US Imposes Tariffs on Major Solar Firms for Dodging China Duties

US Imposes Tariffs on Major Solar Firms for Dodging China Duties - The United States on Aug. 18 slapped tariffs on five solar panel companies for illegally bypassing U.S. tariffs on Chinese-made goods by finishing their products in other countries in Southeast Asia.

US Imposes Tariffs on Major Solar Firms for Dodging China Duties

US Imposes Tariffs on Major Solar Firms for Dodging China Duties

The United States on Aug. 18 slapped tariffs on five solar panel companies for illegally bypassing U.S. tariffs on Chinese-made goods by finishing their products in other countries in Southeast Asia.

In an investigation that began in March 2022, the Commerce Department examined eight companies operating in Cambodia, Malaysia, Thailand, and Vietnam—four countries that together supply about three-quarters of the solar modules imported into the United States.

Of the eight, the department found five evading tariff rules: BYD Hong Kong, New East Solar, Canadian Solar, Trina Solar, and Vina Solar. The firms only conducted minor processing to finish their solar products before bringing them to the U.S. market, Commerce officials said.

The findings were largely consistent with a preliminary finding the agency put out in December, which flagged four solar makers for violating tariff laws. A fifth, Cambodia-based New East Solar, was added to the list on Friday after the company refused to cooperate with the authorities’ on-site audit of its operations.

While the decision has met resistance from solar panel buyers relying on cheap imported products to cut project costs, it is welcome news for small U.S. solar manufacturers, which have struggled to compete with Chinese goods on price points for years.

China has been a dominant force in solar panel production, supplying 97 percent of the world market share in solar wafers, according to the International Energy Agency. Its global share in all the manufacturing states of solar panels exceeds 80 percent.

Under the ruling, all solar manufacturers from the four countries will face new tariffs unless they certify they are not circumventing the duties. The certification requirement isn’t needed for solar cells made in those countries but assembled in another country into modules or other products before reaching the United States.

The tariffs won’t take effect until June 2024, when a two-year waiver from President Joe Biden is set to expire.

U.S. trade officials began the investigation following a complaint from San Jose-based solar manufacturer Auxin Solar. The anti-dumping duties have been in place for a decade on Chinese-made solar goods after a Commerce probe found Chinese companies taking government subsidies to keep prices artificially low.

Construction workers install solar panels at Hami Solar Power Station in Hami, China's Xinjiang region, on Aug. 22, 2011. (VCG/VCG via Getty Images)
Construction workers install solar panels at Hami Solar Power Station in Hami, China's Xinjiang region, on Aug. 22, 2011. (VCG/VCG via Getty Images)

Congress has sought to reverse President Biden’s temporary tariff suspension through a joint resolution of disapproval that received bipartisan support. The president vetoed the measure in May, arguing that the tariff suspension is part of a multi-pronged strategy to stimulate the domestic solar power industry, including new solar panel factories.

Concerns

China’s domination in the solar panel supply chain also draws other concerns.

A nonprofit research group in a July report said that Chinese-made solar panels produce three times as much carbon emissions during production.

By sourcing solar products from China, international solar companies also increase their exposure to human rights abuses. A key supplier of polysilicon, the material used in manufacturing solar panels, is Xinjiang, the region known for the mass detention of Uyghur Muslims and forced labor issues.

Under the Uyghur Forced Labor Prevention Act, which came into effect in June last year, the U.S. Customs and Border Protection by January has identified 2,692 shipments potentially sourced from slave labor. The shipments carried an estimated value of over $800 million.

An August report by England’s Sheffield Hallam University assessed 10 solar manufacturers, including the top five brands in the world, and most of them had a “high” or “very high” risk of exposure to Xinjiang inputs.

“It is sometimes impossible to determine if it is indeed the case that these dedicated product lines are XUAR-input-free because companies do not disclose sufficient supply chain information,” the report said. “Despite significant global pressure for increased transparency, information regarding solar industry sourcing is becoming less transparent over time, thwarting the world’s ability to source ethically.”

Solar panel waste has also become a major issue in China as the country ramps up solar manufacturing capabilities without maintaining proper technology standards.

Photovoltaic panels have a lifespan of around 25 to 30 years, and many of China's projects already show significant signs of wear.

The growing waste volumes for aging solar panels have prompted China's state planner, the National Development and Reform Commission, to set up a recycling system. The commission said on Wednesday it will draw up new industrial standards and rules for the proper ways to dismantle and recycle solar facilities, with the goal of having a "basically mature" recycling system for wind turbines and solar panels by the end of the decade.