[Federal Register Volume 80, Number 183 (Tuesday, September 22, 2015)]
[Notices]
[Pages 57198-57200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24082]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Solar 
Modules

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

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SUMMARY: This document provides notice that U.S. Customs and Border 
Protection (``CBP'') has issued a final determination concerning the 
country of origin of certain solar modules manufactured by Hanwha USA. 
Based upon the facts presented, CBP has concluded that the country of 
origin of the solar modules is Malaysia when Malaysian solar cells are 
used or Korea when Korean solar cells are used for purposes of U.S. 
Government procurement.

DATES: The final determination was issued on September 16, 2015. A copy 
of the final determination is attached. Any party-at-interest, as 
defined in 19 CFR 177.22(d), may seek judicial review of this final 
determination within October 22, 2015.

FOR FURTHER INFORMATION CONTACT: Ross Cunningham, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of International Trade 
(202) 325-0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on September 16, 
2015 pursuant to subpart B of part 177, U.S. Customs and Border 
Protection Regulations (19 CFR part 177, subpart B), CBP issued a final 
determination concerning the country of origin of certain solar modules 
manufactured by Hanwha USA, which may be offered to the U.S. Government 
under an undesignated government procurement contract. This final 
determination, HQ H261693, was issued under procedures set forth at 19 
CFR part 177, subpart B, which implements Title III of the Trade 
Agreements Act of 1979, as amended (19 U.S.C. 2511-18). In the final 
determination, CBP concluded that the processing in Poland or Korea 
does not result in a substantial transformation. Therefore, the country 
of origin of the solar modules is Malaysia or Korea, where the solar 
cells are produced, for purposes of U.S. Government procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.


[[Page 57199]]


    Dated: September 16, 2015.
Harold Singer,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade.

Attachment

HQ H261693

September 16, 2015

OT:RR:CTF:VS H261693 RMC

CATEGORY: Country of Origin

Chip Purcell
Cooley LLP
1299 Pennsylvania Ave. NW
Suite 700
Washington, DC 20004-2400

Re: U.S. Government Procurement; Country of Origin of Solar Modules; 
Substantial Transformation

Dear Mr. Purcell:

    This is in response to your letter dated January 12, 2015, 
requesting a final determination on behalf of Hanwha USA pursuant to 
Subpart B of part 177 of the U.S. Customs and Border Protection 
(``CBP'') Regulations (19 CFR part 177). Under these regulations, 
which implement Title III of the Trade Agreements Act of 1979 
(``TAA''), as amended (19 U.S.C. 2511 et seq.), CBP issues country 
of origin advisory rulings and final determinations as to whether an 
article is or would be a product of a designated country or 
instrumentality for the purposes of granting waivers of certain 
``Buy American'' restrictions in U.S. law or for products offered 
for sale to the U.S. Government. This final determination concerns 
the country of origin of certain solar modules. As a U.S. importer, 
Hanwha USA is a party-at-interest within the meaning of 19 CFR 
177.22(d)(1) and is entitled to request this final determination.

FACTS:

    Hanwha USA acts as the U.S. wholesaler and distributor of solar 
modules manufactured by Hanwha GmbH in Korea and Poland. The solar 
modules convert sunlight into energy and are generally incorporated 
into a system that includes other components such as inverters, 
racking systems, cable management systems, and monitoring systems. 
The systems are installed at facilities in order to generate 
electricity.
    Hanwha USA provided the following information on each component 
that goes into a finished product.

1. Solar Cells--Product of Malaysia or Korea
2. Glass--Product of China
3. Frames--Product of China or Belgium
4. Junction Box, Cable, and Connector--Product of China or Czech 
Republic
5. Back Sheets--Product of China or Germany
6. EVA--Product of Korea or Japan
7. Interconnect Ribbon--Product of Korea for solar panels assembled 
in Korea; product of Austria or Germany for solar panels assembled 
in Poland.

    The solar cells represent slightly more than half of the cost of 
the finished solar modules. Hanwha states that the components are 
assembled into finished products either in Korea or Poland in the 
following nine-step process:

1. Incoming Inspection: Each component undergoes an incoming quality 
inspection and testing based on standard operating procedures.
2. Cell and String Soldering: Individual solar cells are soldered 
together using tin-coated copper ribbons to form cell strings.
3. Matrix Preparation and Bus Bar Soldering: A robot places the cell 
strings on glass panels and workers complete the matrix layup.
4. Lamination: After inspection and electroluminescence testing, the 
matrix layups are transferred into vacuum laminators.
5. Trimming and Framing: Excess material is removed from the edge of 
the laminate and the aluminum frame is press-fit together.
6. Junction Box Installation: The junction box is attached to the 
back of the solar module using silicone glue.
7. Electrical Test: Each solar module undergoes a high-potential 
test at 6,000 volts, and electroluminescence test to inspect for 
micro-cracks and other defects, a flash test to measure performance, 
and a grounding test.
8. Final Inspection, Sorting, and Packaging: The junction box lids 
are applied and the solar modules are allowed to cure, followed by a 
final visual inspection of all solar modules.
9. Outgoing Quality Inspection: A sample of solar modules is removed 
after packaging for a final quality check.

