U.S. Department of Commerce: Countries circumvented tariffs on Chinese solar products

The preliminary determination found that Solar Cells and Solar Products from Cambodia, Malaysia, Thailand, and Vietnam (together, CMTV) are circumventing existing duties and tariffs targeting China. Pending a final determination expected in May 2023, and subject to an ongoing waiver issued by the Biden Administration, this preliminary determination could have the effect of imposing potentially significant tariffs on many imports of Solar Cells and Solar Products from CMTV. Applicable tariffs are currently being waived until June 2024. Nonetheless, given the substantial role these countries play in existing solar supply chains, this decision may have a dramatic impact on future solar projects in the United States.

Background

The United States currently maintains countervailing duties (CVD) and antidumping duties (AD) on imports of Solar Cells and Solar Products imported into the United States from China (the Orders). The Orders also cover Solar Products produced in third countries using Solar Cells manufactured in China.

On February 8, 2022, Auxin Solar Inc. (Auxin) filed a circumvention inquiry petition alleging that Solar Products completed in CMTV and incorporating parts and components manufactured in China are circumventing the Orders. The petition claimed that exporters located in CMTV are so fully integrated with their upstream affiliates in China, and rely so heavily on Chinese inputs in their operations, that Solar Cells and Solar Products from CMTV should incur the same CVD and AD as those from China. In response to this petition, on April 1, 2022, Commerce initiated a circumvention inquiry to investigate Auxin’s claims.

The circumvention inquiry reportedly caused a sharp reduction in the installation and use of solar panels in the United States, as the prospect of tariffs (including, potentially, retroactive costs) created uncertainty about the financial viability of existing businesses and new developments. In order to mitigate these concerns and address “threats to the availability of sufficient electricity generation capacity to meet expected customer demand,” the Biden Administration announced a two-year duty exemption for Solar Cells and Solar Products from CMTV, as well as authorization for the use of the Defense Production Act to expand domestic production of solar products (the Waiver Declaration).

Preliminary determination

Commerce’s preliminary determination found that imports of Solar Cells and Solar Products from CMTV are circumventing the Orders. Commerce cited data from each of the four countries showing that: (i) the value of Solar Cells and Solar Products from China represents a significant portion of the total value of Solar Cells and Solar Products from CMTV; (ii) the process of assembly and/or completion in CMTV is minor or insignificant to the production of the merchandise; and (iii) the merchandise from CMTV is of the same class or kind as the merchandise subject to the Orders. Further, Commerce concluded that action is warranted to prevent evasion of the orders in CMTV, and that these findings collectively support an affirmative determination of circumvention.

Commerce preliminarily determined that four of eight specifically-investigated companies are circumventing the Orders, as noted in the table below. Commerce also reported that some companies in Malaysia, Thailand, and Vietnam did not respond to Commerce’s requests for information, and will therefore be found to be circumventing as well. 

Because Commerce determined that circumvention is occurring in each of the CMTV countries, Commerce is applying the preliminary affirmative determination of circumvention to all shipments of Solar Cells and Solar Products from CMTV that occurred on or after April 1, 2022. However, this excludes shipments from certain exporters found not to have circumvented the Orders, per the table above. Importers can avoid the new requirements by completing a certification that evidences their merchandise: (i) originated from one of the exempted companies; or (ii) otherwise was not manufactured using components produced in China.

Potential effects

Following the Waiver Declaration, any tariffs deemed applicable to Solar Cells/Products from CMTV will be waived until June 6, 2024. Prior to the Waiver Declaration, if Commerce had issued an affirmative determination in its circumvention inquiry, Commerce could have applied the existing AD and CVD to imports of CMTV Solar Cells/Products retroactively, thereby requiring U.S. solar importers to pay duties of up to 250% on previous imports in addition to future ones. The Waiver Declaration allayed these concerns, effectively precluding the application of tariffs to imports until June 6, 2024, regardless of the outcome of Commerce’s investigation.  

Nevertheless, the proposed certification mechanism would require importers, producers, and exporters to complete and maintain attestations evidencing whether their merchandise is subject to the Orders, which could introduce additional diligence requirements into the supply chain. Prior to reaching its final determination, Commerce will be conducting audits to verify information it has received so far, and assessing comments received in response to the preliminary determination. Commerce is expected to issue its final determination on May 1, 2023.

For additional information on Commerce’s preliminary affirmative determinations, see Preliminary Decision Memorandums for the Circumvention Inquiry with Respect to Cambodia, Malaysia, Thailand, and Vietnam.