Trimming, filing or cutting off small amounts of excess materials;
5) Unloading, reloading or any other operation necessary to maintain the good in good condition;
6) Putting up in measured doses, packing, repacking, packaging, repackaging;
7) Testing, marking, sorting, or grading;
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9) Repairs and alterations, washing, laundering, or sterilizing.
In HQ H237642, CBP determined that ADP machines which were subjected to testing and sorting, i.e., "minor processing," were subjected to production in Mexico because "minor processing" still fell within the definition of "production" because it was still "processing." The ruling found that the ADP machines could thus be marked with "Mexico" as the country of origin by application of 19 C.F.R. 102.11(d)(3).
In this case, the used solar panels are subjected to testing, sorting, in some cases - cleaning, and in other cases - repair. All of these processes fall within the definition of "minor processing" in the pertinent CBP regulations. As in HQ H237642, while "minor", the processing still falls within the definition of "production" and thus, by application of 102.11(d)(3), the used solar panels after processing in Mexico may be marked with "Mexico" as their country of origin.
Origin for Section 301 Purposes
The United States Trade Representative ("USTR") has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR's authority under Section 301(b) of the Trade Act of 1974 ("Section 301 measures"). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. Among the subheadings listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS, is 8541.43.00. U.S. Note 20(c) provides, in relevant part:
The additional duties imposed by heading 9903.88.02 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. Texas Instruments, Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (1982).
The operations performed on the used solar panels in Mexico do not substantially transform the used solar panels and thus, their origin remains unchanged. As you claim to not know the origin of the used solar panels, after processing in Mexico and upon entry into the United States, you may be able to seek an "appraisement entry" which is provided for in 19 CFR 143, Subpart B. As stated in HQ H266203, dated November 17, 2015:
. . . CBP previously held that appraisement entry procedures may also be used when the importer does not have sufficient information regarding country of origin for the purpose of making a formal entry. See Headquarters Ruling ("HQ") 735230, dated Jan. 28, 1994 and HQ 735033, dated Jan. 28, 1994. In such cases, we have found that it may be appropriate to identify the country of origin with a generic description of "foreign." Id. However, as we stated in HQ 732320, "there is no provision for a blanket approval of appraisement entry procedures." 19 C.F.R. 143.11 requires either the port director or headquarters to approve each application for appraisement entry. See 19 C.F.R. Part 143.11(a) and (b). Accordingly, you must apply each time before entering goods under an appraisement entry.
The used solar panels that are inspected, tested and returned to the United States do not qualify for preferential tariff treatment under subheading 9802.00.50, HTSUS.
The used solar panels that are inspected, tested, cleaned and returned to the United States qualify for preferential tariff treatment under subheading 9802.00.50, HTSUS, as do the used solar panels that are inspected, tested, cleaned, repaired as described herein and returned to the United States.
The origin of the used solar panels returned to the United States, after processing in Mexico, may be marked with their country of origin as "Mexico."
For purposes of section 301, the country of origin of the solar panels, after processing in Mexico, remains the country of origin of the used solar panels which is determined by the origin of the solar cells within the solar panels.
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.
Monika R. Brenner, Chief
Valuation and Special Programs Branch
 See 86 Federal Register 35589, Interim Final Rule, Agreement Between the United States of America, the United Mexican States, and Canada (USMCA) Implementing Regulations Related to the Marking Rules, Tariff-Rate Quotas, and Other USMCA Provisions, July 6, 2021 (Effective date, July 1, 2021).