The United States has imposed trade restrictions on imports of solar cells and panels starting in 2012, and since then, the number and nature of these restrictions has grown.  The last several weeks have seen a potential for further increase and/or extension of these measures, further complicating trade in this critical component of alternative energy.

First, on September 2, 2021, a World Trade Organization (“WTO”) panel circulated its report in United States – Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products (DS562), upholding the Section 201 safeguard tariffs imposed by the United States on crystalline silicon photovoltaic cells (“solar safeguard”).  The solar safeguard is a 2.5GW tariff-rate quota that was imposed by the United States in 2018 on imports of solar cells from most countries.  The tariff was initially set at 30 percent, and was scheduled to be reduced by five percentage points each year in the subsequent three years (lasting for a total of four years).  China challenged the solar safeguard at the WTO, arguing that the U.S. International Trade Commission (“ITC”) failed to comply with the 1994 General Agreement on Tariffs and Trade (“GATT”) and the Agreement on Safeguards when conducting its safeguard investigation.  China argued that the ITC had failed to demonstrate that imports of products increased “as a result of unforeseen developments,” as required by the GATT, while also attacking the ITC’s analysis regarding the link between increased imports and serious injury.  The WTO dispute settlement body has historically been skeptical of safeguard actions, often finding them inconsistent with members’ obligations.  However, in this instance, the panel rejected all of China’s claims, and affirmed the reasoning of the ITC.

Separate from the WTO challenge, the solar safeguard is scheduled to expire on February 6, 2022.  However, in early August 2021, the ITC received petitions from a group of U.S. solar companies, requesting that the tariffs be extended, and in response, the ITC initiated an investigation.  The hearing in this investigation is scheduled on November 3, 2021 and the ITC must present its findings to the president by early December 2021.  If the ITC agrees that the safeguards should be extended, President Biden will then have the discretion to extend these tariffs, and if so, at what levels.  The safeguard action can be extended, at most, for another four years.

Finally, a coalition of companies claiming to be U.S. solar producers filed a petition at the U.S. Department of Commerce claiming that certain Chinese companies and their subsidiaries are circumventing the existing antidumping duty and countervailing duty (“AD/CVD”) orders currently imposed on solar products from China.  According to the petition, certain companies are assembling the majority of solar cells and panels in China and then completing them in Malaysia, Vietnam, or Thailand and then exporting those products with a non-China origin in order to avoid the AD/CVD orders.  If the Commerce Department makes an affirmative finding regarding circumvention, these AD/CVD orders may be expanded to include certain solar products imported into the U.S. from those three countries.  In which case, entries of products will be subject to the same AD/CVD cash deposit requirements, and potential AD/CVD duty liability, that currently apply to imports from China.  These duties range greatly, depending on producer, with some producers having been assigned tariff rates of over 500%.  These rates are subject to change based on annual administrative reviews.

While none of these proceedings has yet changed the status quo, the Section 201 extension and the anticircumvention petition have the potential to increase duty liability on imports of solar products, perhaps signficiantly.