Photo courtesy of AL ISSA

(ITC press release, Nov. 7) The U.S. International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of crystalline silicon photovoltaic cells and modules from China that the U.S. Department of Commerce (Commerce) has determined are subsidized and sold in the United States at less than fair value.

All six Commissioners voted in the affirmative.

As a result of the USITC’s affirmative determinations, Commerce will issue antidumping and countervailing duty orders on imports of these products from China.

The Commerce Department previously made affirmative critical circumstances determinations in its investigations. Therefore, the Commissioners who made affirmative determinations today are required to determine whether imports covered by the Commerce critical circumstances determinations are likely to undermine seriously the remedial effect of the antidumping and countervailing duty orders Commerce will issue.

With respect to critical circumstances, Commissioners Daniel R. Pearson, Shara L. Aranoff, David S. Johanson, and Meredith M. Broadbent voted in the negative. Chairman Irving A. Williamson and Commissioner Dean A. Pinkert voted in the affirmative with respect to critical circumstances.

As a result of the Commission’s negative determinations regarding critical circumstances, the antidumping and countervailing duty orders concerning these imports will not apply retroactively to goods that entered the United States prior to the date of publication in the Federal Register of the Department of Commerce’s affirmative preliminary determinations.

The Commission’s public report Crystalline Silicon Photovoltaic Cells and Modules from China (Investigation Nos. 701-TA-481 and 731-TA-1190 (Final), USITC Publication 4360, November 2012) will contain the views of the Commissioners and information developed during the investigations.

Copies may be obtained after December 14, 2012, by emailing pubrequest@usitc.gov, calling 202.205.2000, or by writing the Office of the Secretary, 500 E Street SW, Washington, DC 20436. Requests may also be made by fax to 202.205.2104.

FACTUAL HIGHLIGHTS

Crystalline Silicon Photovoltaic Cells and Modules from China
Investigation Nos. 701-TA-481 and 731-TA-1190 (Final)

Product Description: The merchandise covered by this investigation are crystalline silicon photovoltaic cells, and modules, laminates, and panels, consisting of crystalline silicon photovoltaic cells, whether or not partially or fully assembled into other products, including, but not limited to, modules, laminates, panels and building integrated materials. This investigation covers crystalline silicon photovoltaic cells of thickness equal to or greater than 20 micrometers, having a p/n junction formed by any means, whether or not the cell has undergone other processing, including, but not limited to, cleaning, etching, coating, and/or addition of materials (including, but not limited to, metallization and conductor patterns) to collect and forward the electricity that is generated by the cell. Subject merchandise may be described at the time of importation as parts for final finished products that are assembled after importation, including, but not limited to, modules, laminates, panels, building-integrated modules, building integrated panels, or other finished goods kits. Such parts that otherwise meet the definition of merchandise under consideration are included in the scope of this investigation. Excluded from the scope of this investigation are thin film photovoltaic products produced from amorphous silicon (a-Si), cadmium telluride (CdTe), or copper indium gallium selenide (CIGS). Also excluded from the scope of this investigation are crystalline silicon photovoltaic cells, not exceeding 10,000mm2 in surface area, that are permanently integrated into a consumer good whose function is other than power generation and that consumes the electricity generated by the integrated crystalline silicon photovoltaic cell. Where more than one cell is permanently integrated into a consumer good, the surface area for purposes of this exclusion shall be the total combined surface area of all cells that are integrated into the consumer good. Modules, laminates, and panels produced in a third-country from cells produced in the People’s Republic of China are covered by this investigation; however, modules, laminates, and panels produced in China from cells produced in a third country are not covered by this investigation. Merchandise covered by this investigation is currently classified in the Harmonized Tariff System of the United States ( HTSUS”) under subheadings 8501.61.0000, 8507.20.80, 8541.40.6020, 8541.40.6030, and 8501.31.8000. These HTSUS subheadings are provided for convenience and customs purposes; the written description of the scope of this investigation is dispositive.

Status of Proceedings:
1. Type of investigations:  Final antidumping and countervailing duty.
2. Petitioner:  SolarWorld Industries America, Inc., Hillsboro, OR. 
3. Investigations instituted by USITC:  October 19, 2011.
4. USITC hearing:  October 3, 2012.
5. USITC vote:  November 7, 2012.
6. USITC notification of Department of Commerce:  November 30, 2012.

