On August 18, 2023, the United States government announced that solar panels, cells, and modules completed in Cambodia, Malaysia, Thailand, or Vietnam with components from China and exported to the U.S. would end the more than decade-old anti-dumping tariffs on solar bypass energy. panels from China.
To understand the magnitude of the problem, these countries account for nearly 80% of all U.S. solar panel shipments.
After more than 17 months of investigation, the U.S. Department of Commerce has finally determined that certain Chinese manufacturers “send their solar products through Cambodia, Malaysia, Thailand or Vietnam for minor processing in an effort to avoid paying anti-dumping and countervailing duties. ” Specifically, Commerce found that five companies attempted to avoid payment of U.S. import duties by conducting minor processing in third countries.
The new tariffs, which will be as high as 254.19% (i.e. 238.96% anti-dumping duty plus 15.24% countervailing duty) will significantly increase costs for US solar installers, but…
This final decision will have no immediate impact as it is based on the Presidential Proclamation issued on June 6, 2022No duties will be levied on imports of solar panels and cells from these four countries until June 2024. Out of clear concern about the impact on workers in the U.S. solar installation industry, this delay was intended to allow time to adjust supply chains and ensure sourcing does not occur from companies found to be in violation of U.S. law violate. However, the Biden administration’s decision to delay the tariffs was met with controversy in Congress and a joint resolution was passed (over vocal opposition from labor unions) to reintroduce the tariffs in May 2023, but it was vetoed.
Under U.S. law, Commerce may conduct a tariff circumvention investigation if there is evidence that goods subject to an existing “unfair competition” order are being completed or assembled in third countries from parts and components imported from the country to which the order relates. This investigation was initiated after a small American company, Auxin Solar, filed a complaint in February 2022.
This is a separate issue from the More than $1 billion worth of solar panel shipments from China have been banned by the US government under the Uyghur Forced Labor Prevention Act since the outright ban on the import of solar energy produced in the Xinjiang Uyghur Autonomous Region came into effect in June 2022.
Complicating matters for U.S. citizens and businesses looking to install solar panels is that China dominates the vast majority of the world’s solar panel supply chain. It controls at least 86% of solar panels produced in 2022, including 96.8% of polysilicon rods cut into wafers, 85.1% of production in crystalline solar cells, and 74.7% of cells connected together and laminated to form modules.
This now final determination specifies that it covers: solar panels and cells completed in Southeast Asia from wafers produced in China; as well as modules, laminates and panels produced in Southeast Asia from wafers produced in China, and where more than two of the following components in the modules are produced in China: silver paste, aluminum frames, glass, backing plates, ethylene vinyl acetate plates and junction boxes.
In this case, after a thorough investigation of eight companies from the four countries, Commerce discovered that five of the eight companies investigated (potentially representing as much as 30% of U.S. solar panel imports) are attempting to evade U.S. tariffs through small processing in one of the Southeast Asian countries before being shipped to the United States. These non-compliant companies include Canadian Solar and Trina Solar of Thailand, BYD Hong Kong and New East Solar of Cambodia, and Vina Solar of Vietnam.
U.S. domestic production of solar equipment is increasing, with millions of dollars in federal tax credits and deductions and increased and additional recent stimulus from the Inflation Reduction Act, but little U.S. manufacturing capacity still exists.
Today, there are federal tax credits for solar installations that can offset 50% of many individual solar installation project costs. Yes, the costs include the 254% high cost to pay these tariffs on Chinese panels?
In a strange contradiction, since the tariffs are now paid regardless of whether the panels come directly from China or stop somewhere else in Southeast Asia, some US solar companies could simply buy non-Uyghur panels directly from China (…which China becomes the beneficiary of the tariffs imposed on it?).
But more and more U.S. citizens and businesses are saying “no” to Chinese solar panels on their projects, finding that the moral equivalence for on-site renewable energy is no longer acceptable, despite confused U.S. government policy.
A live webinar “How to count your greenhouse gas emissions” 30 Talking Points in 30 Minutes, Tuesday, September 26 at 9:00 AM EDT presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is free, but you must register here.