The US Commerce Department last Friday (Dec. 2), in a preliminary decision, found that Chinese manufacturers are avoiding US tariffs on solar photovoltaic panels by shipping them through other Asian countries. The agency found that China was disguising the origin of the panels by marketing them as coming from Thailand, Malaysia, Vietnam, and Cambodia.
The agency found that China has been shipping panels and components of panels to cooperating Asian firms, which then sold them as their domestic products. It’s a practice akin to what happens in the oil shipping business, where cargos can change ownership multiple times, known as “flag-swapping” in order to hide the origin. Decades ago, Russia often flag-swapped enriched nuclear fuel in order to serve markets where they were banned.
The Commerce ruling paves the way for imposing increased tariffs on Asian PV imports, increasing solar panel prices in the U.S. But that will not happen immediately as the agency has not taken final action. A final determination could come in May. Also, anticipating a ruling that could push up domestic solar panel prices and slow growth of renewable energy, in June President Biden exempted Asian solar cells and components from new tariffs for two years. He also invoked the Defense Production Act to aid U.S. solar cell makers.
US renewable trade groups decried the agency decision. Abigail Ross Hopper, head of the Washington-based Solar Energy Industry Association, said, “The only good news here is that Commerce didn’t target all imports from the subject countries. Nonetheless, this decision will strand billions of dollars’ worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs.”
She added, “While President Biden was wise to provide a two-year window before the tariff implementation, that window is quickly closing, and two years is simply not enough time to establish manufacturing supply chains that will meet U.S. solar demand.”
JC Sandberg of Washington’s American Clean Power lobbying group said, “Today’s announcement from the Department of Commerce is a step backward for the United States. This decision upends a decade of precedent that Commerce itself established, undercutting any sense of business certainty that American companies rely on to continue investing in America’s clean energy future and impacting our ability to reduce our dependence on foreign energy sources.”
Advanced Energy Economy offered a slightly less view of the Commerce Department action. Harry Godfrey, AEE managing director, said, “We are disappointed by the Department’s initial determination in this proceeding, but it’s encouraging that the Department has not made a blanket determination on all solar components. We also appreciate that the Administration’s existing pause on new tariffs ensures the decision won’t have an immediate impact on consumers or America’s progress toward 100% clean energy.”
AEE has a somewhat broader constituency than ACP and SEIA. Its portfolio includes “energy efficiency, demand response, energy storage, solar, wind, hydro, nuclear, electric vehicles, biofuels and smart grid.”
The Commerce Department case began in February with a petition by Auxin Solar, a California solar panel manufacturer. As the D.C. law firm of Morgan Lewis explained, if the four Asian countries targeted were using parts made in China “without significantly altering them, it signifies that those companies are circumventing antidumping duty (AD) and countervailing duty (CVD) tariffs.” Writing in June, before the Biden order, the law firm noted, “Given that 85% of imported solar products come from these countries, developers are now facing challenges in finding alternative sources of supply domestically or abroad.”
The Auxin case developed after Commerce conducted a 2012 investigation and found that Chinese solar panel producers and exporters were dumping the panels on the US market, and issued anti-dumping and countervailing duty orders. “After the orders were imposed,” said Morgan Lewis, “the supply of solar cells and modules substantially moved from China to the four countries….”
–Kennedy Maize