U.S. importers of solar panels are up in arms about a tariff classification ruling issued by CBP on 9 January 2009 that effectively increased the applicable duty rate on certain solar panels imported from mainland China. The ruling was not noticed until recently by solar panel importers or the trade community at large, in part due to the large number of rulings that are issued on a regular basis by CBP. New York Ruling Letter N047472 considered the tariff classification of the Trinasolar TSM-175D solar module, which consists of 72 photovoltaic cells connected electrically and mounted in a photovoltaic module. The module incorporates by-pass diodes that allow current to pass around “shaded cells” to reduce voltage loss. The diode also holds the entire shaded module or group of cells to a small negative voltage of approximately -0.7 volts, thus limiting the reduction in array output.

The U.S. importer argued that these solar panels should be classified under HTSUS 8541.40.6020  (duty-free), which provides for solar cells assembled into modules or made up into panels. However, CBP determined that this subheading does not cover panels or modules equipped with elements such as by-pass diodes to control the direction of the current. Accordingly, CBP decided to classify the subject merchandise as generators of an output not exceeding 750 watts under HTSUS 8501.31.8000 (2.5 percent duty).

This ruling is particularly troubling because it could deny duty-free treatment to a broad range of imported solar panels from mainland China and elsewhere and instead assess a 2.5 percent duty on those panels. According to press reports, the ruling is likely to have a broad-ranging impact because most if not all imported solar panels include by-pass diodes for safety and energy efficiency reasons. The effect on mainland Chinese solar panel/module exporters could be significant, given that mainland China is the largest U.S. supplier of solar cells assembled into modules or panels (HTSUS 8541.40.6020) with total shipments of US$185.8 million during January-August 2009 and a 26.9 percent share of the import market.

The Solar Energy Industries Association will reportedly appeal the decision issued by CBP’s New York branch to CBP headquarters in Washington, D.C. CBP headquarters routinely considers these types of challenges and often reverses the initial classification issued by the New York branch. If CBP headquarters confirms the tariff classification, that decision could be challenged before the U.S. Court of International Trade.