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US solar group alleges Chinese manufacturers improperly avoid tariffs


Cites end-of-process factories in southeast Asia

Most manufacturing remains in China

China shipped 62% of solar cells, panels in 2020

  • Author
  • Michael Copley    S&P Global Market Intelligence
  • Editor
  • Bill Montgomery
  • Commodity
  • Energy Transition
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  • United States
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  • Energy Transition

A group of US solar manufacturers has alleged that Chinese competitors have shifted production to Southeast Asia in recent years as a way of "unlawfully circumventing" American import tariffs.

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American Solar Manufacturers Against Chinese Circumvention, which has not identified its members, said in filings with the US Department of Commerce on Aug. 16 that certain Chinese companies have been shipping components from China to be assembled into solar cells and panels at factories in Malaysia, Thailand and Vietnam to evade antidumping and countervailing duties that Washington imposed on Chinese solar imports in 2012.

The US group said the Commerce Department should find that solar cells and panels produced in or exported from those three countries by some of the world's biggest manufacturers are also subject to antidumping and countervailing duties.

"Chinese producers have developed a circumvention scheme that involves moving the end of the production process for [crystalline silicon solar] products, which entails only minor processing, to a third country for the express purpose of avoiding [antidumping/countervailing] duties, while at the same time retaining as much of the subsidized supply chain and labor as possible in China," the group said in a filing with the Commerce Department.

The group asked the US government to investigate subsidiaries of JinkoSolar Holding, LONGi Green Energy Technology, JA Solar Technology, Trina Solar and Canadian Solar, among other manufacturers.

JinkoSolar, LONGi, JA Solar, Trina and Canadian Solar did not immediately respond to messages seeking comment Aug. 17.

Chinese Embassy's response

The Chinese Embassy in Washington said in a statement that Beijing "has always required overseas Chinese companies to operate in compliance with local countries' laws and regulations, including the laws of the United States."

The embassy added that US antidumping and countervailing duties not only hurt both sides' industries, "but also run counter to jointly addressing the challenges of climate change."

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, a US trade group, said in a statement that the petitions from American Solar Manufacturers Against Chinese Circumvention could cause "severe" disruptions in the US solar market.

Analysts at Roth Capital Partners said in a research note Aug. 17 that this "is yet another headwind that the US solar industry will have to deal with."

Challenges grow

The US solar industry's supply chains are being threatened on several fronts.

US Customs and Border Protection in June ordered officers to detain shipments containing material from Hoshine Silicon Industry and its subsidiaries after the agency said it obtained evidence that Hoshine used forced labor at factories in China's autonomous Xinjiang region. Hoshine is a leading producer of metallurgical-grade silicon, or silicon metal, a key raw material in most solar panels.

A representative of the Chinese Embassy in Washington, Liu Pengyu, said in an emailed statement Aug. 12 that allegations of forced labor in Xinjiang are "an outrageous lie."

Request to extend tariffs

After the import restriction on Hoshine was announced, a pair of American companies, Suniva and Auxin Solar, asked the US International Trade Commission in early August to recommend extending tariffs on most imported solar cells and panels that the Trump administration imposed in 2018.

Among other issues cited in their petition, Suniva and Auxin said Chinese manufacturers responded to the 2018 tariffs by opening factories in Cambodia, which is not subject to the duties. In 2019, the US government asked Cambodia to investigate a Chinese-owned special economic zone after finding companies there were trying to avoid US tariffs.

"While Chinese companies now almost exclusively export to the United States from Southeast Asia, the vast majority of manufacturing, research and development, and capital investment remain in China," American Solar Manufacturers Against Chinese Circumvention said in a news release. "In cases like this the law is clear; the duties on Chinese solar products should be extended to circumventing entities."

China shipped 62% of the world's solar cells and panels in 2020, according to Paula Mints, chief analyst at SPV Market Research. Including capacity that Chinese manufacturers have moved to other parts of Asia, the country's share of global shipments rises to more than 80%. The US by comparison accounted for just 1% of global shipments in 2020.

Domestic solar manufacturing

The US Department of Energy said Aug. 17 that bolstering domestic solar manufacturing could help with efforts to decarbonize the country's power grid. The DOE report was released the same day that First Solar broke ground on a solar panel factory in Ohio.

"First Solar's new factory in Ohio is a model of President Biden's vision for keeping America competitive by investing in clean energy and creating good jobs," US Labor Secretary Marty Walsh said in a news release.

While some solar manufacturers have said tariffs are an important tool to make the US more competitive, the Solar Energy Industries Association warned in early August that "unnecessarily punitive trade measures" will hinder efforts to limit climate change.

"The way to create more US manufacturing is long-term federal investments, not shortsighted tariffs," the trade group said.