2010-25024. Notice of Issuance of Final Determination Concerning Solar Photovoltaic Panel Systems

AGENCY:

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

ACTION:

Notice of final determination.

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 photovoltaic systems which may be offered to the United States Government under a government procurement contract. Based upon the facts presented, in the final determination CBP concluded that the U.S. is the country of origin of the solar photovoltaic systems for purposes of U.S. Government procurement.

DATES:

The final determination was issued on September 29, 2010. 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 on or before November 4, 2010.

FOR FURTHER INFORMATION CONTACT:

Karen S. Greene, Valuation and Special Programs Branch, Regulations and Rulings, Office of International Trade (202-325-0041).

SUPPLEMENTARY INFORMATION:

Notice is hereby given that on September 29, 2010, pursuant to subpart B of part 177, Customs Regulations (19 CFR part 177, subpart B), CBP issued a final determination concerning the country of origin of certain solar photovoltaic systems which may be offered to the United States Government under a government procurement contract. This final determination, in HQ H095409 was issued at the request of Solyndra, Inc. 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, based upon the facts presented, certain articles will be substantially transformed in the U.S. Therefore, CBP found that the U.S. is the country of origin of the finished articles for purposes of U.S. Government procurement.

Section 177.29, Customs Regulations (19 CFR 177.29), provides that notice of final determinations 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.

Dated: September 29, 2010.

Sandra L. Bell,

Executive Director, Office of Regulations and Rulings, Office of International Trade.

HQ H095409

September 29, 2010

OT:RR:CTF:VS H095409 KSG

Joshua Holzer, Wilson Sonsini Goodrich & Rosati, 1700 K Street NW, Fifth Floor, Washington, D.C. 20006-3817

Re: U.S. Government Procurement; Title III, Trade Agreements Act of 1979; Country of Origin of solar photovoltaic panel system; substantial transformation

Dear Mr. Holzer:

This is in response to your letter, dated February 17, 2010, requesting a final determination on behalf of Solyndra, Inc., pursuant to subpart B of 19 CFR Part 177. Your submission of August 4, 2010, was considered as part of the file.

Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 2511 et seq.) (“TAA”), 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 practice for products offered for sale to the U.S. Government.

This final determination concerns the country of origin of certain photovoltaic panel systems that Solyndra may sell to the U.S. Government. We note that Solyndra is a party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is entitled to request this final determination.

Facts:

The photovoltaic panels convert sunlight on low-slope commercial rooftops into electricity. The solar photovoltaic (“PV”) panel systems contain both U.S. and foreign-origin raw materials and components. The following components are of U.S. origin: Ammonium hydroxide, an optical coupling agent, the middle tube, the outer tube, a frit, a gas bag, grease, a frame adhesive, wire harnesses, and the label nameplate.

The following raw materials are from foreign sources (Austria, Japan, the Netherlands, the United Kingdom, Belgium, and Switzerland): Molybdenum, copper, indium, gallium, selenium, cadmium sulfide, hydrochloric acid, and transparent conductive oxide. The manufactured components, which are produced in Germany, Switzerland, Singapore, Malaysia, Belgium, and China, are: An inner glass tube, an outer cap, an assembled pin, an inner contact, harness adhesive, beam, frames, universal, welded aluminum mounts, panel mount screw, lateral clip, grounding strap assembly, and a grounding strap screw.

Solyndra has a manufacturing facility in California where both a front end process and a back end process are performed, which takes approximately six and one half days to complete. Solyndra also conducts all its research and development for its product in the U.S. The front end process converts bare glass tubes into functional PV cells. The back end process encapsulates these tubes in a glass outer tube, isolating the active material from the environment by a true hermetic seal. The last step in the back end process is to assemble these finished modules onto a panel frame, resulting in a solar panel ready for rooftop installation.

The front end process includes five steps which turn a raw glass tube into a component for a PV system. The five steps are as follows:

(1) Bare glass tubes are cleaned using standard ultra-sonic bath and surfactant technology.

(2) Quality assurance testing is conducted using precisely calibrated machinery.

(3) Using Solyndra's proprietary in-line vacuum systems and physical vapor deposition and evaporation techniques, several layers of different thin films of molybdenum, copper, indium, gallium, and selenium, are deposited on the glass tube.

