OT:RR:CTF:VS H309491 CMR
Ms. Serena Chung
Delta Electronics (Americas) Ltd.
46101 Fremont Boulevard
Fremont, CA 94538
RE: Applicability of goods for preferential tariff treatment under subheading 9802.00.40, HTSUS; Alterations; PVI Solar Inverters
Dear Ms. Chung:
This is in response to your eight requests submitted to Customs and Border Protection (CBP) between January 3, 2020 and February 19, 2020, on behalf of Delta Electronics Americas Ltd. (“Delta”), requesting prospective rulings on the applicability of subheading 9802.00.40, Harmonized Tariff Schedule of the United States (HTSUS), to certain PVI solar inverters which are exported to the original manufacturer in China for alterations to the wiring boxes.
In your ruling requests, you indicate that Delta imports Delta PVI Solar Inverters from a manufacturer in China. They are imported for sale within the United States. At entry, they were classified under subheading 8504.40.9570, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Static converters: Other: Inverters. You explain that:
The solar inverter is a device where the equipment converts the variable direct current output of a photovoltaic solar panel into a utility frequency alternating current. The power generated by this equipment can be fed into a commercial electrical grid or used by a local, off-grid electrical network.
The Delta PVI solar inverters at issue contain two main bodies, that is, the power module and the wiring box. In each request, you indicate that the PVI solar inverters are being exported from the U.S. to the manufacturer in China for alterations of the wiring box. The power module remains the same for all models before and after the alterations. There are two types of alterations being performed on the wiring boxes by the manufacturer in China. You indicate that alterations involving the type of connection of the wiring box are done “in order to meet the market’s demand.” The other alteration, improvement of the waterproof capability of the wiring box is to provide the wiring box with a “more robust and . . . better waterproof capability.” The improved wiring box features an added drainage groove around the box to prevent water from entering it.
The PVI solar inverters have an original model number when exported, but are assigned new model numbers after the alterations of the wiring boxes. We note that in reviewing your submission, PVI solar inverters with different original model numbers were assigned the same model number after the alterations. One example is three different module numbers with different types of connections, i.e., terminal block, fuses, and MC4 connectors, were altered to terminal block connections and assigned the same new model number.
You submit that the essential identity of the solar inverters is not affected by the alterations. You state:
In terms of functionality and usability, the solar inverters before and after alteration are the same. All functions and electrical specifications remain unchanged during the rework process. The only change on these solar inverters is the new wiring box.
You seek classification of the altered PVI solar inverters under subheading 9802.00.40, HTSUS, which provides for “[a]rticles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: [a]rticles exported for repairs or alterations: [r]epairs or alterations made pursuant to a warranty.”
Whether the previously imported PVI solar inverters which are exported to China for alterations of their wiring boxes are classifiable under subheading 9802.00.40, HTSUS, upon re-importation into the United States.
LAW AND ANALYSIS:
Subheading 9802.00.40, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of a repair or alteration, when such repair or alteration is made pursuant to a warranty. The reasons given for the alterations of the wiring boxes, i.e., “to meet the market’s demand” and improve waterproof capability, do not indicate that any warranty on the merchandise is at issue here. As such, subheading 9802.00.40, HTSUS, is not the appropriate provision for these altered PVI solar inverters upon re-importation into the United States.
Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of a repair or alteration. Duty is assessed only on the cost or value of the repair or alteration abroad, provided that the documentary requirements of 19 CFR §10.8 are met. Classification under subheading 9802.00.50, HTSUS, is precluded where the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 36 Cust. Ct. 46, C.D. 1752, aff’d 44 CCPA 27, C.A.D. 631 (1956), and Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under this provision is also precluded where the exported articles are incomplete for their intended use and the foreign operation constitutes an intermediate processing operation performed as a matter of course in the preparation or manufacture of finished articles. See Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755 (1978), aff’d, 66 CCPA 77, C.A.D. 1225 (1979).
In this case, the exterior changes to the wiring boxes to improve their resistance to water penetration and the changes to the types of connections for the boxes are alterations which qualify the altered PVI solar inverters for classification under subheading 9802.00.50, HTSUS. As noted previously, this provision allows for a partial duty exemption. Duty is assessed upon the value of the repairs or alterations.
Goods classifiable under subheading 9802.00.50, HTSUS, are subject to additional duties pursuant to U.S. Note 20, Subchapter III, Chapter 99. Specifically, with regard to the solar inverters at issue, heading 9903.88.03, which became effective on September 24, 2018, is applicable. This heading provides an additional 25% duty assessment for certain products of China. The provision description states:
Except as provided in headings 9903.88.13, 9903.88.18, 9903.88.33, 9903.88.34, 9903.88.35, 9903.88.36, 9903.88.37, 9903.88.38 or 9903.88.40, articles the product of China, as provided for in U.S. note 20(e) to this subchapter and as provided for in the subheadings enumerated in U.S. note 20(f)
Subheading 8504.40.95 is listed in U.S. Note 20(f), and subject to U.S. Note 20(e). U.S. Note 20(e) provides, in pertinent part, that:
The additional duties imposed by heading 9903.88.03 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.
You indicate the PVI solar inverters are classified in subheading 8504.40.95, HTSUS, when originally entered. When returned after alterations under subheading 9802.00.50, HTSUS, duty will be assessed upon the value of the alterations using the duty rate applicable to goods classified in subheading 8504.40.95, HTSUS. An additional 25% duty will be assessed in accordance with Note 20(e), Note 20(f), and heading 9903.88.03, HTSUS.
The PVI solar inverters which are modified as described herein qualify for classification under subheading 9802.00.50, HTSUS, upon their re-importation into the United States, provided the documentary requirements of 19 CFR § 10.8 are met. Duty will be assessed upon the value of the alterations in China using the duty rate applicable to goods classified in subheading 8504.40.95, HTSUS. The PVI solar inverters are also subject to 25% additional duties, pursuant to U.S. Notes 20(e) and 20(f), Subchapter III, Chapter 99, HTSUS. At the time of importation, you must report heading 9903.88.03, HTSUS, in addition to 9802.00.50, HTSUS, on your entry documents.
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 the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Monika R. Brenner, Chief
Valuation and Special Programs Branch