US Stands Firm, Finalizes Weighty Tariffs on Chinese Solar Companies

The Department of Commerce is standing behind its preliminary decision to impose strong tariffs on imports of Chinese-made solar cells and panels, despite China’s threats of potential retaliation.

In its final ruling, Commerce set penalties from 18%-250%, depending on how much below fair market value each Chinese company sold their products. For example, Trina Solar’s charge is 18% and Suntech’s is 32%. To deter further dumping below cost, all companies that didn’t agree to be investigated will be charged 250%.

Commerce Department is also applying "anti-subsidy tariffs" to punish the Chinese government for supporting solar companies in ways that violate international trade laws. Trina’s rate is 15.24%, Suntech’s is 14.78% and 15.24% for all others.

On November 7, the US International Trade Commission will make its final determination on whether China’s policies have injured US solar manufacturers – finalizing whether the tariffs stand. In a preliminary ruling last year, they voted unanimously in favor of duties.

But the tariffs still leave a very wide loophole – Chinese manufacturers can avoid the tariffs if they use cells made in other countries.

SolarWorld’s Response

SolarWorld, which originated the trade complaint, wanted all cells and panels produced in China covered. It plans to return to Commerce to close that loophole.

SolarWorld says China’s massive production overcapacity and government-funded export drive have left the world industry in ruins. In the US market alone, at least 22 solar manufacturers have closed plants or laid off significant numbers of workers. Many Chinese producers are now also experiencing losses as high as billions of dollars, but they survive because of government bailouts.

"Just as the solar industry reached a tipping point into mainstream adoption, China, with virtually no industry know-how, launched its export drive into the U.S. solar market, as part of its central five-year planning process targeting emerging "strategic industries," says SolarWorld.

Without government sponsorship, Chinese producers would have a 5% cost disadvantage in producing and delivering solar into the U.S. market, compared with domestic producers, says SolarWorld, pointing to National Renewable Energy Lab research.

This summer, SolarWorld filed the same complaint in Europe, where talks are in process.

China’s Response

As you might expect, China is sharply critical of the decision and is demanding the US repeal the tariffs – pointing to dozens of domestic solar manufacturers that are struggling because of weaker demand and steep price cuts.

"The United States is inciting trade friction in new energy and sending a negative signal to the whole world about protectionism and obstructing the development of new energy development," says Ministry of Commerce spokesman Shen Danyang. "We hope the U.S. side will correct its erroneous action with early termination of the trade remedy measures."

In the past, China hinted it would retaliate if duties are inflicted. It could impose duties on polysilicon imports from the US – a $2 billion export market from the US to China. It also has demanded the federal government intervene to stop six clean energy programs in states including New Jersey, Massachusetts and Ohio because they are unfair to Chinese companies.

A top US executive for Suntech, the world’s largest solar panel maker, issued a statement suggesting the decision is misguided and won’t address the challenges the solar industry faces.

"Unilateral trade barriers will not make any one company more competitive, but will make solar less competitive against other forms of electricity generation," says E.L. "Mick" McDaniel, Managing Director of Suntech America. "These ill-conceived taxes on solar products were the outcome of an unrealistic analysis that compared, for example, Suntech’s costs of production to the theoretical costs of production in Thailand, a country with less than 100MW of PV production capacity."

A spokesman for Yingli Green Energy says the 30% duties his company faces will make selling to the US unprofitable because the industry’s gross profit margins are about 10%.

"A tax rate of 30 percent is the same as 200 percent. Both of them mean the door is closed for exporting to the United States," Wang Shuai, told Bloomberg. "No one does business to lose money."

And many US solar companies – notably developers and installers who benefit from lower solar prices – remain critical of the tariffs, while welcoming the Commerce Department’s decision not to raise them.

"We are hopeful that continued innovations in technology, a competitive global marketplace, and demand-generated pressure for lower prices will take precedence moving forward," says Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE). "At the same time, we remain concerned about the growing global trade war, which will only hurt American solar industry jobs, growth and consumers."

SolarWorld praised the Commerce Department’s ruling, say it will help raise the industry’s chances of "reclaiming equal footing" for US solar makers.

"SolarWorld and [Coalition for American Solar Manufacturing] have fought only to give the solar-pioneering domestic industry a fair chance to continue to compete by removing China’s trade distortions from the U.S. market," says Gordon Brinser, president of SolarWorld Industries America Inc. "Only fair competition can provide sustainable gains in technological efficiency, cost reduction and end-user pricing.

Here’s the background on this case:

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