(4) The glass tubes are immersed into a precise chemical mixture, at a controlled temperature and Cadmium Sulfide is deposited onto the glass at a controlled thickness.

(5) Using either lasers or mechanical scribes to define solar cells and interconnect them, the deposited films are precisely patterned to increase the solar collection efficiency of the glass tubes.

The back end process, which includes eight steps described below, subjects the treated glass tubes to additional processes to create finished modules that protect the solar cells from degradation over their 25-year service life in a rooftop installation. The Modules are then assembled into panels and combined with mounts, cable management components, and mounting hardware, resulting in a finished PV system. The eight steps are as folllows:

(1) The processed glass tubes are encapsulated in a plastic middle tube and a glass outer tube, creating a Module.

(2) Metal connectors are placed at each end of the Module to enable the Module to float in the completed PV System.

(3) Through a complex process that involves melting glass and metal together, the ends of each Module are covered with a stainless steel cap, creating a hermetic seal.

(4) After removing water and air from the Module, an optical coupling agent is used to fill the space between the inner and outer glass tubes and a plug is placed at the end of the Module to complete the sealing process.

(5) The plug is laser welded in place, and the weld is inspected for defects.

(6) Using a mass spectrometer based Helium leak detection system, each Module is checked for leaks.

(7) The approved Modules are then subjected to artificial sunlight and tested to determine the level of electricity being produced.

(8) Based on their performance, tubes are grouped in sets of 40 to make each solar panel.

Forty (40) finished Modules are pressed into each panel frame. Solyndra's customized mounts and mounting hardware are added to each panel to create a complete PV system, ready for rooftop installation.

Issue:

What is the country of origin of the solar PV panel system described above for the purposes of U.S. government procurement.

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 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 practice for products offered for sale to the U.S. Government.

The rule of origin set forth in 19 U.S.C. § 2518(4)(B) states:

An 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. See also 19 CFR § 177.22(a) defining “country of origin” in identical terms.

In rendering advisory rulings and 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. In this regard, CBP recognizes that the Federal Procurement Regulations restrict the U.S. Government's purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 CFR § 25.403(c)(1). The Federal Procurement Regulations define “U.S.-made end product” as: * * * an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States 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 transformed. 48 CFR § 25.003. Therefore, the question presented in this final determination is whether, as a result of the operations performed in the United States, the foreign materials and components are substantially transformed into a product of the United States.

In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 Ct. Int'l Trade 204, 573 F. Supp. 1149 (1983), aff'd, 741 F.2d 1368 (Fed. Cir. 1984). If the manufacturing or combining process is a minor one that leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 Ct. Int'l Trade 220, 542 F. Supp. 1026 (1982). Assembly operations that are minimal or simple, as opposed to complex or meaningful, generally will not result in a substantial transformation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97.

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 such 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. Additionally, 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 will be considered when analyzing whether a substantial transformation has occurred; however, no one factor is determinative.

In this case, the solar PV systems are produced in a production facility located in the U.S. All the research and development for the solar PV panel system is performed in the U.S. A significant number of the components used to make these products are of U.S.-origin. Further, this case clearly involves complex and meaningful assembly operations performed in the U.S. Several layers of thin film deposits are placed on the bare glass tubes which are then transformed into a module for a solar PV panel system with a new name, different and specialized characteristics and use. Therefore, we find that the imported components are substantially transformed in the U.S. and that the country of origin of the solar PV panel systems is the U.S. for purposes of U.S. Government procurement.

We suggest that you contact the Federal Trade Commission to determine whether the solar panel systems may be marked “Made in the U.S.A.”, which is within their jurisdiction.

Holding:

Based on the facts of this case, the country of origin of the solar PV panel systems is the U.S. for purposes of U.S. Government procurement.

Notice of this final determination will be given in the Federal Register, as required by 19 CFR § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 CFR § 177.31 that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 CFR § 177.30, any party-at-interest may, within 30 days after publication of the Federal Register Notice referenced above, seek judicial review of this final determination before the Court of International Trade.

Sincerely,

Sandra L. Bell,

Executive Director, Office of Regulations and Rulings, Office of International Trade.