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Solar Tariff Review Finds Mixed Results

Thursday, February 20, 2020

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A midterm report released last week by the United States International Trade Commission revealed mixed results regarding the Section 201 tariff on solar cells and modules.

The midterm assessment will be used by President Donald J. Trump in determining how the tariffs will be modified prior to their depletion in 2022.

Solar Tariff Background

Starting in November 2017, the Commission completed an investigation that determined that crystalline silicon photovoltaic (CSPV) products were being imported into the U.S. in such high quantities that the endeavor could potentially cause serious injury to the domestic industry and could even produce a competitive article.

Additionally, the Commission also concluded in its findings that the import increases were leading to a decrease in financial performance for the domestic industry.

AlbertPego / Getty Images

A midterm report released last week by the United States International Trade Commission revealed mixed results regarding the Section 201 tariff on solar cells and modules.

A couple months later in January, Trump imposed a four-year-long safeguard measure on CSPV products, slated to begin on Feb. 7, 2018. The safeguard involved a tariff-rate quota (TRQ) on CSPV cell imports not partially or fully assembled into other products, in addition to an increase in duties on imports of CSPV modules.

When broken down, the safeguard TRQ imposed additional tariffs of 30% in the first year, 25% in the second year, 20% in the third year and 15% in the fourth year on imports of CSPV cells in excess of 2.5 gigawatts annually and on the imports of CSPV modules.

Later that same week, the U.S. Trade Representative established procedures for interested persons to request product-specific exclusions from application of the safeguard measure. By June 13, 2019, the U.S. Trade Representative published a notice granting certain requests for exclusions and excluding the products at issue from the safeguard measure’s application.

However, by October. the U.S. Trade Representative announced the elimination of a tariff exclusion for bifacial solar panels, a technology that at the time, was still largely in its infancy. Bifacial solar panels produce power from both sides, in contrast with the more traditional monofacial option.

Should the endeavor go well, the Solar Energy Industries Association (SEIA) also warned that the administration could tighten the tariffs to lower the phase-down to 1% annually.

On the matter, The Trade Representative noted, “In light of new information, which indicated that the production of these panels was increasing across the globe, the exclusion would likely result in increases in imports, resulting in competition with materials produced in the U.S. market.”

Adding that maintaining the exclusion would undermine the objectives of the safeguard measure.

By December, the U.S. Court of International Trade temporarily blocked the Trump administration’s October decision in an order stating that the U.S. Trade Representative had acted unlawfully when it withdrew its exemption for bifacial modules.

Although the U.S. International Trade Commission notes in its most recent review that no U.S.-based producer has reported production of bifacial modules since 2016, it expects that there will be 10 gigawatts of U.S. utility-scale demand this year, which current domestic supply won’t be able to match.

Mixed Results and Opinions

In reviewing the data regarding the Section 201 tariff on solar cells and modules, the Commission collected information from the calendar years 2016, 2017 and 2018, in addition to interim periods January-June 2018 and January-June 2019.

The Commission also received questionnaire responses from 17 U.S. firms estimated to have accounted for more than 90% of known U.S. capacity to produce CSPV cells in 2018 and from 55 firms estimated to have accounted for 84% of U.S. imports of CSPV cells and modules in 2018. Additionally, the Commission also received responses from 43 U.S. purchasers and 46 foreign producers.

As noted in its report regarding CSPV cells, “imports increased from 2017 to 2018 and were higher in the first half of 2019 compared with the first half of 2018. The financial performance of the cell producers generally declined. Additionally, there were changes to the character of certain U.S. CSPV cell operations (i.e., Suniva bankruptcy and SunPower acquisition of SolarWorld) that affected the implementation of adjustment plans.”

Oppositely, CSPV modules imports were reported to decline from 2017 to 2018 but were also higher in the first half of 2019 compared with the first half of 2018. The report also noted that multiple large CSPV module producers opened production facilities in the U.S., which lead to an increase in domestic module production capacity, production, and market share from 2017 to 2018 and from the first half of 2018 to the first half of 2019. Overall module producers’ financial performance showed mixed results.

However, given the results, members in the industry are still divided.

“We have 1,000 member companies that represent the entire solar supply chain, and overwhelmingly, those companies do not support the tariffs as a way to incentivize manufacturing,” said John Smirnow, international trade expert for the SEIA. “It’s only a couple of companies that are supportive of them.”

According to SEIA, the industry would be doing better without the tariffs in place and as a result of them, have already negatively affected the industry by preventing an estimated 62,000 jobs, cost $19 billion in industry investments, and resulted in 10 fewer gigawatts in domestic solar power capacity nationally.

Although, some domestic manufacturers saw a positive impact from the tariffs, reporting to the Washington Examiner that by pricing out imports of solar cells and other panel components, remaining companies have been able to become more competitive.

Smirnow adds, “The tariffs have led to new U.S. module production investment, but we haven’t seen any investments in U.S. cell manufacturing. We do think that there's an opportunity for [Trump] to moderate the tariffs ... we think that continuing the bifacial is a good way to moderate tariffs in a meaningful way to address supply shortages.”

The U.S. Trade Representative is accepting comments on the potential to eliminate the exclusion bifacial modules, and responses to those comments, through Feb. 27.

   

Tagged categories: Government; NA; North America; President Trump; Program/Project Management; Project Management; Solar; Solar energy

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