On June 6, the Administration declared a 24-month tariff moratorium on solar panels manufactured in Cambodia, Malaysia, Thailand and Vietnam, by way of executive action. The moratorium comes in response to serious concerns from the U.S. solar industry about the effects of an ongoing Department of Commerce (DOC) investigation into whether solar panels imported from these nations actually originated in China, and, thus, would be subject to retroactive tariffs of up to 250 percent. While companies may be subject to tariffs after the 24-month period ends, the moratorium reportedly will exempt U.S. companies from any retroactive tariffs.

The Administration also announced plans to invoke the Defense Production Act to ramp up the domestic production of solar energy components and reduce the nation’s reliance on imported solar panels.

More details about these executive actions should be forthcoming from the White House soon, including the effective dates of the 24-month tariff moratorium.

“A two-year moratorium is a great step in the right direction.”

JOHN BERGER, CEO OF SUNNOVA

On March 28, the DOC announced it would investigate solar panel imports from Cambodia, Malaysia, Thailand and Vietnam. A petition filed by California-based solar components manufacturer Auxin Solar alleged that the imported panels were using parts made by Chinese companies and were skirting U.S. tariffs in doing so.

Approximately 80 percent of the crystalline-silicon modules used in the U.S. solar industry come from Southeast Asia, meaning the DOC investigation inadvertently created a major disruption in the supply chain for those components.

The unintended consequences of the DOC investigation—which will proceed as scheduled—have made it difficult for U.S. solar companies to develop new projects. The looming threat of retroactive tariffs has constricted the solar panel supply chain and put U.S. businesses at risk of owing huge penalties should the DOC investigation conclude the Southeast Asian imports violated U.S. tariff law. As a result, the solar industry has reported a significant rate of postponement and cancellation of new solar facilities that were planned for construction in 2021 and 2022.

The prospect of future tariffs after the sunset of the 24-month moratorium still looms. The DOC investigation must continue by statute and could result in the goods in question being subject to tariffs after the moratorium ends. In announcing these Executive Actions, the Biden Administration hopes that invoking the Defense Production Act will result in “domestic manufacturing rapidly [scaling] up to ensure the reliable supply of components that U.S. solar deployers need” and, thus, alleviating the impact of future tariffs on U.S developers.

Solar industry leaders, lawmakers and environmental activists all have called on the Administration to take action to address these concerns. The Biden Administration has made climate change an area of priority, and solar energy is critical to the Administration’s goal of net-zero carbon emissions by 2050. However, the Administration had to be careful that any executive actions did not violate the integrity of the DOC investigation. The tariff moratorium provides much-needed clarity for the industry over the next two years, which is expected to allow more projects to move forward and increase the country’s renewable energy capacity at a pace more in line with the administration’s stated climate change objectives.

The announcement of the two-year tariff moratorium was met with broad approval within solar industry circles. For example, Sunnova CEO John Berger told Forbes, “A two-year moratorium is a great step in the right direction, ” and Solar Energy Industries Association (SEIA) president and CEO Abigail Ross Hopper said, “We applaud President Biden’s thoughtful approach to addressing the current crisis of the paralyzed solar supply chain.” Only time will tell now whether the recent 24-month moratorium on tariffs is sufficient to resuscitate any of the recently cancelled projects or whether it provides sufficient comfort for US companies to move forward with new projects at a rate that will achieve the administration’s carbon neutrality goals.