Department of Commerce Widens Scope of Chinese Solar Import Duties

Finding in favor of an international trade petition brought by leading U.S. solar manufacturer Solar World Americas, the U.S. Department of Commerce made a preliminary decision to close a loophole that Chinese manufacturers have been exploiting. Through the loophole, these companies manufactured crystalline silicon (c-Si) solar photovoltaic (PV) cells in Taiwan and other third-party countries, shipped them to China for assembly into modules and panels, then exported them to the U.S.

Widening the scope of unfair trade and anti-dumping duties and tariffs imposed on Chinese c-Si PV products, the Commerce Department issued preliminary countervailing duties (CVDs) ranging from 18.56 percent to 35.21 percent. These CVDs apply to c-Si PV cells and modules, as well as laminates, panels and other products, consisting of c-Si PV cells produced and/or partially or wholly assembled into other products by Chinese manufacturers in China or other countries.

Commerce's preliminary decision in favor of SolarWorld America's petition reignites controversy over an issue that has divided the solar PV industry in the U.S. and globally.

SolarWorld and supporters applauded the department's preliminary decision, saying it will protect manufacturing jobs and level the playing field for U.S. solar manufacturers. Critics, led by the Coalition for Affordable Solar Energy, say that it will lead to higher solar energy costs, weigh on downstream solar energy industry participants and constrain growth in a fast-growing U.S. residential solar PV market.

Solar trade war: A new chapter

Subsidized by the government to help drive China's export-driven economy, Chinese c-Si PV manufacturers quickly rose to dominate global production and trade. U.S. imports of the c-Si PV products covered in the Commerce Dept.'s June 3 preliminary determination were valued at an estimated $1.5 billion in 2013.

The largest manufacturer of c-Si PV cells in the U.S. for many years running, SolarWorld Americas, a subsidiary of Germany's SolarWorld AG, has been the driving force in legal efforts to offset what U.S. international trade authorities have agreed are illegal Chinese government subsidies granted to Chinese c-Si PV manufacturers and unfair trade practices on their part, namely “dumping” of product in U.S. markets.

Supported by the Coalition for American Solar Manufacturing (CASM), an association of some 250 U.S. PV manufacturers and downstream solar energy providers, SolarWorld filed an initial petition with the Commerce Department in October 2011.

Late in 2012, U.S. international trade authorities imposed duties averaging 31 percent on imports of certain c-Si PV products from China. Seeking to avoid the import duties, Chinese manufacturers began commissioning production of c-Si PV cells in other countries – Taiwan in particular – then shipping them to China for assembly into modules and panels for export to the U.S.

According to SolarWorld, “State-controlled Chinese media said at least 70 percent of U.S. imports from China contain Taiwanese cells.”

Closing a loophole

Seeking to close this loophole by widening the scope of the initial import duties, SolarWorld on Dec. 31, 2012 filed a second petition with the Commerce Department.

In its June 3 preliminary determination, Commerce agreed with SolarWorld's assertions and set out preliminary countervailing duties of 18.56 percent on Trina Solar and 35.21 percent on Suntech Power and five affiliates. A CVD of 26.89 percent applies to imports of all other specified c-Si PV products from Chinese manufacturers.

Applauding Commerce's preliminary determination, SolarWorld Americas' President Mukesh Dulani stated:

“Today is a strong win for the U.S. solar industry. We look forward to the end of illegal Chinese government intervention in the U.S. solar market, and we applaud Commerce for its work that supports fair trade.”

Speaking for its members, CASE, on the other hand, isn't encouraged by Commerce's ruling. In addition to questioning the legal merits of Commerce's preliminary determination, CASE contends that negotiations between the U.S. and Chinese governments, similar to those that took place recently between the EU and China regarding a similar international trade dispute over c-Si PV imports, are a better route to resolving the dispute than the imposition of duties.

As CASE argues in a statement:

“Today’s announcement is just the first determination in a legal process which is set to drag on throughout this fall, taking its toll on the industry with every step.

"At a time when the U.S. solar industry is primed to continue its record-breaking growth and began 2014 recording the second largest quarter for solar installations in history, U.S. solar businesses now find themselves collateral damage to litigation which is increasing module costs and freezing future investment through pricing uncertainty."

The U.S. Solar Energy Industries Association (SEIA) has joined CASE in calling on the Obama administration to reach out to its Chinese counterpart and find a resolution. According to CASE:

“This is a global dispute that will not be resolved through litigation alone. The best path forward continues to be a negotiated settlement between the U.S. and Chinese governments to end this dispute and create the conditions for growth.

“But to achieve this, SolarWorld must come to the table and work with the industry to find a settlement that benefits the entire global supply chain. We ask the White House to help by convening the parties for true negotiations, and we urge SolarWorld to make its conditions known and join the rest of the U.S. industry in support of the Solar Energy Industries Association (SEIA) proposal.”

Looking ahead, Commerce is scheduled to issue additional anti-dumping duties in this latest investigation around July 25. A final determination is expected on or about August 18. If affirmative, the case will proceed to the U.S. International Trade Commission (ITC).

The ITC will issue a CVD order instructing the U.S. Customs Bureau to impose the specified countervailing duties at U.S. ports of entry if it affirms an affirmative final determination by Commerce, agreeing “that imports of certain crystalline silicon photovoltaic products from China materially injure, or threaten material injury to, the domestic industry.” The ITC's decision is due around 45 days subsequent to an affirmative final determination by Commerce.

*Image credits: 1) Suntech; 2) Datamyne; 3) The Guildhall, Bath, U.K.