OT:RR:CTF:VS H345671 RMC
Center Director
Electronics Center of Excellence and Expertise
U.S. Customs and Border Protection
301 E. Ocean Blvd.
Long Beach, CA 90802
RE: Internal Advice Request; Country of Origin of XLamp LEDs; Section 301; Marking
Dear Center Director:
This is in response to the request for internal advice (“IA”) initiated by Penguin Solutions,
Inc. (“Penguin”) on November 18, 2024. The IA concerns the country of origin, for purposes of
Section 301(b) of the Trade Act of 1974 (“Section 301 measures”) and country-of-origin marking, of
various light-emitting diodes (“LEDs”) marketed under the “XLamp” product line.
FACTS:
Penguin is a technology company engaged in intelligent platform solutions, integrated
memory, and LED businesses.1 The importer, CreeLED, Inc. (“CreeLED”) is a wholly-owned
subsidiary of Penguin that offers LED solutions to customers across various market segments.
At issue in this internal advice request are various configurations of the XLamp LED
product imported by Penguin’s wholly-owned subsidiary, CreeLED. CreeLED is currently
importing these products through various ports of entry under subheading 8541.41.00, Harmonized
Tariff Schedule of the United States (“HTSUS”), and has requested IA to determine the correct
country of origin of the products for purposes of both the Section 301 measures and country-of-
origin marking.
1 According to the information provided, before October 15, 2024, Penguin was known as SMART Global Holdings
Inc.; however, no changes in the overall corporate structure have occurred since that time.
Penguin’s annual 10-K report, filed in 2024, provides an overview of the CreeLED XLamp
product line:
Our CreeLED XLamp, J Series and high-brightness product lines feature
packaged LED components. The XLamp and J series LED components meet
a broad range of market needs for lighting applications, including general
illumination (both indoor and outdoor applications), portable, architectural,
signal and transportation lighting. Our high-brightness LED components
consist of surface mount device (“SMD”) and through-hole packaged LED
products. Our SMD LED component products are available in a full range of
colors and are suitable for a variety of applications, including video, signage,
general illumination, transportation, gaming and specialty lighting. Our
through-hole packaged LED component products are available in a full range
of colors and are primarily designed for the signage market.
Penguin states that, broadly speaking, the production of the XLamp LEDs involves a “front-
end process” in Taiwan followed by two “back-end processes” in Taiwan and China.
Front-End Process in Taiwan
Penguin states that “creating LEDs (including the XLamp LEDs), follows a standard, seven-
step semiconductor fabrication process referred to as a ‘front-end process.’” LEDs are produced by
using combinations of these seven processes to build stacked layers, with a typical LED having
between ten and 20 individual layers. Different products are built using variations of this basic
fabrication process to optimize a variety of output parameters. A “wafer” contains hundreds or
thousands of individual LED chips.
The seven-step process is carried out in Taiwan using materials of various origins and
includes:
1. Stripping –polymerized photoresist or another developed thin film material is removed;
2. Deposition – a thin film of a conducting, isolating, or semiconducting material is deposited
on the wafer to enable the desired layer structure of an LED;
3. Photoresist Coating – the wafer is covered with a light-sensitive coating called photoresist
(there are both “positive” and “negative” types of photoresist);
4. Exposure – light is projected onto the wafer through a mask which holds the design of the
pattern to be printed.
5. Developing – special chemicals are used to remove the soluble photoresist. The result of
this process is a physically built pattern of polymerized photoresist;
6. Etching – select material is removed from the wafer surface, creating complex patterns and
structures that define the optical and electrical performance of the LED; and
7. Chemical/Physical Cleaning – the wafer is chemically or physically scrubbed to remove
contaminants that can affect the performance, reliability, and yield of the LED.
