Tariff case raises questions about solar panel imports
May 3, 2022
The solar industry is growing at a rapid and exciting pace, pushing the country closer and closer to a clean energy future with every megawatt installed. While demand is higher than ever, supply is in flux in large part because of the U.S. Department of Commerce investigation into potential tariff circumvention.
The solar industry is growing at a rapid and exciting pace, pushing the country closer and closer to a clean energy future with every megawatt installed. Like any new industry, however, there are bound to be growing pains. Sourcing materials for the panels, ethical labor and procurement of the panels from foreign countries are major hurdles facing the industry today. While demand is higher than ever, supply is in flux in large part because of the U.S. Department of Commerce investigation into potential tariff circumvention.
The 2018 tariff on China
What’s behind all this drama? In 2018, the US Government instituted tariffs on solar panels and components imported from China. Exceptions were made for bi-facial panels, and panels that had “significant” manufacturing done in another country (eg. cells were made in China but were made into panels in another country.)
China produces nearly 78% of the solar cell market globally; the US contribution is about one percent. Due to the U.S. tariffs, American companies started sourcing panels from factories in Cambodia, Malaysia, Vietnam and Thailand. These four countries represent 80% of total solar imports, and the majority of the U.S. solar supply. Panels from these countries may have Chinese components, due to the dominance of the Chinese solar cell manufacturing industry.
The anti-circumvention filings
Last year, four anonymous companies filed an anti-circumvention case with the Federal Department of Commerce (DOC), alleging that companies were illegally circumventing the tariffs on Chinese solar components by importing from these countries. The DOC rejected this case, partially due to the anonymity of the complainants and also because DOC thought finding in favor would advantage some imports over others.
This spring, Auxin Solar, a panel manufacturer based in California, filed a copycat anti-circumvention case. Auxin is reiterating the concerns from last year that the panels imported from those four South Asian countries are “cheating” by not paying the tariffs, as they allege only minor assembly is happening outside of China. Auxin imports cells from Taiwan and assembles them in the US, with a current capacity of about 150 MW of solar panels per year, though an upcoming expansion will bring that to 400 MW. For context, the U.S. solar industry installed between 2-3 GW of solar last year.
If the DOC agrees with Auxin Solar in their preliminary decision, a tariff would be retroactively applied to all panels that entered the U.S. market on April 1, 2022, the date DOC agreed to consider Auxin’s petition. The industry is very concerned as big questions remain about the size of the tariffs, which could be anywhere from 50-250 percent.
The deciding factors
There are two main legal questions that the DOC will need to answer in determining the status of the petition: appropriateness, or how the decision would impact the industry, and significance, in terms of how much manufacturing of the panels is happening in the four named countries. To the appropriateness question, the national Solar Energy Industries Association (SEIA) has maintained that this petition is already causing damage to the solar industry; a survey of over 700 solar companies has found 51 GW of utility-scale projects were impacted, with panel supply delayed or canceled. Several solar panel manufacturers are not shipping any containers to the United States while the case is being adjudicated, and many panel distributors are not taking any orders from developers, as they await the determination.
The DOC has determined in previous decisions that turning solar cells or wafers into panels does constitute “significant manufacturing,” and SEIA is confident that the merits of the case will lead to a negative decision.
SEIA has asked the DOC to issue their preliminary decision after 60 days to allow for time for both sides to provide more information, though the DOC has up to 150 days to decide. SEIA is encouraging companies impacted by the petition to send letters to the White House and the Secretary of Commerce detailing the impacts to the industry.