Commerce sets initial US duties for solar cells from Southeast Asia

The US Commerce Department released preliminary countervailing duties on solar cells imported from Cambodia, Malaysia, Thailand and Vietnam on Oct. 1, marking the midway point in a major trade case launched in April and aimed largely at producers headquartered in China.

The general preliminary rates are 8.25% for Cambodia, 9.13% for Malaysia, 23.06% for Thailand and 2.85% for Vietnam. These apply to photovoltaic (PV) cell imports, whether or not assembled into panels, and are meant to counter subsidies. However, depending on the company, the preliminary countervailing duty rates range from 8.25% to 68.45% in Cambodia; 3.47% to 123.94% in Malaysia; 0.14% to 34.52% in Thailand; and 0.81% to 292.61% in Vietnam.

"These results are in line with our expectations, and this is a positive next step and [an] early step in the investigations," Tim Brightbill, a lawyer representing the American Alliance for Solar Manufacturing Trade Committee who filed the antidumping and countervailing duty petitions, said during an Oct. 1 press call.

Analysts at Roth Capital Partners said in an Oct. 1 note to investors that the rates were "mostly lower than expected."

That sentiment was echoed broadly, with analysts at KeyBanc Capital markets calling the levels "so low as to be meaningless" in an Oct. 1 client note.

The rates "should result in slightly lower than expected module pricing for developers/installers," JP Morgan equity research analysts said in an Oct. 2 note.

But Brightbill said since the subsidy investigation is only halfway through, "we also are confident there is a strong likelihood that these margins will increase, and in some cases significantly, by the time of the final determinations."

Brightbill pointed to prior cases in which preliminary rates were inflated in final determinations.

In addition, a forthcoming decision on antidumping tariffs "could be more punitive" with "sizable impacts," analysts at Jefferies LLC said in an Oct. 2 note.

As the Commerce Department works on its investigations, "many of these companies are adept at hiding their subsidies and where they're coming from," Brightbill added.

The petitioners have also filed allegations of subsidies for wafer, polysilicon and other materials, Brightbill noted. On Sept. 20, Commerce began its investigation into the petitioners' new subsidy allegations on PV wafers from all four countries and on polysilicon from Cambodia. However, allegations of subsidies on solar glass, silver paste, junction boxes and aluminum frames have yet to be initiated and investigated.

"We're confident that by the final determination, there will be significant subsidies, not only on all four countries but on the major Chinese producers," Brightbill said.

'Retroactive duty risk'

This preliminary decision comes after several US solar manufacturers filed a petition against an influx of imports from these four Southeast Asia countries. The American Alliance for Solar Manufacturing Trade Committee asked for investigations into potentially illegal trade practices by Cambodia, Malaysia, Thailand and Vietnam and to impose new tariffs on solar imports from these countries.

The petitioners — Convalt Energy LLC, First Solar Inc., Mission Solar Energy LLC, Hanwha Q Cells USA Corp., Meyer Burger Technology AG, REC Silicon ASA and Swift Solar Inc. — also filed a critical circumstances notice to ask for a quick assessment to determine whether a sudden shipment surge requires retroactive duties to be applied before the Commerce Department completes its investigation. On Oct. 1, Commerce found critical circumstances exist for Thailand and Vietnam, in part.

The US imported 17.4 GW of panels in the second quarter, supplied primarily by factories in Vietnam and Thailand, according to the S&P Global Market Intelligence Global Trade Analytics Suite. That was a 36% increase from a year earlier and a new quarterly record.

Roth Capital analysts said the critical circumstances finding was "an incremental negative" for Canadian Solar Inc., noting the company's 23% preliminary rate in Thailand and exposure to "retroactive duty risk."

Imports from Hanwha Q CELLS Malaysia Sdn Bhd, another subsidiary of South Korea-based Hanwha Solutions Corp. and an affiliate of petitioner Qcells, could face 14.72% duties from its Malaysia factory. Qcells has committed to investing $2.8 billion in a major PV production hub in Georgia, including ingot, wafer, cell and module manufacturing.

Several analysts noted the initially low rates for some major producers, including affiliates of China-based Trina Solar Co. Ltd., JA Solar Technology Co. Ltd. and Boway Group. Trina's preliminary rate in Thailand is 0.14%, while JA Solar's rate in Vietnam is 2.85%.

The Commerce Department's preliminary decision "reconfirms Trina's commitment to the US renewable energy industry," Steven Zhu, president of Trina Solar (U.S.) Inc., said in an Oct. 2 emailed statement.

Trina is nearing completion of a 5-GW module assembly facility in Wilmer, Texas, that is anticipated online in the fourth quarter, Zhu added.

The preliminary duties will go into effect soon, Brightbill noted.

"What happens is these rates will translate into cash deposits collected at the border in the very near future," Brightbill said. "So, Commerce will instruct Customs and Border Protection to begin collecting cash deposits in these amounts, and that will happen almost immediately. And again, these are preliminary rates. So, if the subsidy rates increase by the time of the final determination, then Commerce will simply tell Customs to expand its collection to the higher rates."

A final decision on countervailing duties is scheduled for next year. Additionally, preliminary antidumping determinations are expected in late November.