    Hanwha USA notes that this process takes ``less than one day'' 
to complete. Hanwha USA also states that it conducts research and 
development in Korea and Poland related to the manufacturing process 
and the development of methods and systems to ensure stable 
production.

ISSUE:

    Whether the manufacturing process described above 
``substantially transforms'' the solar-module components such that 
the country of origin of the finished product is either Korea or 
Poland for U.S. Government procurement purposes.

LAW AND ANALYSIS:

    Pursuant to Subpart B of Part 177, 19 CFR 177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. 2511 et seq.), CBP issues country-of-origin advisory 
rulings and final determinations as to whether an article is a 
product of a designated country for the purpose of granting waivers 
of certain ``Buy American'' restrictions on U.S. Government 
procurement.
    In rendering final determinations for purposes of U.S. 
Government procurement, CBP applies the provisions of Subpart B of 
Part 177 consistent with the Federal Procurement Regulations. See 19 
CFR 177.21. The rule of origin applicable in this context states 
that ``[a]n article is a product of a country or instrumentality 
only if (i) it is wholly the growth, product, or manufacture of that 
country or instrumentality, or (ii) in the case of an article which 
consists in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.'' 19 U.S.C. 2518(4)(B); 19 CFR 177.22(a). Here, Hanwha 
cannot satisfy paragraph (i) of CFR 177.22(a), so the issue is 
whether the solar-module components are ``substantially 
transformed'' in Hanwha's manufacturing processes in the Republic of 
Korea or Poland, as the case may be.
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled to form 
completed articles, CBP considers the totality of the circumstances 
and makes its decisions on a case-by-case basis. The country of 
origin of the article's components, the extent of the processing 
that occurs within a given country, and whether such processing 
renders a product with a new name, character, and use are primary 
considerations in such cases. CBP also considers resources expended 
on product design and development, the extent and nature of post-
assembly inspection procedures, and the worker skill required during 
the actual manufacturing process; however, no one factor is 
determinative.
    A substantial transformation will not result from a minor 
manufacturing or combining process that leaves the identity of the 
article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 
267 (1940); and National Hand Tool Corp. v. United States, 989 F.2d 
1201 (Fed. Cir. 1992). The Court of International Trade has applied 
the ``essence test'' to determine whether the identity of an article 
is changed through assembly or processing. For example in Uniroyal, 
Inc. v. United States, 3 CIT 220, 225, 542 F. Supp. 1026, 1030 
(1982), aff'd 702 F.2d 1022 (Fed. Cir. 1983), the court held that 
imported shoe uppers added to an outer sole in the United States 
were the ``very essence of the finished shoe'' and thus were not 
substantially transformed into a product of the United States. 
Similarly, in National Juice Prods. Ass'n v. United States, 10 CIT 
48, 61, 628 F. Supp. 978, 991 (1986), the court held that imported 
orange juice concentrate ``imparts the essential character'' to the 
completed orange juice and thus was not substantially transformed 
into a product of the United States.
    In HQ H095409, dated Sept. 29, 2010, a U.S. manufacturer 
produced finished panels in California. Forty three percent of the 
cost content of the parts originated from the United States and all 
research and development took place in California. Key to our 
finding that a substantial transformation had taken place was the 
manufacturing process of the solar cells themselves. This process--
which involved depositing thin films of chemicals on the inside of 
glass tubes--took five of the six and a half days it took to 
manufacture the finished solar panels. We found that turning bare 
glass tubes into functional solar cells in the United States 
constituted making a product with a new name, character, and use 
such that a substantial transformation had occurred.

[[Page 57200]]

    Here, Hanwha's assembly processes fall short of those described 
in H095409. For one, Hanwha's assembly processes take less than a 
day, whereas those in H095409 took more than six. Moreover, although 
Hanwha conducts research and development in Korea and Poland, it is 
focused on the manufacturing process, not on product design and 
development.
    In the scenario where Malaysian solar cells are used, almost 
none of the parts in the finished panels come from either Korea or 
Poland, the two countries where the panels are assembled. Unlike 
H095409, which involved a 43% cost content of the country of 
assembly, here, where Malaysian solar cells are used, the cost 
content is at most 8.6% Korean for the panels assembled in Korea and 
0% Polish for the panels assembled in Poland. Most importantly, 
however, the solar cells themselves are produced in Malaysia. As 
noted above, the complex manufacturing process of the solar cells 
themselves was key to our finding that a substantial transformation 
had occurred in H095409. Turning glass tubes into functioning solar 
cells resulted in a product with a new name, character, and use. 
Here, assembling solar cells into finished solar panels does not. 
Rather, we find that the solar cells impart the essential character 
of the solar panels. Therefore, where Malaysian solar cells are 
used, the country of origin for government-procurement purposes is 
Malaysia.
    Similarly, in the scenario where Korean solar cells are used, 
the country of origin for government-procurement purposes is Korea.

HOLDING:

    Based on the facts of this case, the solar panels' country of 
origin for U.S. Government procurement is Malaysia when Malaysian 
solar cells are used and Korea when Korean solar cells are used.

Sincerely,

Harold Singer,
Acting Executive Director, Regulations & Rulings Office of 
International Trade.
[FR Doc. 2015-24082 Filed 9-21-15; 8:45 am]
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