Commerce Issues Preliminary Determination Finding Chinese Solar Producers Receive Countervailable Subsidies

by King & Spalding

The Department of Commerce (Commerce) preliminarily determined on June 3 that the Chinese government subsidizes the production and export of crystalline silicon photovoltaic solar cells (solar cells), as well as modules, laminates, and/or panels consisting of solar cells, with subsidy rates ranging from 18.56 percent to 35.21 percent. Commerce initiated the investigation in January 2014 following a petition filed by SolarWorld Industries America, Inc. In the petition, SolarWorld sought to close a loophole that allowed some Chinese solar producers to avoid duties imposed as a result of SolarWorld's successful 2012 antidumping and countervailing duty cases on solar cells exported from China (as discussed in the November 2011, November 2012, and February 2014 editions of the Trade & Manufacturing Alert).

In the original investigations on solar cells, Commerce determined that duties did not apply to solar cells that are completed or partially manufactured in a country other than China. As a result, SolarWorld has alleged that some Chinese solar producers are shipping solar cell components to Taiwan, where the components are used to make solar cells, and then importing the solar cells back to China to assemble them into solar panels and avoid paying additional duties when exporting solar panels to the United States. In the preliminary determination of the new investigation, Commerce clarified that the tariffs would apply to modules, laminates, and/or panels consisting of solar cells manufactured in another country, if ingots or wafers are manufactured in China or the solar cells' manufacturing process begins in China.

Commerce's preliminary determination created widespread dissatisfaction among downstream U.S. solar companies that focus on installation. The Coalition for Affordable Solar Energy, representing 90 U.S. photovoltaic firms, stated that the ruling would boost prices of U.S. photovoltaic products and cut jobs in one of the fastest-growing sectors of the U.S. economy. Solar Energy Industries Association President Rhone Resch also expressed disappointment about the determination and stated that the duties will increase the cost of solar products and slow the adoption of solar technology in the United States.

Commerce is scheduled to announce its final determination in the countervailing duty investigation by August 18, 2014. Approximately 45 days after that, the International Trade Commission (ITC) is expected to make its final ruling on injury. If both Commerce and the ITC issue affirmative rulings, a countervailing duty order will be imposed on U.S. imports of the subject Chinese solar products. In addition to the countervailing duty investigation, Commerce also is investigating allegations raised by SolarWorld that China and Taiwan are "dumping" solar products by selling them below the cost of production in the U.S. market. Commerce's preliminary determinations in the antidumping duty investigations are expected to be issued on July 25, 2014.

Chinese solar producers also face challenges in the European Union (EU). On June 5, EU ProSun, a joint initiative of EU solar businesses led by SolarWorld, submitted a lengthy filing to the European Commission (EU Commission) alleging that over one hundred Chinese companies are selling products below an agreed price floor previously negotiated by the EU Commission and China. Although it is unclear how the EU Commission will respond to the allegations, experts believe that the EU Commission is unlikely to abandon the agreement entirely, even if it finds pervasive violations. The EU Commission is more likely to order specific companies that have breached the agreement to pay heavy antidumping duties on the underpriced export shipments.

Ruby Hong


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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