Punitive solar tariffs against China may shrink

By Daniel Cusick | 01/06/2015 07:59 AM EST

Chinese solar manufacturers whose products have been subject to stiff U.S. tariffs for two years could see those penalties reduced by nearly half this spring after the Commerce Department found the degree of illegal dumping by Chinese firms between 2012 and 2013 was lower than previously estimated.

The preliminary findings, revealed in a Wednesday memorandum between Commerce officials, show that between May 25, 2012, and Nov. 30, 2013, actual dumping margins by leading Chinese manufacturers selling products into the U.S. market were less than 2 percent, significantly lower than what U.S. officials previously estimated.

As a result of the investigation, Commerce officials are recommending a revised anti-dumping tariff of 1.82 percent for most Chinese manufactures, while countervailing duties would remain roughly the same, at 15.86 percent. That compares with the current combined duties of roughly 31 percent for most Chinese manufacturers.

The revised tariff schedule would take effect later this year pending a final determination by senior Obama administration officials, according to the Commerce memo.

Dumping, which is illegal under international trade rules, involves the selling of goods or products into foreign markets at levels below their cost to produce to gain a market advantage over other suppliers, including those from the host country.

A coalition of U.S. solar firms, led by SolarWorld Industries America of Oregon, have aggressively pursued trade remedies to correct what they characterize as flagrant violations of trade laws by Chinese solar firms and the Chinese government, which they say have conspired to flood foreign markets with below-cost solar equipment and eliminate competitors in the process.

U.S. solar prices could drop

In 2012, the Commerce Department determined that Chinese firms were engaged in widespread dumping and were benefiting from illegal subsidies from Chinese government ministries, leading to the imposition of both countervailing and anti-dumping duties ranging from 24 to 25 percent.

A second round of duties, authorized by Commerce late last year and awaiting final approval from the ITC, will apply independently to Chinese and some Taiwanese firms that SolarWorld argued had circumvented the 2012 tariffs by outsourcing some parts of their solar manufacturing to other countries (ClimateWire, Dec. 17, 2014).

The new preliminary findings pertain only to the first round of tariffs imposed on solar cells and panels produced fully in China. Nevertheless, if upheld after a 120-day review, the lowering of the 2012 tariffs would sharpen Chinese competition and potentially drive down prices for U.S. buyers of Chinese solar panels, experts say.

"If you assume that the final [determination] looks similar to the preliminary one, it should make a big difference, especially when you consider the lower rates would apply to 20 or so companies that make most of the cells and modules coming into the United States from China," said Shayle Kann, a senior vice president and solar analyst at GTM Research in Boston.

Reactions to the possible tariff relief for Chinese manufacturers came quickly from both supporters and critics of U.S. sanctions.

U.S. reaction is mixed

Mukesh Dulani, president of SolarWorld Americas, said in a statement that Commerce’s preliminary findings "do not reflect the actual amount of dumping by Chinese producers," especially since the department opted to remove one of China’s largest manufacturers and a primary respondent in the 2012 trade case, Wuxi Suntech Power Company Ltd., from the list of firms receiving specific anti-dumping duty rates.

"By taking Suntech out of the calculations, the Commerce Department has allowed other Chinese producers to obtain an artificially lowered antidumping rate," Dulani said.

In comments yesterday, open market advocacy groups such as the Coalition for Affordable Solar Energy welcomed the findings from Commerce’s administrative review, saying the reduction in duties would correct a currently skewed solar market and stimulate solar development in the United States.

Jigar Shah, CASE’s president, called the proposed lower tariff rates "a step in the right direction for the U.S. solar industry," adding that the reduction in duties "means more American consumers will be able to afford solar power and more American solar companies will be able to expand their hiring."

Still, Shah added, the proposed measures do not remove all tariffs on Chinese imports, nor do they affect firms subject to the latest trade sanctions approved by the Commerce Department last month.

The new duties, applying both to leading Chinese and Taiwanese solar firms, will range from 11 to 78 percent.