Retroactive charges may force smaller companies out of the market
(UPDATE) The U.S. Department of Commerce today posted anti-dumping duties of just over 31 percent on solar cells and modules from the Chinese factories Suntech, Trina and about 60 other companies that provided data in cooperation with investigors. Chinese companies that declined to respond to the DoC investigation will pay 249.96 percent.
These duties apply retroactively, back 90 days to mid-February. Importers must post bonds for these duties on all product shipped in since then.
“It’s too soon to tell how the market will respond to the new tariffs,” said Ben Santarris, head of corporate communications for SolarWorld USA, the lead complainant in the case. “What we can say is that the government has found the Chinese industry guilty of criminal trade practices.”
SolarWorld, and the loose trade group it organized as the Coalition for American Solar Manufacturing (CASM), filed an anti-dumping complaint with the Federal Trade Commission and Department of Commerce on Oct. 19, 2011. The FTC in March imposed anti-subsidy duties of 2.9 to 4.73 percent. Net tariff on some cells and modules may therefore total nearly 255 percent.
Further duties may be announced later this month to offset other forms of subsidies.
Mike Grunow, vice president of marketing at Trina Solar, noted that the most immediate impact would come from the 90-day retroactive charge. Smaller importers, with little cash available, may not be able to pay what amounts to a fine, and will have to withdraw from the market.
“Tier 3 players will withdraw,” Grunow said. “For Tier 2 companies, the fine may amount to 20 to 50 percent of their outstanding cash. Trina has the most robust balance sheet in the category, and for us the retroactive charge is a speed bump.”
Grunow noted that the tariff decision is founded on what he considers a faulty assumption: that manufacturers can determine pricing. “We know that the market sets the price,” he said. “We’re a publicly traded company and our balance sheet shows that we operated in the black for the first time last year, for three quarters.” In the fourth quarter, Grunow said, market conditions forced Trina to cut prices just to move inventory.
Affected companies will appeal the ruling, Grunow said. “We’ll fight this with data.”
In a press release, Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE), stated, “Today SolarWorld received one of its biggest subsidies yet — an average 31 percent tax on its competitors. What’s worse, it will ultimately come right out of the paychecks of American solar workers. Fortunately, these duties are much lower than the 250% tax that SolarWorld originally requested. This decision will increase solar electricity prices in the U.S. precisely at the moment solar power is becoming competitive with fossil fuel generated electricity. At the same time, CASE recognizes that today’s decision is ‘preliminary.’ Between now and a final decision before the end of the year, there are many issues that will be addressed and whose resolution would lead to a significantly lower tariff. CASE will continue to fight SolarWorld’s anti-consumer and anti-jobs efforts to ensure a better result for America’s solar industry.”
The tariff decision is likely to have long-term ramifications. China may respond with its own tariffs on U.S. exports of polysilicon, and Chinese factories may expand their production capabilities in North America. In 1981, after Detroit-based auto companies filed a complaint against Japanese car companies, a “voluntary” trade agreement limited Japan to sending 1.68 million cars to the United States. annually. Toyota, Nissan and Honda responded by building large factories in non-union states, and launched luxury brands (Lexus, Infiniti, Acura) to pad the profit margin on each car exported. The unintended consequence of limiting the import of cheap cars was to create new competition in luxury cars. Chinese factories may seek to adopt analogous tactics. A report published in May by Third Way.org noted that Chinese investment in U.S. clean energy companies jumped 130 percent in 2011.
Significant tariffs are likely to slow the current installation boom, and the U.S. market may suffer a series of plateaus until prices stabilize. Long-term, the cost of fossil fuels will continue to rise while the cost of solar, driven by efficiency improvements on the installation side, should soon resume its downward trend. At the utility scale, a short-term rise in the installed cost of PV may encourage faster installation of concentrating thermal and concentrating PV systems, and provide a boost for thermal storage installations.
Meanwhile, the DoC was scheduled to announce on May 30 a parallel decision on tariffs against Chinese-made wind turbine equipment.