U.S. Industry:
1. Number of U.S. producers: 14.
2. Location of producers' cell and module plants:  Arizona, California, Delaware, Florida, Georgia,
       Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, Tennessee,
       Washington, and Wisconsin. 
3. Employment of production and related workers of crystalline silicon photovoltaic modules in 2011: 
       1,856.
4. U.S. producers' U.S. shipments of crystalline silicon photovoltaic modules in 2011: $790.5 million.
5. Apparent U.S. consumption of crystalline silicon photovoltaic modules in 2011:  $3.01 billion.   
6. Ratio of subject imports from China to apparent U.S. consumption of crystalline silicon 
       photovoltaic modules in 2011:  57.4 percent.

U.S. Imports in 2011:
1. Quantity of imports of crystalline silicon photovoltaic cells and modules from China:  1.5 million
   kilowatts.
2. Value of imports of crystalline silicon photovoltaic modules from China:  $1.9 billion.

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.

Reuters reports that while imports of Chinese modules fell sharply in May, the major Chinese factories are finding Taiwanese and other sources for their cells to evade tariff-driven price increases, and accelerating their acquisition of manufacturing plants closer to their end markets. As a result, the steady multi-year price drop continues, albeit at a slower pace. Pressure on Western-owned factories has not abated.

Meanwhile, China has opened its own inquiry into whether polysilicon ingots made in the United States and Korea have been exported to China at prices that damage Chinese polysilicon factories.

A group of European module manufacturers, led by SolarWorld in Germany, on Tuesday filed a new anti-dumping complaint against Chinese factories through the European Union.

The Coalition for Affordable Solar Energy fired back, with a statement beginning “Today Germany-based SolarWorld has once again demonstrated that it is willing to undermine the world’s solar industry in a desperate effort to avoid competition in the marketplace.”

Nonetheless, SolarWorld stock, which had lost 60 percent of its value over the past year, appeared for now to have reversed the slide.

Meanwhile, China reaffirmed its determination to build 21 gigawatts of PV generation by 2015, and announced a new goal of 50 gigawatts by 2020. And in India, sources predicted that the country might install up to 40 gW by 2020. While that rapid expansion may help to work through the global oversupply of PV modules, it raises the likelihood of very rapid investment in inverter and BOS manufacturing in China. Because aluminum extrusions are a commodity worldwide, racking manufacturers can probably feel safe about their local markets. But Western inverter manufacturers may soon face the same fate as module factories, with a flood of low-priced Chinese inverters entering global markets.

And Ben Santarris, head of corporate communications at SolarWorld’s U.S. subsidiary, held a conference during InterSolar to explain the mechanics of the new tariffs on Chinese modules and cells. “The 31-percent rate is just an initial rate, based on the difference between the selling price and the calculated cost to manufacture,” he said. “As prices and manufacturing costs change, the tariff rate will change, too.”

Photo by Ingrid Taylar

A few days after the U.S. Department of Commerce imposed a 25 percent tariff on wind turbine towers made in China, and two weeks after announcing a 31 percent tariff on silicon solar cells and modules made in China, another set of Commerce officials, representing the United States at the Asia-Pacific Economic Cooperation meeting in Kazan, Russia, agreed to work for sharp tariff reductions in “green goods” by September. Products slated for freer trade between the 21 nations include wind turbines and solar panels.

The fact that two different sets of officials in two separate offices within the U.S. Department of Commerce are calling simultaneously for two opposing trade policies is just the latest irony in the evolving mix of alliances created by SolarWorld’s anti-dumping petition.

It would be easy to divide the renewable energy world into three camps:

• For high tariffs on Chinese goods — the Coalition for American Solar Manufacturing (CASM) and its allies, including manufacturers of silicon modules with factories outside China (including Korea, Taiwan, Japan, Malaysia and the Philippines);
• Against  — the Coalition for Affordable Solar Energy (CASE) and its allies, including American installers, developers and most balance-of-system operators; and
• Those caught in the middle — including trade associations serving both sides and factories exporting raw materials like polysilicon, who now may be threatened by retaliatory tariffs imposed by China.

