Commerce Dept steps into Chinese solar trade war

A trade complaint filed against Chinese solar makers, accusing them of benefiting from illegal subsidies, has drawn a line in the sand for the U.S. solar industry. And while the U.S. Commerce Department has yet to decide on the complaint, it just issued a finding that seems to tilt the case in favor of the petitioner, SolarWorld, which is asking the U.S. government to impose duties on the Chinese solar manufacturers.
In the ruling issued last Friday, the commerce department said it’s found enough evidence to show that Chinese manufacturers might have benefited from illegal subsidies back home and that they might have shipped a much larger-than-usual amount of products into the U.S. in recent months to head off any decision by the government on the trade complaint.
The ruling is important because it paves the way for the commerce department to make another decision that could impose duties retroactively by 90 days. That means if the commerce department sides with SolarWorld and its coalition of manufacturers, then Chinese solar cell and panel makers (or their importers) will have to pay the so-called “countervailing duties” starting with their shipments made back in early December. The commerce department said Monday it plans to announce the official ruling for that on March 5.
Countervailing duties are meant to offset unfair subsidies in order to even the playing field. China is the biggest exporter of solar cells and panels into the U.S. Chinese companies have expanded production by gigawatts in recent years to take advantage of a growing demand for solar energy around the world. At the same time, the massive production also contributed to a glut of solar panels that led to a drop of around 50-percent in prices over the past year. The price collapse has cause big financial losses not just for Chinese companies but also manufactures from other countries as well, and it’s led to big layoffs, factory closures and bankruptcies.
The complaint, filed by SolarWorld and six other manufacturers (who wouldn’t reveal their identities publicly), contends that Chinese solar companies have received unfair government subsidies that allow them to sell products at far lower prices than their rivals from other countries. The U.S. International Trade Commission is looking at the same allegations, and both the commission and the commerce department have to agree in their final decisions before any duties become permanent.
The complaint has deeply divided the solar industry. On one hand the petition calls for creating a fair marketplace by following U.S. and international laws. On the other hand, the rulings outcome could lead to an increase in solar panel prices and that goes against the industry’s goal of reducing solar energy costs so that it’s more expensive than power from coal or natural gas power plants (and it could reduce profits for developers, too). Some U.S. manufacturers also worry that the complaint will invite retaliation from the Chinese government, which already has vowed to investigate whether the U.S. government has unfairly subsidized its silicon producers. The U.S. sells a lot of silicon and solar factory equipment to China.
The commerce department hasn’t indicated how much Chinese manufactures might have to pay for the countervailing duties. It’s still investigating the claim that Chinese silicon solar cell and panel makers have received Chinese government subsidies that has made it difficult for their rivals in the U.S. to compete fairly. The commerce department will have to calculate the amount of unfair subsidies before deciding how much countervailing duties it will impose on Chinese imports, said Tim Brightbill, the lead attorney for the SolarWorld-led group.
The complaint isn’t just asking for countervailing duties to be imposed on imported silicon solar cells and panels from China. There is a second part to the complaint that accuses Chinese companies of flooding the market with cells and panels at prices that are less than the production cost or less than what they sell at home, Brightbill said.
The anti-dumping complaint could lead to additional duties being imposed on Chinese solar cell and panel. The commerce department is looking at whether Chinese companies are selling their products at anywhere from 50 percent to 250 percent below the fair market value. What that below-market value is will help determine the amount of anti-dumping duties. For example, a $100 shipment of solar panels with a 250 percent anti-dumping duty will require the manufacturers or importers to pay $250 to the U.S. Customs. The commerce department is scheduled to decide on the anti-dumping claim on March 27, SolarWorld said.
If Chinese companies have to pay countervailing and anti-dumping duties, they will have a hard time finding customers in the U.S. Major Chinese solar companies, such as Suntech Power (s STP), Trina Solar and Yingli Green Energy, all have publicly refuted the allegations. Trina, in particular, said last week that it shipped more solar panels to the U.S. in the fourth quarter because there was a rush by developers to get projects underway before a key federal incentive expires on Dec. 31.
Resentment against Chinese manufacturers has been brewing for a few years now as they gained in size and influence with financial help from the Chinese government. SolarWorld, which is based in Germany but runs a factory in Oregon, has been vocal about fending off what it sees as anti-competitive practices by its Chinese rivals long before it filed the trade complaint with the U.S. government last October.
A group of project developers aligned with major Chinese solar companies last November to oppose the trade complaint. That group issued a report on Monday to highlight the number of jobs that it said will not be created if the U.S. government imposes heavy duties on Chinese products. The report, prepared by the Brattle Group, said a 100 percent duty on Chinese imports could cut the number of new jobs by up to 50,000 over the next three years.
Photo courtesy of Maxintosh via Flickr, Suntech Power.