In One Sentence – Executive

• The Commerce Department is investigating whether solar panels from Cambodia, Malaysia, Thailand and Vietnam, using parts and components from China, are circumventing U.S. Anti-Dumping & Countervailing Duty (AD/CVD) orders on Chinese solar cells and modules.
• Two months into the investigation, President Biden has imposed a two-year moratorium on applying tariffs to solar imports from the four Southeast Asian countries.
• Commerce Secretary Gina Raimondo told the Senate that it is “exceedingly unlikely” that the probe could lead to steep tariffs but resisted calls for an expedited preliminary determination.
• Biden has also invoked the Defense Production Act to turbocharge the domestic solar industry.

In One Sentence – Industry

• The Commerce Department’s investigation was initiated after a petition from Auxin Solar, which claimed that China was using the four Southeast Asian countries as “export platforms” to evade AD/CVD orders.
• Several industry groups under the Solar Energy Industry Association (SEIA)—which includes some U.S. subsidiaries of Chinese companies subject to the original orders—opposed the Commerce Department probe, arguing that it would hurt U.S. imports.
• U.S. solar panel installations had slowed over the last two months amid possibilities of retroactive tariffs extending from the Commerce Department’s probe as well as supply chain disruptions.

In One Sentence – Legislative

• Several Senators urged the Commerce Department to accelerate the solar investigation and avoid imposing retroactive tariffs, arguing that the probe was causing “massive disruption” in the U.S. solar industry.
• Meanwhile, another group of lawmakers, all Democrats, criticized SEIA for lobbying against the probe and questioned its claim that the trade enforcement mechanism was leading to an import slowdown.
• Passed by the House, the America COMPETES Act would allow Commerce to expand existing AD/CVD restrictions to cover “circumventing imports” from third countries through an expedited process.

Mark the Essentials

• Imports from Malaysia, Vietnam, Thailand and Cambodia account for more than half of total U.S. solar panel supply. 80 percent of the world’s solar cells and modules are currently produced in China. 
• In 2012, the Commerce Department imposed AD/CVD orders against solar module imports from China after determining that Chinese companies sold imports at less than their fair value and received unfair government subsidies. 
• In 2018, the Trump administration imposed additional tariffs on Chinese solar modules, citing China’s “unreasonable and discriminatory” practices on technology transfer and intellectual property. 
• Highlighting the dependency of U.S. solar companies on panel imports, a bipartisan group of more than 20 Senators argued that expanded tariffs would significantly undercut the growth of the solar industry and raise energy prices for U.S. consumers.
• Arguing that the solar industry is recovering from a similar tariff petition last year, SEIA said that the Commerce Department’s decision to launch the circumvention investigation “responds to the self-interests of one company” and will lead to market volatility. 
• Meanwhile, lawmakers led by Senate Finance Committee members Sherrod Brown and Bob Casey say that, given China’s virtual global monopoly on solar panel production, AD/CVD laws are critical in shielding domestic manufacturers against unfair trade practices. The lawmakers noted national security concerns with China’s dominance in the solar market and have called domestic production of solar modules a necessary component of “our burgeoning electrical grid and infrastructure”.

Keeping an Eye On…

• Solar is the classic case of a 21st century industry that is riven by tension between its labor and environmental wings. Labor would much prefer that domestic trade enforcement tools are utilized to the hilt to erect tariff barriers behind which upstream production capacity and good-paying union jobs are created. Conversely, environmentalists (and industry) would much prefer that imported solar modules flow freely, so that the clean energy transition can be accelerated. Typically, the regulatory dice tends to be stacked in favor of defensive interests petitioning for protection—and protectionism. Not this time, however. It is a measure of the Biden administration’s overriding commitment to the green transition that it has chosen to not just side with the environmentalist (and industry) camp but also: (a) declare a national emergency pursuant to Section 318(a) of the Tariff Act of 1930 and authorize a moratorium on tariffs on solar cells and modules from four Southeast Asian nations, and (b) issue a determination pursuant to Section 303 of the Defense Production Act and accelerate the domestic rollout of clean energy components and technologies, including solar panel parts. Auxin Solar, the impacted U.S. solar cell producer, has already threatened to challenge the administration’s action in court. No matter how the court rules—and courts tend to defer to presidential authority at times of a declared emergency—one thing is clear: activist ‘industrial policy’ is wisely being put to work. 

Expanded Reading

• Following Solar Debacle, Republicans Come Out Swinging on China, Coalition for a Prosperous America, June 9, 2022
• Biden waives solar panel tariffs for four countries, invokes defense law, Reuters, June 6, 2022 [Paywall]
• Brown, Casey, Kaptur, Sewell, Doyle, Ryan Urge Administration to Shield American Solar Manufacturing Industry from Unfair Foreign Competition, U.S. Senator for Ohio Sherrod Brown Press Release, May 26, 2022
• Deconstructed: Biden’s Solar War With China, The Intercept, May 26, 2022
• Democrats divided on solar investigation, Axios, May 26, 2022
• Commerce Department Could Pay Manufacturers to Reshore Critical Production, The American Prospect, May 25, 2022
• Lawmakers battle over Commerce tariff probe into solar panel parts, The Hill, May 14, 2022
• Raimondo fails to reassure a rattled solar industry, Washington Post, May 12, 2022 [Paywall]
• Solar Trade Probe Risks Delaying Duke Renewable Projects to 2024, Bloomberg, May 9, 2022 [Paywall]
• Heinrich, Rosen, Sinema Lead Bipartisan Call On Biden Administration To Expedite Solar Tariff Investigation Decision, United States Senator for New Mexico Martin Heinrich Press Release, May 2, 2022
• Portman, Brown Introduce Legislation to Strengthen Trade Remedy Laws, Protect American Workers, United States Senator for Ohio Rob Portman Press Release, April 16, 2021
• Commerce Department Decision Imperils U.S. Clean Energy Progress, Solar Energy Industries Association Press Release, March 28, 2022