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Phase 1 Back-End Process in Taiwan
Once the front-end process is complete, the first phase of the back-end process is carried
out in Taiwan. In this phase, the wafer is singulated into individual LED chips, also known as LED
die. The result of this process are sheets of tested, binned, and sorted LED chips. The processing
conducted during this phase includes:
1. Wafer Dicing –the wafer is separated by mechanical sawing, laser cutting, or
scoring/mechanical separation into individual LED chips, or LED die, that can be used in
electronic devices;
2. Optoelectrical Testing –the functionality, performance, and reliability of the LEDs is
assessed both electrically and optically;
3. Optical Inspection –scratches, contamination, and other defects are identified using optical
inspection systems; and
4. Chip Sorting – LED chips are sorted into groups based on their optical and electrical
characteristics which were measured during optoelectrical testing (e.g., luminous flux, light
color, forward voltage, color rendering index, etc.).
Phase 2 Back-End Process in China
Once the front-end processing and the phase 1 back-end processing have been completed in
Taiwan, the LEDs are sent to China to be “packaged,” or attached to a substrate, wirebonded,
covered in phosphor material, and encapsulated. This processing, referred to as “phase 2 back-end
processing,” results in the final LED products and involves the following steps:
1. ESD Die Attach – a special electrostatic discharge chip is attached to protect the final
component while it is being handled by the customer;
2. LED Placement – flux is used to attach the LED chip to the panel;
3. Reflow and Attach – the backside contact metal on the LED chip is heated to attach it to
the panel;
4. Cleaning – a chemical wash is used to remove the flux reside and other contaminants;
5. UV Light Inspection – a visual inspection is carried out under UV light to ensure that no
damage or debris is present;
6. Wire Bonding – a wire is attached to connect the top of the LED die to the panel;
7. Automated Visual Inspection – a visual inspection is conducted to ensure that no damage
or debris is present;
8. First Plasma Clean – an argon plasma clean is applied to the surface to enhance adhesion;
9. Phosphor Deposition – a proprietary phosphor is applied that converts blue light to white
light;
10. Second Plasma Clean – a second plasma clean is applied;
11. Molding – silicone is applied to create the dome, also known as the lens, on top of the chip;
12. Curing – curing is conducted for the silicone dome;
13. Panel Dicing – the panel is diced using a mechanical saw; and
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14. Taping and reeling – the LED packages are placed into a pocketed tape and reel for
transport to an end customer.
ISSUE:
What is the country of origin of the LEDs for purposes of Section 301 measures and
country-of-origin marking?
LAW AND ANALYSIS:
The United States Trade Representative has determined that Section 301 measures
consisting of an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports.
These measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter
III, U.S. Note 20(b), HTSUS, which lists goods of subheading 8541.41.00, HTSUS.
When determining the country of origin for purposes of applying the trade measures
described above, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling
(“HQ”) H316281, dated March 18, 2021. The substantial transformation analysis also applies to the
second issue in this case—namely, country of origin marking. Section 304 of the Tariff Act of 1930,
as amended (19 U.S.C. § 1304) provides that unless excepted, every article of foreign origin imported
into the United States 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 United States, the English name of the country of origin of the article.
Section 134.1(b), U.S. Customs and Border Protection Regulations (“CBP”) (19 C.F.R. § 134.1(b)),
defines “country of origin” 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 [the marking laws and regulations].”
A substantial transformation occurs when, as a result of manufacturing process, a new and
different article emerges, having a distinct name, character or use, which is different from that
originally possessed by the article or material before being subjected to the manufacturing process.
See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc.
v. United States, 69 C.C.P.A. 142, 681 F.2d 778 (1982). This determination is based on the totality of
the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed.
Cir. 1993).
If the manufacturing process is a minor one which leaves the identity of the article intact, a
substantial transformation has not occurred. In Uniroyal, Inc. v. United States, 3 CIT 220 (1982), aff’d,
702 F.2d 1022 (Fed. Cir. 1983), the U.S. Court of International Trade (“CIT”) concluded that a
finished shoe upper was not substantially transformed when it was combined with the shoe’s outer
sole. The process of attaching the shoe upper was a minor manufacturing or combining process
which left the identity of the upper intact and was “conceptually no different than (for example)
attaching buttons to a man’s dress shirt or attaching handles to a finished piece of luggage.” Id. at
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224. The CIT further stated that “the upper – which in its condition as imported is already a
substantially complete shoe – is readily recognizable as a distinct item apart from the outsole to
which it is attached.” Id. The CIT concluded that the uppers did not lose their identity and were the
“very essence of the finished shoe.” Id. at 225.
