For all the hubbub over steep tariffs levied on imported Chinese crystalline silicon cells as part of the high-profile SolarWorld trade case, the trade action's final impact might not live up to the hype.
Despite a yearlong legal battle that resulted in the Commerce Department finalizing duty rates yesterday ranging from 24 to 255 percent on Chinese solar modules, two key decisions could hollow out SolarWorld's victory.
The first decision, which is already undercutting SolarWorld's effort to protect American solar manufacturers from illegal Chinese subsidies and dumping practices, was Commerce's ruling yesterday not to expand the scope of the case, as SolarWorld and its fellow petitioners had sought (ClimateWire, Oct. 11).
Commerce ruled that the trade action covers only solar modules and panels made with Chinese-origin cells and rejected a request to include modules assembled in China from third-country-origin cells. Had Commerce expanded the scope, the duties levied yesterday would have applied to solar modules assembled in China from cells produced in Taiwan, Canada or any other country.
Supporters of the case argued that China is subsidizing the manufacturing of panels made with non-Chinese cells and that Chinese producers are still dumping those panels on the U.S. market.
In a Sept. 27 letter to Commerce, eight members of Congress who have backed the SolarWorld case expressed concern that duties wouldn't be applied when crystals are manufactured in China and made into wafers in China but turned into cells in a third country before being sent back to China to be made into panels. In such a situation, they point out, 80 percent of the value of the final product would have been added in China but no tariff would apply.
The lawmakers noted the government's investigation has found evidence that Chinese manufacturers are already developing such circumvention plans.
Yesterday, after the Commerce ruling, Sen. Jeff Merkley (D) -- who hails from Oregon, where SolarWorld is based -- expressed concern about the effectiveness of tariffs without a scope expansion.
"I fear that the action does not go far enough in addressing the loophole allowing Chinese companies to duck the tariff by moving a small part of the operation overseas," he said. "We need to close that loophole and ensure that American workers and businesses are playing on a level field."
Opponents of the trade action, including U.S. and Chinese manufacturers and U.S. installers that call themselves the Coalition for Affordable Solar Energy (CASE), praised Commerce yesterday for not expanding the scope and escalating a trade dispute that they say has launched a renewable energy trade war around the globe.
"This allows for large corporations with established channels to market like Suntech, Trina, Canadian, etc., to substitute Chinese cells for Taiwanese cells or Malaysian cells or Indian cells or other people's cells to keep the market flowing," CASE President Jigar Shah said. "Commerce came down on the side of free trade by not expanding the scope."
E.L. McDaniel, managing director of Suntech America, one of the companies named in the trade complaint, moved quickly yesterday to let it be known that the company has ways of selling its product in the United States without being subject to the tariff rates.
"As a multinational company with global supply chains and manufacturing facilities in three countries, including Goodyear, Ariz., we will continue to provide our customers in the U.S. with hundreds of megawatts of high-quality and affordable solar products that will not be subject to tariffs," McDaniel said.
Adams Lee, a counsel at the Washington, D.C., firm White & Case who specializes in international trade law and is not involved in the trade action, pointed out today that while SolarWorld and its co-petitioners didn't get what they asked for in yesterday's scope ruling, the door isn't permanently closed for them.
Lee said SolarWorld could refile circumvention allegations with Commerce later.
"If the facts show there is a huge shift in production operations geared toward getting around the order, they could still get a lot of the entries here," he said.
And SolarWorld President Gordon Brinser is showing no signs of dropping the circumvention issue.
Brinser said in a release yesterday that his company and fellow co-petitioners in the case plan to ask the Commerce Department and Customs and Border Protection to address the circumvention issue through strict enforcement actions.
The other decision, which could further undercut SolarWorld's effort, has to do with the wonky trade remedy known as "critical circumstances."
Almost immediately after announcing a trade case last fall, SolarWorld began arguing that Chinese companies were dramatically stepping up exports to move as much product as possible ahead of a potential tariff decision.
To help address that uptick, Commerce has ruled that U.S. customs officials could collect duties on most Chinese solar imports dating back 90 days before Commerce announced its tariff decisions earlier this year. But that affirmative critical circumstances determination could still be overturned if the U.S. International Trade Commission doesn't agree that retroactive tariffs are warranted.
Trade lawyers on both sides of the case have acknowledged that U.S. ITC traditionally sets a higher bar when it comes to the critical circumstances issue than Commerce, and that fact was evident last week when both sides went before U.S. ITC to present their final arguments. One commissioner repeatedly pressed SolarWorld's lawyers to explain how a critical circumstances determination would help the U.S. solar industry (E&ENews PM, Oct. 3).
If SolarWorld is unable to obtain an affirmative critical circumstances ruling, then a large portion of the duties that have so far been collected on Chinese products would not be upheld.
CASE President Shah said numbers from Customs and Border Protection -- which is charged with collecting duties -- have not been released, but he estimated that the "vast majority" of the approximately $100 million in tariffs that has been collected was for shipments that came into the United States in the 90-day window covered by critical circumstances.
Without critical circumstances and the scope ruling, Shah said, the case "really is a hollow victory" for SolarWorld.
SolarWorld's lawyer in the trade action, Tim Brightbill, disputed that assessment today.
"We have more data for the critical circumstances period than for the period after," he said. But "there's still substantial levels of Chinese imports coming in [today], and 30 percent duties are being collected on those," he said.
Brightbill also disputed that the Commerce decision had in any way marginalized what the trade action means for leveling the solar trade playing field.
"We know some Chinese companies are using the loophole in the scope, but many others are still producing in China and are therefore subject to the duties," he said.
He said that the repeated concern raised by the Chinese government and Chinese producers that are worried about their own self-interest also speaks to the impact of the case.
"The Chinese producers and the Chinese government itself has said the [Commerce and U.S. ITC] trade cases are having and have had a significant impact," Brightbill said. "We're going to work on enforcement, but these cases are extremely important ... for the U.S. industry and will help restore fair competition to solar manufacturers."