Solar Tariffs: How They’ll Work

Solar-Tarrifs

Photo Credit: Bloomberg

By Ben Santarris
Head of Corporate Communications
SolarWorld Industries of America, Inc.

From 2008 to 2011, SolarWorld Industries America Inc. debated whether to bring trade cases against the Chinese solar industry.  The company had 35 years of experience developing U.S. solar manufacturing.  However, it had no experience fighting trade cases.  In fact, no one had ever brought a case on behalf of a U.S. green-technology industry, and scarcely anyone had brought a case against China with trading values as big as those of the solar industry.

Yet, it was clear to SolarWorld that the Chinese government was illegally underwriting its industry’s export drive, its state-sponsored industry was selling at dumped U.S. prices to seize market share and the combination was both damaging the pioneering U.S.industry and eroding solar’s potential to boost American energy independence.  By 2010, China’s drive had forced at least a dozen U.S. manufacturers to downsize or close, even as the U.S. market was producing big annual gains in demand.

SolarWorld resolved that it owed its shareholders, its employees and its industrial heritage to stand up toChina.  On Oct. 19, 2011, SolarWorld filed anti-subsidy and anti-dumping trade cases.  Nine months later, the company has won both anti-subsidy and anti-dumping duties on Chinese products totaling between 35 percent and 250 percent.  But SolarWorld remains in uncharted territory:  For the duties to fully neutralize market distortions from China, the company must not only bar Chinese producers from circumventing duties, as some have pledged to do, but also explain to the industry how the duties work.

The mechanism for calculating anti-dumping duties is complex, partly because they are initially estimated based on trade predating the cases.  For that purpose, the Department of Commerce studied the second and third quarters of 2011. Commerce used the difference, or margin, between China’s production costs and its U.S. pricing to calculate preliminary estimates of duties. For most Chinese manufacturers, preliminary estimated duties of about 35 percent are being collected now on imports since Feb. 25, 2012. Commerce will announce its final estimates of duty margins on Oct. 9, 2012.

But Chinese production costs and pricing have continued to change since the 2011 study period. Commerce will reassess the antidumping and countervailing duty rates every year to make sure they reflect how the margin between Chinese costs and pricing have changed.  If current prices are falling faster than costs, as appears likely, then actual duty rates will be revised higher – potentially much higher.  In addition, appeals to U.S. courts and the World Trade Organization can also affect duty rates, often years after the fact.

Bottom line: Actual, final duties are moving targets. To employ a dense but accurate legal term, Chinese manufacturers and importers face an “open-ended contingent liability.”  No one can say how much liability for duties that Chinese manufacturers are accruing now.  For that reason,U.S.solar importers and purchasers should be extremely wary about imports fromChina.

With the trade remedies, it is hoped that fair and robust international competition will return to the U.S. marketplace, the U.S. industry will recover sales volume lost to unfairly traded Chinese goods and pricing will find a natural equilibrium between supply and demand without massive distortions from illegal Chinese government interference in theU.S.market.

Such is the goal of the SolarWorld-led Coalition for American Solar Manufacturing (CASM), which represents 215 companies employing nearly 18,000 workers.  About 85 percent of member companies is made up of downstream providers, such as installers.

The membership believes competition, not Chinese federal export targets, best serves U.S. solar industry manufacturers, installers and consumers long term. To read members’ comments or register support as an associate member of CASM, go to www.americansolarmanufacturing.org.

The  opinions expressed here are those of the author and do not represent any position by the American Solar Energy Society or Solar Today.

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