The CIT interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v.
United States, 190 F. Supp. 3d 1308 (2016). Energizer involved the determination of the country of
origin of a flashlight. All its components were of Chinese origin, except for a white light-emitting
diode and a hydrogen getter. The components were imported into the United States and assembled
into the finished flashlight. The court reviewed the “name, character and use” test utilized in
determining whether a substantial transformation had occurred and noted, citing Uniroyal, 3 CIT at
226, that when “the post-importation processing consists of assembly, courts have been reluctant to
find a change in character, particularly when the imported articles do not undergo a physical
change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined
at the time of importation, courts have generally not found a change in use.” Energizer at 1319,
citing Nat’l Hand Tool Corp., 16 CIT at 311-312.
Here, Penguin argues that the Taiwanese front-end processing imparts the essence to the
final product, as it creates LED chips with a pre-determined end use. In support of this argument,
Penguin points to several CBP rulings that examine wafer manufacturing processes involving front-
and back-end production. It argues that these rulings establish that the type of back-end production
involved in this case does not result in a change in name, character, or use.
In the context of integrated circuits, it has long been CBP’s position that the processes that
renders an integrated circuit to be functional results in a substantial transformation. For example, in
in HQ H338127, dated September 17, 2024, CBP considered the country of origin of a silicon
carbide Schottky diode used in various applications including solar panels, motor drives,
uninterruptable power supplies, and electric vehicles. The “front-end” processing occurred in the
United States and included steps such as single crystal growth; fabrication; chemical-mechanical
polishing; epitaxial growth; further wafer processing such as photolithography, photoresist, and
etching and ion implantation; and chip probing. We noted that these steps “create the silicon
carbide semiconductor die/chip.” In contrast, the back-end operations that took place in China,
such as wafer sawing, cleaning, and trimming, only amounted to “minor processing of a product
whose use and identity will already be established by the extensive front-end operations.”
Accordingly, we held that no substantial transformation occurred in China, and the country of origin
of the product was the United States.
Similarly, in HQ H309802, dated May 27, 2020, CBP considered the country of origin of
semiconductor transistors manufactured using silicon carbide substrates. There, the production
process consisted of three stages, i.e., substrate construction in the United States, front-end
operations in Italy, and back-end operations in China. CBP noted that after the front-end
operations in Italy were complete, the merchandise was usable as transistors, whereas the back-end
processing in China did not change the character or function of the transistors. After analyzing each
of the processing stages, CBP concluded that the complex fabrication and associated front-end
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operations in Italy resulted in a substantial transformation of the transistors because it was at that
point that the integrated circuits were functional.
Here, as in the cases cited above, the front-end processing results in a new product (namely,
LEDs) with a different name, character, and use from its constituent materials. Moreover, the front-
end processing results in a functional product, with a pre-determined end use, that imparts the
essence to the finished product. The subsequent processing in China consists of minor finishing
operations—such as attaching components, cleaning, inspecting, and dicing—on a product whose
identity and use have already been established in Taiwan. As a result, the operations carried out in
China do not result in a substantial transformation, and the country of origin of the goods for
purposes of the Section 301 measures and country-of-origin marking is Taiwan, where the front-end
processing and phase 1 back-end processing occur.
HOLDING:
The country of origin of the LEDs for purposes of Section 301 measures and country-of-
origin marking is Taiwan.
You are to mail this decision to the internal advice requester no later than 60 days from the
date of the decision. At that time, the Office of Trade, Regulations and Rulings will make the
decision available to CBP personnel, and to the public on the Customs Rulings Online Search
System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border
Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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