It’s not that simple, of course. The middle ground is dangerous territory for officials and companies in both China and the United States, precisely because they have to do business with both sides. Speaking for the middle ground, the Solar Energy Industries Association (SEIA) has been calling for mediation. Immediately following the May 17 announcement of U.S. tariffs on Chinese modules, SEIA President Rhone Resch issued a statement beginning “The solar industry calls upon the U.S. and Chinese governments to immediately work together towards a mutually satisfactory resolution of the growing trade conflict within the solar industry. While trade remedy proceedings are basic principles of the rules-based global trading system, so too are collaboration and negotiations.” Meanwhile, both CASM and CASE reiterated their own entrenched positions.

It’s still unclear what long-term consequences the tariffs will have. Retroactive charges against Chinese imports had the immediate effect of sharply cutting the flow of new modules into the United States. Market research firms variously forecast a drop of 45 percent to 75 percent in the volume of shipments this year. But those cutbacks were largely made by smaller Chinese factories that were nowhere close to running profitably to begin with. Bloomberg New Energy Finance now predicts that more than half of all module manufacturers will fail or be acquired by larger companies, but that was the case before the tariffs, too.

The import slowdown did not immediately affect the availability or price of existing inventory. Spot prices for modules did not rebound, or even level out, following the tariff announcements (though some of the price reductions were masked by the weakening of the euro). Worldwide, silicon-PV factories continued to trim margins (and put each other into bankruptcy) in pursuit of market share in countries without new import barriers: Japan’s newly announced 42-yen-per-kilowatt-hour feed-in tariff drove some of the action, and Australia (without its own significant PV manufacturing base to protect) began to look like a safer bet than any country eager to impose a domestic-content requirement. And so the flood of inventory was diverted, not curtailed.

During the months leading up to the tariff announcements, solar installations continued to boom both in Germany and North America (especially in New Jersey). Toward the end of May, a German research organization reported that half of the country’s mid-day electricity demand was met by solar sources. Thanks to a wide variety of causes, the wholesale price of electricity in Europe fell in May by 5 to 11 percent.

Moreover, while the tariffs may provoke a palpable price increase for American installers and developers, it may not do so for end consumers. That’s because the installer business itself is consolidating rapidly, mainly around leasing/PPA companies with a business model based on zero upfront cost. As far as Joe and Jill Householder are concerned, a 31 percent tariff on zero is zero. SolarCity, SunRun, Clean Power Finance and the other large consolidators of small systems can find ways to fold the tariff into the business model. Don’t lose sight of the fact that the average cost per watt to install an American system is still roughly double the cost in Germany: There’s still a lot of inefficiency in the North American permitting-and-labor process. Squeezing that out can go a long way to ironing over a higher module cost — at least for bigger companies. That gives the small locally-owned installer a powerful incentive to become a subcontractor.

In the long run, trade officials in the United States and China may find some middle ground that won’t make anyone very happy, a kind of product-dumping demilitarized zone where everyone is at war but no one shoots. Tariff or no tariff, big fish will grow bigger and small fry will be absorbed. And the price of solar installations will move steadily downward.

PV production line. Photo courtesy of TIANWEI

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.

Tianwei PV production line

The U.S. Department of Commerce has announced preliminary countervailing tariffs to correct for more than $30 billion in subsidies provided by the Chinese government for silicon modules and cells made in China.

But the tariffs are far lower than American solar module makers asked for, between 2.9 and 4.73 percent. Members of the Coalition for American Solar Manufacturing (CASM), which lodged the original complaint, asked for tariffs ranging from 30 to 50 percent to offset subsidies and dumping (the sale of product below its cost to manufacture and ship). An announcement regarding antidumping tariffs — which may be higher — is due in May.

Both sides claimed initial victory in the dispute between American solar manufacturers and other solar industry interests, represented by the Coalition for Affordable Solar Energy (CASE).  But stock prices for solar module manufacturers surged on the news.

Jigar Shah, president of CASE, noted that in anticipation of stiff tariffs, module manufactures have been padding their U.S. prices for several months. “Today, the U.S. pays the highest prices in the world, by about 12 percent,” he said. “A mid-size firm pays about 95 cents a watt, versus about 84 cents in Europe. Hopefully this announcement, which largely exonerates China, will bring American module prices down.”

