On August 18, 2023, the U.S. Department of Commerce (Commerce) issued final determinations in its circumvention inquiries regarding the import of certain solar cells and modules from Cambodia, Malaysia, Thailand and Vietnam (together, CMTV). Commerce found that imports of subject solar cells and modules are, with certain exceptions, circumventing duties levied against the People’s Republic of China (PRC).
Although a waiver on related tariffs is currently in effect, imports of solar cells and modules from CMTV will be subject to significantly higher tariffs beginning in mid-2024 when the waiver expires, with the exception of CMTV imports (i) from certain companies which Commerce determined to not be circumventing AD/CVD tariffs or (ii) which do not contain material Chinese inputs. Solar developers will need to evaluate suppliers and monitor supply chains to manage risk of substantially increased solar procurement costs.
The U.S. maintains antidumping (AD) duties and countervailing duties (CVD) on solar cells and modules from PRC (the Orders). On February 8, 2022, a U.S. solar manufacturer petitioned Commerce to investigate potential circumvention of the Orders by exports from CMTV to the U.S. The firm alleged that certain companies completing and exporting solar cells and modules from CMTV, using parts and components from PRC, were undermining the Orders. On April 1, 2022, Commerce launched an investigation into potential circumvention of the Orders. On December 8, 2022, Commerce published its preliminary determinations in its inquiries (see our client alert on the preliminary determinations).
The inquiries cover solar cells and modules that have been completed in CMTV, using parts and components produced in PRC, that are subsequently exported from CMTV to the U.S. Specifically, the inquiries cover:
- crystalline silicon photovoltaic cells produced in CMTV from wafers produced in PRC; and
- modules, laminates, and panels consisting of crystalline silicon photovoltaic cells produced in CMTV from wafers produced in PRC, and where more than two of the following components of the module, laminate or panel were produced in PRC:
- silver paste;
- aluminum frames;
- ethylene vinyl acetate sheets; and
- junction boxes.
For the purposes of inquiries, wafers produced outside of PRC using polysilicon from PRC are not considered wafers produced in PRC.
In its final determinations, Commerce mostly affirmed its preliminary findings. Commerce found that, with some exceptions involving certain manufacturers, U.S. imports of solar cells and modules from CMTV are circumventing the Orders on a “country-wide basis.” Commerce listed companies it deemed to be uncooperative, and which it determined to be circumventing the Orders. Commerce also issued negative determinations (i.e. finding no circumvention) for solar cells and modules imported to the U.S. from two entities in Malaysia and one in Vietnam. See the table below for a listing of Commerce’s findings with respect to specific entities:
Waiver Declaration and “Applicable Entries”
Prior to Commerce publishing its preliminary findings, the Biden Administration issued a two-year AD/CVD exemption for covered solar cells and modules, citing insufficient domestic electricity generation capacity (the Waiver Declaration). The exemption is set to continue until June 6, 2024, or the date the emergency described in the Waiver Declaration has been terminated, whichever occurs first (the Date of Termination).
Tariffs are waived for qualifying solar cells and modules (i.e. those that would otherwise be subject to applicable AD/CVD duties as a result of Commerce’s circumvention determinations and that meet the criteria noted below) that enter the U.S. within the period contemplated by the Waiver Declaration. Solar cell and module imports covered by the Waiver Declaration include those from CMTV that are entered into the U.S., or withdrawn from a warehouse for consumption, before the Date of Termination and, for entries that enter after November 15, 2022, are used within 180 days of the Date of Termination (Applicable Entries).
Commerce establishes three types of certifications that importers and exporters may use to establish exemption from AD/CVD duties applied based off the affirmative determinations:
- Certification for Applicable Entries – available to entries exempt from duties because they meet the definition of Applicable Entries per the regulations.
- Certification for Entries of Inquiry Merchandise from Companies Found Not to Be Circumventing – available to the three entities that received negative circumvention determinations.
- Certification Regarding Chinese Components – available to entries that meet certain component content requirements.
Those companies that Commerce found to be uncooperative with the inquiries (see chart above) may not use Certifications (2) and (3) listed above.
Solar developers should carefully evaluate procurement practices and supply chains for solar cells and modules. Many cells and modules acquired from CMTV-based exporters – other than those determined to be not circumventing – are likely to become substantially more expensive in mid-2024. These and related impacts to the solar cell and module supply chain – price, availability, lead-time from order to production to delivery to the project site – can create difficult uncertainties and impact overall project viability. Managing these risks through selective procurement, management of solar supply chains, and care in related contractual provisions will be key.