Shah also released this statement:

Today’s preliminary determination by the Department of Commerce imposing low tariffs on imported solar cells and modules, is a relatively positive outcome for the U.S. solar industry and its 100,000 employees.  However, tariffs large or small will hurt American jobs and prolong our world’s reliance on fossil fuels. Fortunately, this decision will not significantly raise solar prices in the United States as SolarWorld has sought.

 This decision clearly demonstrates that the Commerce Department did not find the Chinese government engaged in massive subsidization, as SolarWorld and CASM claim. 

 There is more work to be done to protect the future of solar industry and power in America. There will be another decision in May when the Commerce Department announces anti-dumping duties.  A recent study by the Brattle Group confirmed that placing artificially high tariffs on solar panels would severely undermine the US solar industry, resulting in the loss of up to 60,000 US jobs by 2014.

At the same time, SolarWorld, the lead company in the CASM petition, issued this press release:

U.S. trade ruling will help restore fair competition in solar trade

Commerce ruling is calibrated to offset effects of China’s subsidized solar exports

HILLSBORO, ORE., March 20, 2012 – SolarWorld, the largest U.S. solar manufacturer for more than 35 years, today said the U.S. Department of Commerce’s preliminary trade-remedy ruling against China’s state-sponsored solar industry represents an important step toward restoring fair trade in the critically important U.S. renewable-energy manufacturing industry.

The U.S. Department of Commerce today issued a preliminary finding that Chinese state sponsorship of its solar industry is anti-competitive under U.S. and international trade law and ordered preliminary duties on the industry’s U.S. exports of crystalline silicon solar cells and panels to offset the effects of China’s illegal subsidies. Commerce will require importers of record to post deposits or bonds toward anti-subsidy margins of 2.9 percent for cells and panels made by Suntech, 4.73 percent Trina Solar and 3.6 percent for all other Chinese manufacturers.

“We commend the Department of Commerce for its preliminary decision today, which is the first step in a process that will roll out over the next several months,” said Gordon Brinser, president of SolarWorld Industries America Inc., member of the seven-manufacturer Coalition for American Solar Manufacturing (CASM) and petitioner in anti-subsidy and anti-dumping cases against the Chinese industry.

“If fair international trade can be re-established, the solar-pioneering U.S. industry will once again compete on legitimate market factors such as product performance, production efficiency and unsubsidized pricing,” Brinser said. “We need both the domestic manufacturing and installation businesses to participate in fair competition to advance our solar industry’s reach for greater national energy, economic and environmental security.”

CASM contends that China’s broad portfolio of subsidies spurred its producers to build huge excesses of manufacturing capacity, export more than 95 percent of production and sell product at artificially low prices to unfairly seize U.S. market share at the expense of domestic producers. At least 12 U.S. manufacturers of crystalline silicon solar cells and panels have closed plants, gone bankrupt or staged significant layoffs since 2010.

On Dec. 2, the U.S. International Trade Commission (ITC) made a unanimous preliminary determination that China’s trade practices were harming the domestic industry. On Jan. 30, Commerce found that Chinese importers had mounted a massive, evasive surge ahead of the preliminary determination. As a result, today’s ruling on duties applies to Chinese solar imports not just hereafter but also retroactively 90 days.

Commerce is expected to issue a preliminary ruling on anti-dumping duties on May 16 (announced May 17). Final determinations on the duties would take place in the summer. To close the case in the fall, the ITC would need to make a second, final ruling on whether Chinese trade practices have harmed the domestic industry.

Trina’s American distribution subsidiary released this statement:

Trina Solar is committed to providing high-quality modules to the United States for the long term. We value our customers, and we our working to ensure that our U.S. team will continue to grow our North American business in order to meet our customers’ expanding needs.

This determination is only the first step, and is subject to further examination and final determination later this year by the Department of Commerce and the International Trade Commission. Until then, Trina and the solar industry will continue to operate in an era of uncertainty brought upon by these proceedings. As a forward-thinking global company, we are constantly assessing our options so that we can most effectively serve all of our markets around the world. Until the final determinations are made, it is premature to speculate about next steps in the United States, but know that Trina Solar is committed to serving the United States market for the long term.